Sanctions & Export Control Training

Section 11(1) of the Foreign Trade (Development and Regulation) Act, 1992 states that no export or import may be made except in accordance with the Act, the rules and orders made under it and the Foreign Trade Policy in force. Section 11(2) makes anyone who makes, abets or attempts an export or import in contravention liable to a penalty, and section 11(3) applies a similar penalty for using a forged, tampered or materially false declaration or document.

The 2010 amendment added Chapter IVA on "specified goods, services and technology". Section 14A applies the WMD Act, 2005 to their export, transfer, transit, trans-shipment and brokering. Section 14C is a catch-all: no person may export any material, equipment or technology knowing it is intended for a biological, chemical or nuclear weapon or their missile delivery systems. Section 14D lets the Director General suspend or cancel a licence, and section 14E applies the WMD Act's penalties and imprisonment terms.

SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) is India's national export control list of dual-use, munitions and nuclear-related items, including software and technology, notified as Appendix 3 to Schedule 2 of ITC (HS). Under Chapter 10 of the Foreign Trade Policy 2023, export of a SCOMET item is either prohibited or permitted only under an authorisation, unless specifically exempted. DGFT revises the list periodically, so classification must be checked against the current Appendix 3 on the DGFT website.

Paragraph 10.05 applies catch-all controls to items not on the list: if DGFT has notified the exporter in writing, or the exporter knows or has reason to believe that an item could be used in or diverted to weapons of mass destruction, their missile systems or military end use (including by terrorists and non-state actors), the export may be denied or allowed only under a licence. Imported SCOMET items cannot be re-exported without authorisation unless exempted, and DGFT encourages voluntary self-disclosure of breaches (paragraph 10.11).

The WMD Act prohibits unlawful dealings in nuclear, biological and chemical weapons and their delivery systems (section 8), transfers of notified material, equipment or technology to non-State actors or terrorists (section 9), and exports known to be intended for weapons of mass destruction (section 11). Section 12 prohibits residents from knowingly brokering a prohibited or regulated transaction. Section 13 controls the export and transfer of notified items and their technology, and section 13(4) makes supplying a notified item to a foreigner inside India an offence.

Under section 20, persons in charge of a company's business are also guilty of its offences unless they prove lack of knowledge or due diligence. The WMD (Amendment) Act, 2022 inserted section 12A, which prohibits financing any activity prohibited in relation to weapons of mass destruction and gives the Central Government power to freeze, seize or attach related funds and economic resources. Section 12A comes into force on a date notified by the Central Government.

Section 51A of the Unlawful Activities (Prevention) Act, 1967 lets the Central Government freeze the funds of individuals and entities listed under the order implementing UN Security Council resolutions, prohibit anyone from making funds or services available to them, and bar their entry into India.

The Ministry of Home Affairs order of 2 February 2021 sets the procedure. The Ministry of External Affairs updates the list when the UN Security Council 1267 Committee (Al Qaida and Da'esh) and 1988 Committee (Taliban) change their lists, and financial regulators pass it to banks, depositories, intermediaries and insurers. A corrigendum of 29 August 2023 added that any person holding funds or other assets of designated individuals or entities must, without delay and without prior notice, freeze any transaction in them and immediately inform the nearest police station.

US OFAC sanctions, the US Export Administration Regulations and EU and UK sanctions are foreign laws, but they can affect Indian companies through US-origin items, dollar payments, banks and contracts. Screen for them and take specialist advice on whether they apply directly.