Background
In our previous article, 'Strengthening India's Export Controls: The Critical Role of Internal Compliance Programs', we examined the scope of SCOMET Law in India (dealing with export of dual use items) and touched upon what an Internal Compliance Program ('ICP') is and its significance in the export control framework.
Recently, the Directorate General of Foreign Trade ('DGFT') issued Trade Notice No. 07/2025-25 dated 14 July 2025 under Para 1.07A of the Foreign Trade Policy, 2023 ('FTP'). Through this Trade Notice, the DGFT has invited views, suggestions, comments, and feedback from stakeholders—including exporters, industry associations, and experts—on proposed amendments to the Draft Management System Requirements for ICP for Dual-Use Items, which are annexed to the notice.
Against this backdrop, the present article highlights the key considerations for entities while drafting their ICPs in line with the Draft Management System Requirements.
What is ICP and why is it needed?
In brief, the SCOMET list is the list of the dual-use items that have been identified under FTP, whose exports are to be controlled. Non-compliance with the procedures prescribed w.r.t. SCOMET list will have severe consequences under multiple laws.
An ICP is a structured set of internal policies and procedures designed by companies handling dual-use items to ensure compliance with export control regulations. It plays a critical role in preventing violations and fostering responsible international trade practices. Previously, ICP references were limited to General Authorization Policies under Chapter 10 of the Handbook of Procedures, 2023, which outlined submission requirements. This requirement to have an ICP in place has also been reinforced by the current Trade Notice dated 14 July 2025 and Handbook on India's Strategic Trade Control System.
Introduction of Draft Management System Requirements
Trade Notice dated 14 July 2025 has been issued by the DGFT. Draft Management System Requirements for ICP for Dual-use items have been formulated and are enclosed as an Annexure to the Trade Notice. With the recent Trade Notice, ICPs have received formal recognition—marking a significant step towards better organization of India's export control framework.
The draft document establishes a comprehensive framework to guide organizations in developing, implementing, maintaining, and continually improving effective ICPs. It is relevant for all organizations that deal in the export/transfer of dual-use items. Considering the mandatory requirement of industry to comply with export control regulations, it is essential for the stakeholders to go through the draft ICP and provide their views, suggestions, etc. which will help to standardize the elements of effective ICP. However, irrespective of such views being provided, the FTP makes it clear that ICP must be maintained by each organization. The nature of the ICP maintained can vary from organization to organization.
While organizations have been granted flexibility to draft and maintain their ICP, there are certain key factors highlighted by the Draft Framework which must necessarily be incorporated in each ICP. Certain such key factors are highlighted below.
Onus on management and appointment of Chief Export Control Officer
The framework released contemplates and necessitates at all points a key role of the management in drafting and maintaining the ICP in its full spirit. Senior management should cultivate a compliance-driven corporate culture, reinforcing the importance of adhering to export control laws. The Framework also contemplates issuing an annual management commitment statement which should be reviewed and disseminated annually. There should be comprehensive training programs to educate all personnel on the ICP procedures, and individual roles and responsibilities.
One of the key requirements that comes across from the present framework, in line with leadership commitment, is the need for organizations to have a Chief Export Control Officer ('CECO') who would be assigned an export control function. The responsibilities of this role are to be clearly defined, which will include the following:
a. Development and revision of the ICP, operational procedures, etc.
b. Having expertise and staying updated with the current information on export control laws and regulations.
c. Represent the organization in matters related to export regulations such as licensing requirements, items classification, disclosures, etc.
d. Classification/Identification, screening, and approval of export controlled and related business transactions.
e. Providing guidance to the employees and organization's affiliated entities.
The Draft guidelines do not explicitly enlist the liabilities of the CECO including in a scenario where the entity has contravened export control legislation.
Factors affecting ICP design
An ICP must be tailored to the specific entity for which it is developed. Key factors influencing its structure include:
a. Size and organizational structure: including subsidiaries, partnerships, and outsourcing arrangements.
b. Nature of operations: their complexity and associated risk landscape.
c. Geographical presence: as local regulatory requirements and enforcement activities vary.
d. Subsidiary footprint and customer diversity, which affect compliance complexity and risk exposure.
e. Nature of dual-use items involved: including their applications and associated risks.
Additionally, regulatory bodies expect entities to establish controls that ensure compliance with applicable laws and develop policies aligned with these standards. Robust reporting mechanisms also form a critical part of these expectations.
Scope of ICP and its implementation
To ensure compliance with national and international regulations on the export of dual-use items, the ICP's scope should include:
a. Adherence to relevant export control laws and regulations.
b. Identification and assessment of potential compliance risks and implementation of mitigating controls.
c. Development and documentation of clear policies and procedures for employees.
d. Regular review and updating of these policies and procedures.
e. Training employees on the compliance program and its significance.
f. Establishing a process for reporting suspected compliance violations.
Other key elements in the draft management system requirements
Beyond the points discussed above, the Draft Requirements emphasize additional areas:
a. Planning the Service Delivery
* Risk Management: Identify potential compliance risks, adopt internal screening measures, and ensure item classification accuracy.
* Service Quality Objectives: Establish clear objectives that guide ethical conduct within the organization.
* Planning for Change: Implement structured processes for managing and communicating operational changes.
* Alignment with Sustainable Development Goals (SDGs): Recognize linkages between export activities and UN SDGs.
b. Support Measures
* Resource Allocation: Ensure adequate resources for ICP development and implementation.
* Competence and Training: Provide updated training on export control laws, internal processes, and role-specific responsibilities.
* Awareness and Communication: Promote awareness across all organizational levels and establish clear communication channels—both internal and external.
* Documentation: Maintain a framework for managing all ICP-related documents.
c. Operational Controls
* Operational Planning: Implement, monitor, and maintain processes necessary for compliance.
* Grievance Handling: Develop fair and timely procedures for addressing compliance-related complaints.
d. Performance Evaluation
* Periodic Reviews: Test and recalibrate the ICP regularly.
* Internal Audits: Conduct audits to identify gaps or inconsistencies.
* Management Reviews: Engage senior leadership in reviewing ICP effectiveness.
e. Continuous Improvement
* Ongoing Enhancement: Strive for continuous improvement in compliance processes.
* Corrective Actions: Promptly address and rectify any identified non-compliance or risks thereof.
The Draft Management System Requirements for ICP for Dual-Use Items provides an example of implementing ICP by an entity. This example highlights how a good and effective ICP can reduce SCOMET license processing times, avoid potential penalties by proactively identifying violations through internal reporting and secure smoother access to global authorizations.
Conclusion
While it is not explicitly said that ICP is mandatory for all exporters for dual use items, it can be safely gathered that this is an expectation of DGFT for grant or issuance of SCOMET licenses.
Pertinently, ICP is not merely a document. The DGFT is intending to provide an SOP which is clearly defined and followed by all employees. Thus, mere documentation is not sufficient, the entity must ensure everyone is adequately made aware of the requirements and trained in the law, to comply with the law to the fullest. This is the first step to ensure a compliant company and by extension a compliant country.
Considering the export boom expected from India, in light of India entering into new Foreign Trade Agreements with highly regulated economies like UK, and shortly with USA, EU etc. the need for just compliance is strengthened and is of the utmost importance. Countries like the UK, USA, and EU are regions which demand and insist on utmost compliance with law and legal mandates. Thus, to cater to these countries, along with requirements of product quality, care should also be exercised to ensure that procedural and legal compliance requirements are also fully adhered to. As the SCOMET law is stemming out of India's commitment to International Treaties and Agreements, it is safe to say that other parties to these treaties (like the USA, UK, EU) will need the exporter to fully comply with the legal mandate: not just in name, but also in letter and spirit.
The Draft explicitly states that its scope extends to all entities involved in the export or transfer of dual-use items. However, given the global environment marked by increased movement of dual-use goods, the need for transparency and accountability in such transfers is critical. Moreover, in today's vigilant enforcement landscape, investigating agencies are increasingly scrutinizing exports to detect potential SCOMET or dual-use classifications. Thus, implementing an ICP can be beneficial even for entities that do not regularly handle dual-use items, as it will help the entity to keep a record of the nature of the items exported and to justify their compliance posture with robust documentary evidence if required.
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.
