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Quality Control Orders and Trade
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The experts are raising concerns that quality control orders are being misused to restrict imports, causing supply chain disruptions.
Understanding Quality Control Orders (QCOs)
- Quality Control Orders (QCOs) are mandatory quality standards set by various central government departments to ensure that products sold in the Indian market meet specific benchmarks.
- These standards apply to both domestic and foreign manufacturers, with compliance being assessed through testing, inspection, and certification by the Bureau of Indian Standards (BIS).
- QCOs have been issued for a wide range of products, including toys, footwear, electronics, electrical appliances, steel, and textiles.
Why is India Issuing More QCOs?
- Developed countries regulate product quality through QCOs that apply to all manufacturers, regardless of origin.
- As India lowers import duties, QCOs have become a key tool for maintaining quality control and managing imports.
- Before 2014, only 14 QCOs covered 106 products in India. However, since the enactment of the BIS Act in 2017, over 140 QCOs have been introduced, covering approximately 550 consumer and industrial products, with many more in progress.
- While QCOs aim to improve product standards, they have also sparked debate over their impact on trade and industry.
- Businesses argue that these regulations create unnecessary trade barriers, lack transparency, and disrupt supply chains.
- For instance, strict QCOs on steel imports have led to shortages, affecting various industries reliant on the material.
Challenges in Steel Imports
- The Ministry of Steel mandates that foreign manufacturers obtain BIS certification for 1,376 steel grades under the QCO framework.
- However, import restrictions extend beyond these grades, requiring a No Objection Certificate (NOC) for all steel imports, even for grades not covered under QCOs.
- This regulation is particularly problematic, as there are over 10,000 globally recognized steel grades.
- The complex approval process—requiring clearance from multiple regulatory bodies including the Ministry of Steel, BIS, and Customs—lacks coordination and functions like an outdated licensing system.
- As a result, importers face delays, increased costs from demurrage fees, and business disruptions due to supply chain bottlenecks.
Concerns Over Selective Approvals
- There have been concerns about the transparency of BIS approvals for foreign suppliers.
- In some cases, QCOs appear to have been selectively issued to benefit certain foreign firms that have joint ventures with large Indian companies, while applications from other foreign suppliers remain pending.
- Such practices raise concerns about fair competition and the possibility of market distortions.
Improving QCO Implementation
To ensure that QCOs enhance product quality without becoming barriers to trade, India must adopt a more structured and transparent approach. Several key measures can help improve their implementation:
- Establish Clear Timelines: BIS should define predictable timelines for inspections and QCO approvals to prevent unnecessary delays.
- Limit NOCs to Regulated Products: NOCs should not be required for products that do not fall under QCO regulations.
- For example, India mandates NOCs for all steel grades, even though only 1,376 out of 10,000 global grades are regulated.
- Exclude Non-Domestically Manufactured Products: QCOs should not apply to products that India does not manufacture, such as Cold Rolled Grain Oriented (CRGO) steel, which is essential for transformers and primarily sourced from international suppliers.
- Ensure Fair and Non-Selective Approvals: BIS should ensure that approvals are granted fairly and are not selectively delayed based on the applicant’s country or business affiliations.
- Provide Sufficient Transition Periods: Businesses, particularly small and medium enterprises (SMEs), need adequate time to adapt to new regulations.
- While Europe allows a four-year transition period for new safety standards, India’s rapid implementation has created compliance challenges.
- Align QCOs with International Standards: Standardising quality requirements with global benchmarks can enhance India’s export competitiveness and attract foreign investment.
- Strengthening testing facilities, accreditation systems, and market surveillance will also improve overall efficiency.
- Conduct Regulatory Impact Assessments: Before implementing new QCOs, the government should assess their potential impact on trade, supply chains, and industry competitiveness. This will help mitigate disruptions and support better decision-making.
Preventing the Misuse of QCOs
- With global tariffs declining, many countries are using QCOs as a means to regulate trade.
- For example, China employs pre-registration and factory inspections to delay import approvals.
- In India, BIS factory inspections currently lack clear timelines, raising concerns that QCOs could be misused as a trade restriction tool rather than a genuine quality control measure.
While QCOs play a crucial role in ensuring product quality, their implementation must be transparent, efficient, and aligned with global best practices. By streamlining approval processes, conducting thorough impact assessments, and ensuring fair competition, India can strengthen its manufacturing ecosystem while maintaining its reputation as an open and business-friendly economy.
