Changes in the SCOMET List: What it means for the Indian Defence Industry

India has recently announced a revised list of controlled items whose export is regulated. The revised list, which comes into effect from May 1, 2017, is part of “India’s International commitments and obligations in the field of non-proliferation.” The list has an impact on the domestic defence industry, which is slowly but steadily gaining a foothold under the Make in India programme.

Changes in the SCOMET List

The Directorate General of Foreign Trade (DGFT), vide Notification No. 5 dated April 24, 2017, has issued a revised list of what in Indian parlance is known as SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) items, whose export is either prohibited or permitted under an explicit authorisation. The revised list of items is part of India’s larger commitment to non-proliferation as enshrined in various laws, particularly the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005, and the Foreign Trade (Development and Regulation) Amendment Act, 2010. The revised list is also part of India’s efforts to harmonise its list of controlled items with those of the four multilateral export control regimes: Missile Technology Control Regime (MTCR), Nuclear Suppliers Group (NSG), Wassenaar Arrangement (WA) and the Australia Group. India is already a member of the MTCR besides being an adherent to NSG Guidelines. The latest revised list reflects not only the updated list of controlled items of the first two regimes but also of the latter which India wishes to join as a member.

In comparison to the previous SCOMET list which had eight categories, the revised list has nine broad categories, with each category containing an exhaustive list of items, running into over 200 pages. Category 8, the newly added one, has been included for the purpose of harmonising India’s list of dual use items with that of the WA. The nine categories of the revised SCOMET list are:

• Category 0: Nuclear material, nuclear-related other materials, equipment and technology
• Category 1: Toxic chemical agent and other chemicals
• Category 2: Micro-organism, toxins
• Category 3: Material, materials processing equipment, and related technologies
• Category 4: Nuclear-related other equipment, assemblies and components; test and production equipment; and related technology, not controlled under category 0
• Category 5: Aerospace systems, equipment including production and test equipment, related technology and specially designed components and accessories thereof
• Category 6: Munitions List
• Category 7: Electronics, computers, and information technology including information security
• Category 8: Special materials and related equipment, material processing, electronics, computers, telecommunications, information security, sensors and lasers, navigation and avionics, marine, aerospace and propulsion

Implications for the Indian Defence Industry

From the defence industry’s point of view, Category 6 (Munitions List), which was hitherto ‘reserved’, is the most relevant as the export of any items listed under the category would be controlled as per the new guidelines. It is, however, to be noted that, although the SCOMET list has included munitions items for the first time, a somewhat similar list was earlier available outside the SCOMET framework in the form of the list of Military Stores notified by the DGFT. With the formal inclusion of munitions items in the SCOMET list, the previous Military Stores list now stands withdrawn. This apart, the list of Munitions items, is much more comprehensive and in line with the munition items covered in the WA list. In comparison to 17 broad categories that the previous Military Stores list had, the munitions list now has 22 categories.

Export of SCOMET List items with the exception of Category 1A chemicals (which are also part of Munitions List’s Category 6A007.b) are permitted under an export licence authorisation to be provided by the competent authorities. With certain exceptions, the export licensing authority for munitions items is the Department of Defence Production (DDP), which was also the licensing authority for the previous military stores items. The DDP’s grant of export licence is governed by the Standard Operation Procedure (SOP), which has been revised to reflect the Munitions List and India’s commitment to non-proliferation. The revised SOP divides the whole procedure into six parts (as opposed to five parts in the previous SOP), with the inclusion of a dedicated part for the export authorisation of technology and software related to munitions items. The six parts are:

Part A: Export of select Munitions List items (mostly consisting of lethal items but excluding components and accessories)

Part B: Export of Munitions List items other than those covered in Part A

Part C: Export of Munitions List of Items for exhibition purposes

Part D: Export of Munitions List items for testing and evaluation

Part E: In-principle approval for Munitions List items for participation in Tenders/RFP [Request for Proposal]/NIT [Notice Inviting Tender]

Part F: Approval for transfer of technology/software for design, development, manufacturing, training, maintenance services, upgrade and overhaul of Munitions List items

Like in the previous SOP, the revised SOP also stipulates the standard conditions pertaining to multi-agency stakeholder consultation and end-use certification for the grant of export authorisation (see Table below). The consultation of stakeholders – who include representatives from the Ministry of External Affairs (MEA), the concerned armed force, Defence Research and Development Organisation, Planning and International Cooperation (PIC) Wing of the MoD and other concerned agencies – is mandatory for all items figuring in Parts A and F, whereas consultation with the MEA is mandatory only for items whose export destination is a country that figures in the MEA’s ‘negative list’.

Table: End Use and Stakeholder Consultation Requirements for Export Authorisation of Munitions List Items

	EUC	Stakeholders Consultation
Part-A (Lethal Items)	Mandatory. EUC to be signed and stamped by the government of the end-user country	Mandatory
Part-B (Components & Accessories)	Mandatory. EUC may not be signed and stamped by the government of the end-user country	Consultation with MEA only if the export is intended to a country which features in the MEA’s ‘negative list’
Part-C (Exhibition)	Mandatory. EUC may not be signed and stamped by the government of the end-user country	Required for Part A items. For Part-B items, consultation with MEA only if the export is intended to a country which features in the MEA’s ‘negative list’
Part-D (Testing & Evaluation)	Mandatory. EUC may not be signed and stamped by the government of the end-user country	Required for Part A items. For Part-B items, consultation with MEA only if the export is intended to a country which features in the MEA’s ‘negative list’
Part-E (Tender/RFP/NIT)	Mandatory. EUC may not be signed and stamped by the government of the end-user country	Required for Part A items. For Part-B items, consultation with MEA only if the export is intended to a country which features in the MEA’s ‘negative list’
Part-F (Software & Technology)	Mandatory. EUC to be signed and stamped by the government of the end-user country	Mandatory

A Caution for the Defence Industry

The formal inclusion of the Munitions List within the SCOMET framework explicitly brings the defence industry under the purview of India’s global commitment to non-proliferation. The defence industry is now expected to play the game by the rules set forth in various laws, including the provision of ‘catch-all control’ that prohibits anybody from exporting any material, equipment or technology knowing that such export could be used for weapons of mass destruction or their delivery systems. Any violation of laws will attract penalties ranging from suspension or cancellation of licence to punishment ranging from six months to life imprisonment.

The defence industry also needs to exercise caution in identifying the correct category in which an item intended for export falls. There may be a possibility of a few items figuring in both the Munitions List and one of other categories of the SCOMET List. For the defence industry, the key to decide category jurisdiction of an item is the end-use of the intended export. If the ultimate end use is for military purpose, then the category jurisdiction is the Munitions List; otherwise, other relevant category would apply. This simple understanding of category jurisdiction would save the industry crucial time in processing of export authorisation.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.