DGFT Delists 15 Scrap Inspection Firms Over Certificate Issuance Lapses

DGFT Takes Regulatory Action Against Scrap Inspection Firms Amid Import Challenges

The recent delisting of 15 scrap inspection firms by the DGFT highlights growing regulatory scrutiny in India’s metal scrap import sector.

Regulatory Scrutiny Intensifies

The DGFT’s decision to delist these 15 PSIAs follows a review that uncovered significant lapses in the certification process. The agencies were found to have issued a large number of PSICs without adhering to the required inspection protocols. This regulatory action is part of a broader effort to tighten the certification regime, ensuring that only compliant agencies can facilitate the import of metal scrap into India.

As a result of this delisting, importers are facing new hurdles. An executive from a listed metal recycling company reported that they had to pay penalties for consignments inspected by now-unrecognized agencies. This situation has created a backlog and confusion at ports, as customs officials are rejecting PSICs from delisted firms, complicating the clearance process for many importers.

Impact on Importers and Trade

The regulatory changes have led to significant operational challenges for importers. The DGFT’s recent mandate requiring PSIAs to issue PSICs on the same day as inspection was later adjusted to allow a two-day window. However, this change has not alleviated the issues faced by importers whose cargo was already in transit when the new rules were implemented. The executive noted that penalties were incurred on multiple cargoes due to the inability of PSIAs to upload certificates within the stipulated timeframe.

With the delisting of these PSIAs, the DGFT has recognized additional agencies to maintain inspection capacity. However, the immediate fallout has been a rise in costs and delays for importers, who are now navigating a more complex regulatory landscape.

Industry Response and Future Prospects

The Material Recycling Association of India (MRAI) has voiced its concerns over the PSIC/PSIA mechanism, advocating for the use of destination-side radiation scanning infrastructure at Indian ports. MRAI officials argue that the existing capabilities at Indian ports could provide adequate safeguards without relying on foreign inspection agencies, potentially saving significant foreign exchange.

The DGFT, in response to industry feedback, is currently consulting with the Department of Revenue regarding the operational status of scanning infrastructure across ports. The regulator has indicated that expanding the list of safe countries and regions is a priority, which could further reduce reliance on PSIAs and streamline the import process.

Key Highlights

• DGFT has delisted 15 PSIAs for lapses in issuing PSICs.
• Importers face increased penalties and delays at ports.
• New regulations require PSIAs to issue PSICs within two days of inspection.
• MRAI advocates for using domestic scanning infrastructure to reduce costs.
• DGFT is consulting on expanding the list of safe countries to ease trade.

Investor Note: The recent regulatory changes by the DGFT underscore the importance of compliance in the metal scrap import sector. Investors should monitor how these developments affect operational costs and trade dynamics, particularly as the industry adapts to new certification requirements.