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European companies should know about BIS registration in India

 

Before you start importing or manufacturing your product in India, it is wise to check whether you need a mandatory BIS registration. This is a hallmark issued by the Indian government to guarantee the quality of specific products. There are registration options for around 900 products, but for more than 300 products BIS registration is actually mandatory. For example, foodstuffs, household electrical products chemicals, cement and steel. In this article, we explain what a BIS registration is and how you can obtain one.

Bis registration for foreign companies

What does BIS stand for?

The 'BIS' in BIS certification stands for the Bureau of Indian Standards, which is the national certification body of India. The bureau was established in 1986 with the aim of: 

  • offer consumers safe goods of reliable quality

  • minimising health risks for the consumer

  • human, plant and animal safety

  • environmental safety

  • prevention of misleading commercial practices

  • promotion of a culture of quality through the application of good manufacturing practice

  • educating the industry in various aspects of standardisation and testing

  • promotion of exports and encouragement of import substitution

  • monitoring the distribution of plant species

  • minimising waste

The BIS Product Certification System is one of the largest in the world, with over 26500 licence holders for more than 900 products. BIS certification allows licensees to use the popular ISI mark on their product, which in India is synonymous with a quality product. Within the BIS Product Certification System, there are four different ways or 'schemes' by which producers can apply for registration depending on their product.

The four different BIS Certification Schemes

1. The normal procedure for domestic manufacturers 

The applicant must submit the BIS certification application with the required documents and the required fee. After submitting the application, a preliminary factory assessment is carried out by a BIS employee. Subsequently, samples are tested at the factory and samples are also taken for independent testing in an external laboratory. BIS certification is granted if the samples meet the standards. Under this method, BIS certification is expected to be granted within 4 months of the application being submitted.

2. Simplified procedure for domestic manufacturers 

In the simplified procedure, in addition to the documentation required for the BIS registration, the applicant must also enclose a test report of a sample by a laboratory recognised by the BIS. If the test report is satisfactory, an inspection of the factory site is carried out by a BIS employee. The BIS certification is granted if the verification by the BIS officer is sufficient. With this method, it is expected that the licence will be granted within 30 days after submitting the BIS certification application with the required documents and the test report.

3. ECO Mark Scheme 

BIS license for environmentally friendly products is granted under a scheme separate from the normal BIS certification process. Eco-friendly products must meet additional requirements to qualify for the ECO mark. However, the licensing procedure is similar to that of the scheme for domestic producers.

4. Foreign Manufacturers' Certification Scheme (FMCS).

Foreign manufacturers should apply for their BIS registration, if mandatory, through the FMCS. In addition, it is also possible to obtain the registration as a foreign manufacturer if it is not mandatory for your product. 

Applying for a BIS registration through the Foreign Manufacturers' Certification Scheme (FMCS)

Over 300 products, ranging from air conditioners to aluminium foil, require foreign producers to apply for BIS certification. In addition, a mandatory registration is required for 49 electronic & IT products that are not on the standard list, because the application for that certification does not go through the FMCS. More about this specific application can be found here.  

To obtain the BIS registration, you first need to apply to the BIS and pay the application fee for registration. Please be aware that a separate application is required for each product. The application to the BIS can be done by two entities:

  • Your Indian liaison or branch office (as long as it has all the rights of the Reserve Bank of India to file an application) 

  • A legally appointed agent in India

It is highly recommended to choose the second option. The process starts with a lot of paperwork in which you have to demonstrate how the quality of the product is guaranteed. It has to be explained on paper exactly how the production processes work, from the purchase of the raw materials to the ways in which the final product is tested. Only a local expert with specific experience in applying for BIS certification for international companies will understand how everything needs to be documented and submitted. If you place this task with your local entity and they start without experience, you are bound to experience a delay of several months.

Once your representative has submitted everything, your application will be examined by the BIS. If it is found to be complete, your application will be officially registered. A visit to your production facility is then scheduled with your Indian representative. The costs for this visit are at your expense and include working days, travel and accommodation expenses and the BIS employee's daily allowance. During the visit, the inspector will check the following items:

  • Whether your production process and your testing facilities meet Indian standards

  • The competence of your permanent test staff

  • Whether samples of your product meet the requirements of the Indian standard.

The BIS inspector does not only carry out tests on site, but also takes samples which you must have tested by an external BIS-approved laboratory in India. The costs for these tests are also for you.

If the BIS considers the results of the inspection sufficient and the independently tested samples also meet the Indian standard, you will receive your BIS registration. Your representative must then sign the terms of the BIS agreement. This means that you are willing to comply with the Scheme of Testing and Inspection (STI) and will pay the annual minimum marking fee and the licence fee. 

Minimum marking fee and licence fee 

You have to pay the annual minimum marking fee (amount depends on your product) and the licence fee (₹1000) once the BIS registration is granted. Thereafter, you may pay the marking fee either quarterly or annually. A BIS licence is normally granted for the duration of one year, but extension options of up to 5 years are available for most products.

The renewal process is much simpler than the initial BIS registration as it does not require a visit to your facility. When applying for a renewal, you must submit the following documents:

  1. Renewal form

  2. Production details of products marked ISI

  3. Extended bank guarantee (six months longer than the validity of the licence)

  4. Proof of payment of the marking fees

No Objection Certificate

It sometimes happens that the code of your product indicates to customs that a BIS registration is required, but this is not the case. It also happens regularly that customs confuses products that are "similar" to your product and fall under the "mandatory certification". Your product is then detained by the authorities, leading to considerable delays, and you may even be fined.  

In order to prevent this, a special "No Objection Certificate" (NOC) can be requested from BIS, which proves that the material is not subject to "compulsory certification". BIS checks on a case-by-case basis, using test reports, product specifications, declarations and other evidence, whether a NOC is applicable. However, the fee for this certificate is limited. It takes approximately two months to obtain an NOC. A NOC is issued for every import of the same product and must be presented together with the cargo documents. 

 

How to handle post-pandemic exports to India smartly

 

Exporting to India is currently challenging due to the ongoing Covid-19 pandemic. Prices for international sea and air freight have doubled since last year. At the same time, the Indian economy is recovering rapidly and consumer spending is on the rise. How do you export to India intelligently? Our supply chain management expert, Shashank Verma, provides advice for companies exporting to India.

export-distribution-sales-india

Challenges for European exporters

"European companies exporting abroad are currently facing several challenges worldwide," Verma says of the impact of Covid-19 on international trade flows. "Firstly, the number of available cargo ships was already reduced before the pandemic because these boats did not comply with the IMO's new climate rules. Then in 2020, when the pandemic broke out and almost the entire world went into lockdown, there were thousands of containers get stuckwhich in turn caused a shortage of available containers. The combination of these shortages then caused sea and air prices to rise dramatically, by over 300% on some major shipping routes. As a result, many European exporters have had to raise the prices of their products or reduce their profit margins. This leads to lower sales in India."

High prices and too much stock

According to Verma, the problems with international distribution, and the high freight costs that go with it, will be solved only in two years' time. In the short term, this means that European companies need to re-evaluate the demand for their product in India and adjust their strategy accordingly. "We see many exporters making the same mistake," says Verma. "Now that India is open again, large volumes of products are being exported to the country in a short period of time, fearing a third wave and new lockdowns that will bring trade between Europe and India to a halt again. But this tactic can cause problems. Not only are the warehouses overflowing at the moment, but it is also questionable whether these producers will be able to sell all that stock. At the moment, we see that Indian consumers prefer goods produced in India because the prices are much lower than those of imported products. Therefore, it is advisable not to hold more stock in India than you can sell in a quarter. Do you already have a stock surplus in India? Then it is smart to reduce it by redistributing products in the region.

In the long run, a production site in India can bring you a lot".

For the long term, Verma advises companies to look at the possibilities of setting up a production site in India. "Not only does this give you a better competitive edge over local producers and other international players, it also offers you a lot of cost advantages such as the Made in India advantage in tenders, and the opportunity to customise your product or develop new versions of your products that appeal to a wider audience."

Apart from the advantages that a local production site offers you in the country itself, setting up a second factory in India is also a good way to spread your risk. "Not only now, but also in the long run, it is smart to produce in different locations," says Verma. "That way, you can create manufacturing hubs from which you can start exporting in the region for lower cost and greater convenience. In the past, India was known for its restrictive rules for companies coming to manufacture in the country. But the government is increasingly looking to brand India as an export country and is offering interesting subsidies for many sectors."

Are you facing specific problems exporting your product to India that you could use some advice on? Our local experts, such as supply chain management expert Shashank Verma, are ready to assist you. Please feel free to contact us and together we will look for the best approach to your challenge. 

 

Five tips for exporting to India

 

Exporting to India is an interesting way for European companies to start selling in the country, but it requires good preparation, customisation and patience. Here are our five tips for exporters looking to conquer India.

1. Consider India as a continent

Remember that the EU internal market is more developed than the Indian internal market. In practice, this means that it is easier to drive a truck from Portugal to Germany than from, say, Tamil Nadu to Gujarat. It is therefore advisable not to start immediately with the whole of India, but to choose a state of India. Especially considering the differences at state level in terms of legislation, language, culture and climate in India.

2. Export to India requires customisation

Most companies that want to export to India tailor their products specifically to the needs of Indian consumers. Think of TomTom that developed a navigation system specifically for the Indian market that is based on landmarks instead of street names; or Dr. Oetker that decided to focus on mayonnaise instead of frozen pizza and home baking products; and think of Philips that is developing highly simplified medical equipment specifically for India. Of course, your customised product must also be of top quality. The whole world sees India as a market: the competition is huge.

3. Take into account import duties in India

The import duties in India are around 30%. This means that the actual "landed costs" of your product (including import duties, transport, insurance, etc.) for your Indian customer can sometimes be one and a half times your invoice. Keep this in mind during the negotiations.

You can also choose not to do these negotiations yourself, but to work with an agent, distributor or dealer. Such a local partner not only has important knowledge of your sector, but also already has a large customer base to whom your product can be promoted. Wondering what to look for when looking for a partner in India? Here, we compare the different options:

4. Working capital in India is expensive

Be aware that working capital is expensive in India. Interest on credit can easily reach 20-25% per year. The high cost of capital is an additional reason for Indian companies to only deal with foreign suppliers that can offer high added value. 

5. Think out-of-the-box

Exporting high technology to India is usually not easy, due to high costs for the customer. It is therefore worth developing an alternative strategy for exporting to India. The Dutch company Fresh Food Technology is a good example. The producer of refrigerated storage systems for the fruit and vegetable sector broke open the Indian market with a creative CSR project. By cooperating with a local NGO and a socially committed investor, it managed to build its first installation in India. Today, more than 30% of its turnover comes from India.