Wider QCO Relief for SEZ Imports: Alignment of FTP 2023 with SEZ Act and SEZ Rules

The Directorate General of Foreign Trade (DGFT) has significantly widened the scope of exemption from mandatory Quality Control Orders (QCOs) for imports made by Special Economic Zone (SEZ) Units and SEZ Developers. This important policy change has been notified through Notification No. 16/2026-27 dated 01 June 2026, by amending Paragraph 2.03A(iii) of the Foreign Trade Policy (FTP), 2023.

Under the new framework, SEZ Units and Developers now enjoy a broader exemption from QCOs and associated Bureau of Indian Standards (BIS) requirements for all permissible goods imported for authorised operations within SEZs, subject to strict conditions when such goods or their finished products are moved to the Domestic Tariff Area (DTA).

Statutory powers invoked

The Central Government has exercised its authority under:

  • Section 3 read with Section 5 of the Foreign Trade (Development & Regulation) Act, 1992; and
  • Paragraph 1.02 of the Foreign Trade Policy (FTP), 2023, as amended from time to time.

Using these provisions, DGFT has revised Para 2.03A(iii) of FTP, 2023 in order to:

  1. Harmonise FTP provisions with the SEZ Act, 2005 and the SEZ Rules, 2006, specifically Rule 27; and
  2. Clarify the exact scope and conditions of QCO and BIS exemptions for SEZ-related imports.

Earlier position under existing Para 2.03A(iii)

Before the amendment, Para 2.03A(iii) provided a narrower QCO exemption:

  • Exemption was limited only to inputs required for export production.
  • Such inputs could not be cleared into the DTA, either as such or in the form of goods manufactured from them.
  • An undertaking had to be given by the SEZ Unit at the time of import, confirming that the exempted inputs and resultant products would not be moved into the DTA.
  • The exemption was specifically restricted to physical exports and was further subject to Para 2.03(c) of FTP.

This formulation created ambiguity on whether a wider range of SEZ activities and categories of goods could qualify for QCO exemption, especially considering the broader framework for “authorised operations” under SEZ law.

Key Changes Introduced by the Revised Para 2.03A(iii)

The amended Para 2.03A(iii) introduces a comprehensive and clearer regime for QCO exemptions in respect of SEZ imports.

1. Broadened scope of QCO exemption

Under the revised text, exemption from the applicability of Quality Control Orders (QCOs) issued under the BIS Act, 2016 is now expressly available to:

  • SEZ Units; and
  • SEZ Developers.

The exemption covers import of all permissible goods required for authorised operations within SEZs, including:

  • Raw materials
  • Components
  • Consumables
  • Spares
  • Capital goods

This marks a shift from the earlier narrow focus on “inputs required for export production” to a more comprehensive coverage consistent with the concept of “authorised operations” under the SEZ regime.

2. Alignment with SEZ Act, 2005 and SEZ Rules, 2006

The amended provision explicitly states that the exemption:

  • Must be in accordance with the SEZ Act, 2005; and
  • Is to be governed by Rule 27 of the SEZ Rules, 2006.

Important: The reference to Rule 27 of the SEZ Rules, 2006 anchors the exemption squarely within the legal framework governing imports for authorised SEZ operations and reinforces that the benefit is not a blanket relaxation, but conditional upon the activity qualifying as an authorised operation within the SEZ.

3. Limitation: Exemption confined to use within SEZ for authorised operations

The exemption from QCOs is strictly limited to: