DGFT Clarification on Warehousing of Industrial Chemicals under FTP 2023

Background: FTP 2023 and its facilitative approach

India’s Foreign Trade Policy (FTP) 2023 adopts a continuity-focused and facilitative framework built on four central pillars:

  • remission‑based incentives,
  • export promotion through collaborative mechanisms,
  • ease of doing business with reduction in transaction and compliance costs, and
  • support for new growth segments such as e‑commerce exports.

Unlike earlier policies operating on a fixed five‑year cycle, FTP 2023 is designed as a dynamic policy with in‑built review and feedback mechanisms. It recognises exporters and other trade participants as partners in capacity building, rather than mere beneficiaries of incentives.

Within this broader context, a crucial operational issue emerged around warehousing of chemicals under Paragraph 2.36 of FTP 2023, which deals with private and public bonded warehouses.

Text of Para 2.36: Private/Public Bonded Warehouses

Paragraph 2.36 of Foreign Trade Policy (FTP) 2023 governs the setting up and use of private and public bonded warehouses for imports. The provisions read as follows:

(a) Private/ Public bonded warehouses may be set up in OTA as per rules, regulations and notifications issued under the Customs Act, 1962. Any person may import goods except prohibited items, arms and ammunition, hazardous waste and chemicals and warehouse them in such bonded warehouses.

(b) Such goods may be cleared for home consumption in accordance with provisions of FTP and against Authorisation, wherever required. Customs duty as applicable shall be paid at the time of clearance of such goods.

(c) The clearance of the warehoused goods shall be as per the provisions of the Customs Act, 1962.

The express exclusion of “hazardous waste and chemicals” in Para 2.36(a) triggered industry‑wide concerns, especially for sectors heavily dependent on industrial chemicals and intermediates.

Industry concern: ambiguity around “hazardous chemicals”

Practical difficulties raised by stakeholders

Exporters, importers, and logistics operators pointed out that:

  • Industrial raw materials, intermediates, speciality chemicals, petrochemicals, and pharmaceutical inputs are central to India’s manufacturing and export value chain.
  • These products are routinely handled and stored at ports, terminals, and Container Freight Stations (CFS) under strict regulatory supervision.
  • The wording in Para 2.36(a) appeared to treat all “hazardous chemicals” as barred from bonded warehouses, even where they are legitimate industrial inputs regulated under existing safety and customs frameworks.

Stakeholders highlighted that this created:

  1. Regulatory inconsistency – the same category of chemicals was allowed to be handled at ports and CFSs, but seemingly barred from bonded warehouses.
  2. Supply chain risk – inability to warehouse industrial chemicals under the bonded warehouse scheme could disrupt just‑in‑time inventory models, raising working capital costs and affecting productivity.
  3. Trade facilitation concerns – the perceived blanket exclusion of hazardous chemicals did not align with the trade‑facilitative intent of FTP 2023.

It was therefore represented to the authorities that a clarification was required to distinguish between:

  • prohibited “hazardous waste and chemicals” that the policy aims to keep out of bonded warehousing, and
  • legitimate industrial chemicals that are part of regular, regulated trade flows.

DGFT clarification under Para 2.58 of FTP 2023

Scope of powers used

To resolve the representational issues, the Directorate General of Foreign Trade invoked its powers under Para 2.58 of FTP 2023.