No Import or Export Without a Code
Chapter Five
Syllabus topic 2, "Registration Procedure of Importer Exporter Code under The Foreign Trade (Development and Regulation) Act, 1992."
Pages 10 to 11 of 62
The prohibition
Section 7 of the Foreign Trade (Development and Regulation) Act, 1992:
No person shall make any import or export except under an Importer-exporter Code Number granted by the Director General or the officer authorised by the Director General in this behalf, in accordance with the procedure specified in this behalf by the Director General:
Provided that in case of import or export of services or technology, the Importer-exporter Code Number shall be necessary only when the service or technology provider is taking benefits under the foreign trade policy or is dealing with specified services or specified technologies.
One sentence and a proviso, and both are examinable.
The prohibition is absolute for goods. No person, no import, no export, without the Code.
The proviso is narrower for services and technology. A service or technology provider needs the Code only if he is taking benefits under the foreign trade policy, or is dealing with specified services or specified technologies. A software consultant exporting services and claiming nothing under the policy does not need one.
How the Act reaches section 7
The five sections before it build the machinery, and a good answer names them.
Section 1, short title and commencement. The Act extends to the whole of India.
Section 2, definitions. Among them "import" and "export", which are wide: bringing into, or taking out of, India any goods, services or technology.
Section 3, powers to make provisions relating to imports and exports:
(1) The Central Government may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports.
Sub-section (2) lets it prohibit, restrict or otherwise regulate the import or export of goods, services or technology.
Section 4, continuance of existing orders. Orders made under the Imports and Exports (Control) Act 1947, which this Act replaced, continue.
Section 5, Foreign Trade Policy. The Central Government may, by notification, formulate and announce the foreign trade policy and amend it. The policy is where the operational detail lives, and the Act is deliberately short because of it.
Section 6, appointment of Director-General and his functions. The Central Government appoints a Director General of Foreign Trade, who advises on the policy and is responsible for carrying it out.
Then section 7. The Director General grants the Code, in the procedure he specifies. That is why the detail of the application is on the DGFT's portal and not in the Act.
Who needs the Code
Every person who imports or exports goods. Whatever the value, whatever the quantity, and whether once or every day.
| Who | Needs the Code? |
|---|---|
| A firm importing one consignment of machinery | Yes |
| A firm exporting handicrafts worth Rs. 40,000 | Yes |
| A software firm exporting services and claiming nothing under the policy | No, by the proviso |
| The same firm claiming a benefit under the foreign trade policy | Yes, by the proviso |
| An individual importing goods for personal use, not connected with trade, manufacture or agriculture | Exempt under the exemptions the Director General notifies |
| A department of the Central or a State Government | Exempt, on the notified basis |
No Import or Export Without a Code
The exemptions are notified by the Director General under the procedure section 7 refers to, not written into the Act, and a candidate should say so rather than reciting a list as though it were statutory.
Where the Code sits among the other registrations
The Code is not the first registration a business takes; it is one of the last. It presupposes a PAN, because the Code is the PAN, and it presupposes a bank account, because the application asks for one.
But it comes before the first shipment, and that is the point of section 7's wording: no person shall make any import or export without it. A consignment that arrives at a port for an importer with no Code cannot be cleared.
The offence
Importing or exporting without the Code is a contravention of the Act, and section 11 makes a person who contravenes the Act, the rules, an order or the foreign trade policy liable to a penalty. Section 11 also provides for confiscation of the goods.
The practical consequence comes first. Customs will not clear the consignment, the goods sit at the port accruing demurrage, and the penalty follows.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.