At the recently concluded Defexpo 2022, our Defence Minister reiterated India's defence export target worth $5 billion by 2025. Focussed on turning India into a net exporter from being a net importer, it was emphasised that the target reflects the intent of making India an export-oriented defence manufacturing hub.

India's arms exports are said to have grown to US$ 1.5 billion during FY 2021-22 with Mauritius, Mozambique and Seychelles becoming major buyers of arms during 2017-2021. The proposed agreement to co-develop Air Launched UAVs under the India-US Defence Technology and Trade Initiative is seen to be the starting point for more such projects. The United States has categorised India as a "Major Defence Partner" and is seeking to enhance India's ability to deter China.

There is an export deal worth US$ 375 million with the Philippines for exporting Brahmos supersonic cruise missiles, including supply of three missile batteries, training operators and maintenance and an integrated logistics support package. India is also in talks with some Middle Eastern countries like UAE and Saudi Arabia for exportin the Brahmos missile and Akash air defence missiles.

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Recent policy announcements and export trends validate these statements. Government's decision to set aside 25% of the defence R&D budget for private entities and defence start-ups is also witnessing the emergence of a robust public and private defence industry.

Is the Indian defence industry compliance ready?

This impetus to defence manufacturing and exports and promotion of private entities, including start-ups, highlights the issue of awareness and preparedness (or lack thereof) amongst various constituents of the defence industry to remain compliant with their domestic and international obligations.

India's commitment to ensuring world peace is well established and recognised through its memberships of the multilateral export control regimes, beginning with the Missile Technology Control Regime in June 2016, Wassenaar Arrangement in December 2017 and the Australia Group in January 2018. India is also an adherent to the Nuclear Suppliers Group since 2008.

Correspondingly, industry bears corporate responsibility for upholding international non-proliferation norms and for adherence to export controls and sanctions laws that apply in all jurisdictions in which they are operating. It is imperative that the awareness of compliance under export controls and sanctions laws is disseminated far and wide ensuring that controlled goods do not end up in the hands of non-State actors, even inadvertently.

Export Controls

Export controls are legal requirements that affect where to do business, who to do business with, and what industries and technologies (such as defense and aerospace) have a higher risk of being subject to export controls.

In India, export controls regulate the export, transfer, re-transfer, brought-in-transit, trans-shipment and brokering of goods, services and technology (both tangible and intangible) specified in the List of Special Chemicals, Organism, Materials, Equipment and Technologies (SCOMET List), which can be used for the development, production, handling, operation, maintenance, storage or dissemination of a nuclear, chemical or biological weapon or of missiles specially designed for delivering any such weapon. Anything not expressly covered in the SCOMET List can also be subjected to the catch-all controls where the exporter has knowledge that the goods, services or technology are intended to be used in the design or manufacture of a biological, chemical or nuclear weapon or other nuclear explosive device or in their missile delivery systems.

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Export of controlled goods, services and technology is either prohibited or regulated. There is a general prohibition on direct or indirect export to a non-State actor or terrorist. There are also country, individual and/or product specific prohibitions on export to sanctioned countries like the Democratic People's Republic of Korea, Iran and Iraq targeted towards maintenance of national security, public order and fulfilment of obligations under the Charter of the United Nations for the maintenance of international peace and security.

Export Authorisations

There is a requirement of obtaining export authorisations for exports, transfers, re-transfers, brought-in-transit, transhipment of and brokering of dual use goods and munitions listed in the SCOMET List. While the overall regulation of the SCOMET List, which comprises of India's dual-use and munitions control list, is under the Directorate General for Foreign Trade (DGFT), Category 6 of the SCOMET List (Munitions List) is implemented by the Department of Defence Production (DDP) and the category pertaining to nuclear and nuclear related material is implemented by the Department of Atomic Energy.

Increasing emphasis on compliance programmes for export of Munitions

Regulators have been promoting active and voluntary participation of the industry, encouraging it to ensure safe and authorised export of munitions and dual-use items by putting in place internal checks and balances, taking steps to sensitize and train their employees to the export control requirements and leading this awareness from the very top in the company.

Standard Operating Procedures (SOP) issued by DDP

This emphasis on compliance programmes is best reflected in the SOP dated 21 June 2022 issued by the DDP, for the implementation of controls concerning the Munitions List. The application required to be made under the SOP for export authorisation seeks an express declaration from the applicant that it has in place an internal control programme to prevent transfer of goods/technologies to countries/entities facing United Nations Security Council (UNSC) sanctions or arms embargo.

The SOP, inter alia, also provides that for grant of approvals for intra-company transfer of technology/software for design, development, manufacturing, training, maintenance services, upgrade and overhaul, the applicant exporter may submit End-use Certificates (EUCs) signed by their parent companies. The EUC must include the internal compliance programme (ICP) and technical compliance programme (TCP) as per the best practices recommended under the Wassenaar Arrangement.

Export authorisations granted pursuant to the SCOMET List are "shipment specific" and "time specific". Generally, export authorisations for the SCOMET List are valid for a period of two years with only two permissible extensions of six months each. However, regulators have announced certain general licenses that are valid for two years (with the exception of GAICT, as discussed below) and do not restrict the number of shipments thereunder. The underlying eligibility for these general licenses is the existence of an effective internal compliance programme.

Open General Export Licenses (OGEL) issued by DDP

On 14 June 2022, DDP issued three OGELs pertaining to:

  • Intra-company transfer of technology (OGEL1)1;
  • Export of parts and components a.2; 6A003.c.3; 6A0054; 6A0065; 6A0096; 6A0107; 6A0138 and 6A0159 (OGEL 210; and
  • Export of major platforms and equipment (OGEL 3)11

OGEL 1 and OGEL 2 are available for exports made to Belgium, France, Germany, Japan, South Africa, Spain, Sweden, UK, USA, Canada, Italy, Poland and Mexico.

OGEL1 is applicable to intra-company transfer of technology/software under categories 6A02112, 6A02213 of the Munitions List. The permissible exports under OGEL1 include:

Control List Classification Technologies of software related to items listed categories
6A021 and
Components of ammunition & fuze setting device without energetic and explosive material listed in Category 6a003a and 6A003c
All goods of category 6A005
All goods under category 6A006 except complete systems
All goods under category 6A009 except complete systems

All goods under category 6A010 except

  • complete aircraft; or
  • complete unmanned aerial vehicles (UAVs) and any components specially designed or modified for UAVs
All goods under category 6A013
Category 6A01414 Simulators only
All goods under category 6A015

OGEL2 is applicable for export of parts and components for the following categories:

Control List Classification
Components of ammunition & fuze setting device without energetic and explosive material
6A005 All goods under this category except complete systems
6A006 All goods under this category except complete systems
6A009 All goods under this category except complete systems

All goods under category 6A010 except

  • complete aircraft; or
  • complete unmanned aerial vehicles (UAVs) and any components specially designed or modified for UAVs
6A013 All goods under this category
6A015 All goods under this category except complete systems

OGEL 3 is a license for export of major platforms and equipment to the following countries:

Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Ukraine, the United Kingdom and the United States.

The items permitted to be exported under OGEL 3 are:

Control List Classification
6A014 Simulators only
6A015 Night Vision Devices, Thermal Night Sights, Thermal Binocular

These OGELs, inter alia, require:

  • setting up of an appropriate/certified ICP/Export Compliance Programme (ECP) of its own or the exporter's compliance with the ICP of its subsidiary/principal abroad to which the items will be exported. This could be self-certified by the Compliance Manager of the exporter or could be a government certification pertaining to supply chain, security and trade of items like the Authorised Economic Operator (AEO) Scheme;
  • agreement to an on-site inspection/ audit / verification by DDP;
  • declaration that a comprehensive set of internal controls exists to prevent transfer of goods to countries/ entities facing UNSC sanctions or arms embargo;
  • the internal controls must be comprehensive enough to ensure that the company does not export, transfer or share any items without the necessary authorisations, including procedures requiring:
  • proper classification and marking prior to export;
  • items are not transferred or shared with a denied party in contravention of any embargo, sanction, debarment or denied party designation maintained by any government or union of states (e.g., European Union); and

(c) robust access controls to protect the items from unauthorised access.

  • no export or transfer must be done if the company is aware or suspects that these items may be used, in whole or in part, for weapons of mass destruction or their delivery systems;
  • where the exporter senses that items could be covered under catch-all, then the exporter must follow the regular procedure under the SOP for obtaining authorisation;
  • post-shipment reporting in the prescribed format, providing details of the items exported along with details of the consignee, end users, technical specifications and destination countries for each export consignment;
  • recordkeeping for a period of five years;
  • Any change in the ICP, company structure, internal process or trade compliance team must be notified to DDP within 15 days of such change.

Emphasis on having effective internal controls is not restricted only to exports under the Munitions List. On 03 June 2022, DDP also issued revised Guidelines for Issuance of End User Certificate (EUC) for Indian companies (Public and Private) against Requirement of Defence Goods and Technologies Abroad (Guidelines). Pursuant to the Guidelines, EUCs may be issued for the following:

  • import of equipment/ articles/ component/ material by Indian Defence Industry meant for use of Indian Armed Forces;
  • import of equipment/ articles/ component/ material by Indian Defence Industry meant for the purposes of Design & Development and Export;
  • import for direct acquisition from foreign companies as provided in the relevant Defence Procurement Procedures.

These Guidelines, require the importing company to furnish an express declaration that it has put in place a robust ICP as per the "Best practice Guidelines on ICP for Dual-Use Goods and Technologies" of Wassenaar Arrangement and provide details of the Internal Compliance Officer. Failure may result in cancellation of the Defence Industrial License of the importing company.

Compliance programmes and dual-use control list

DGFT has also provided for submission of a compliance programme for exports pursuant to the Global Authorisation for Intra-Company Transfer (GAICT). GAICT is applicable to export and re-export of items, including specific software and technology under SCOMET Category 8 from an Indian parent company exporting to its foreign subsidiaries or an Indian subsidiary of a foreign company exporting to its foreign parent or parent's foreign subsidiary companies.

Export/ re-export is allowed to Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Republic of Korea, Romania, Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, United States.

GAICT remains valid for three years and requires the ICP to be certified/approved by the Compliance Manager of the company or by any governmental agency such as the AEO scheme, etc. and is subject to on-site inspections and catch-all controls. The Indian subsidiary company can also demonstrate compliance with the ICP of the foreign parent company.

Constituents of Compliance Programmes

As can be seen, export control and sanctions laws obligate the various constituents of the Indian defence industry to implement efficient and effective compliance programme to ensure that there is no violation. Compliance programmes, be it ICP, ECP or TCP, are governed by the globally accepted principles of self-management and self-declaration.

Most entities today operate in a transnational environment, with their foreign parents or subsidiaries, rely on diversified supply chains, and employ foreign nationals. Software and technology are transferred around the globe, information shared across borders and software and technical data are stored in a cloud.

This global trade environment and the requirements of export controls and sanction laws necessitates a comprehensive understanding of potentially complex issues, such as strategic trade and sanctions compliance, international security concerns, supply chain issues, latest technological developments, intangible technology transfer controls and catch-all controls.

Trade compliance only matters if it is effective to prevent, detect, and correct violations of law. These best practices focus on the features of the programme, such as screening, training, monitoring, auditing, policies, procedures, controls, and so on.

An effective compliance programme provides an organization protection against violations of law; reduces non-legal risks; and provides a competitive advantage. Strong compliance can keep an organization out of the news for doing things that would draw adverse attention. If these are not reasons compelling enough, a strong compliance program could be a mitigating factor encouraging the regulators and prosecutors to ease enforcement.

Key ingredients of an effective and efficient compliance programme, such as:

  • Top-level management commitment to compliance
  • Organisation structure, responsibilities and resources
  • Training and awareness raising
  • Export screening process and procedures
  • Performance review, audits, reporting and corrective actions
  • Recordkeeping and documentation
  • Physical and information security

directly address the obligations under export controls and sanctions laws and the corporate responsibility for upholding international non-proliferation norms. There cannot be more compelling reasons for implementing compliance programmes to strengthen the desired defence exports.



2. Ammunition and fuze setting devices as specified and specially designed components therefor

3. Fuze setting devices specially designed for ammunitions specified by 6A003.a.

4. Fire control and related alerting and warning equipment and related systems, test and alignment and countermeasure equipment specifically designed for military use and specially designed components and accessories therefor

5. Ground vehicles and components

6. Vessels of war (surface or underwater), special naval equipment, accessories, components and other surface vessels

7. Aircraft, lighter-than-air vehicles, UAVs, aero-engines and aircraft equipment, related equipment and components specially designed or modified for military use

8. Armoured or protective equipment, construction and components

9. Imaging or countermeasure equipment, as follows, specially designed for military use, and specially designed components and accessories therefor



12. Software, as defined

13. Technology, as defined

14. Specialised equipment for military training' or for simulating military scenarios, simulators specially designed for training in the use of any firearm or weapon specified by 6A001 or 6A002 and specially designed components and accessories therefor


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.