India: New policy to regulate functioning of used clothing by SEZs

Trade & Policy

India: New policy to regulate functioning of used clothing by SEZs

The Special Economic Zone (SEZ) Division, Department of Commerce, Ministry of Commerce & Industry, Government of India, has prescribed a new policy to regulate functioning of worn/used clothing units in SEZs carrying on reprocessing/recycling of used clothing. Each consignment of used clothing imported by unit shall be accompanied with a certificate from the exporter/agency in which it was generated regarding disinfection and fumigation of the containers from an agency licensed in the state of origin of worn clothing with import documents.

In case of misdeclaration regarding the materials being free from any toxic/hazardous substances by the importer, action would be taken as per the Foreign Trade (Development & Regulation) Act, 1992. The units should fulfill the export obligation criteria including NFE as per the provisions of the policy and no broad branding of unrelated products shall be allowed. All units would be required to ensure that certain minimum percentage of the unit’s annual turnover is physically exported out of the country. At the end of the second year, the minimum physical export obligation for recycling units would be at least 40 percent of their total annual turnover. By the end of the fourth year, this obligation would increase to 80 percent, and recycling units have to export 100 percent of their recycled goods by the end of the fifth year.

Further, the sales of domestic tariff area (DTA) of un-mutilated clothing on account of export surplus or export rejects will not exceed 15 percent of the physical export turnover of the unit. DTA means an area within India but outside the SEZs and/or export-oriented units (EOUs). Before the clearance of the used clothes to DTA, all imported consignments of such used clothes shall be subject to 100 percent scrutiny at the premises of the unit by SEZ authorities.

Compliance with parameters for import of all used clothing and other regulatory requirements as specified in this instruction and applicable through various legal provisions, as amended from time to time shall be kept in view by the Board of Approval while considering LoA renewal cases etc, relating to units in SEZs carrying on recycling of used clothes.