QCO Exemptions for R&D and Samples: The Exact Process

Many importers assume the Bureau of Indian Standards (BIS) Quality Control Order (QCO) regime admits no relief — that once a Harmonised System of Nomenclature (HSN) code is notified under Section 16 of the BIS Act, 2016, every consignment must carry a CM/L number. The assumption is wrong. Rule 21 of the BIS Conformity Assessment Regulations, 2018 and the parallel exemption window administered by the Department for Promotion of Industry and Internal Trade (DPIIT) under its 2020 and 2023 office memoranda carve out three categories: research and development (R&D) lots, samples for type approval and pre-production testing, and goods imported for laboratory evaluation against an Indian Standard. The relief is real. The documentation discipline is unforgiving, and any leakage into the commercial market reopens the full penalty stack under Sections 29 to 33 of the BIS Act, 2016.

What "exemption" actually covers

The exemption is a use-bounded relief, not a category exclusion. The goods remain QCO-notified for every purpose other than the declared end use; the relief attaches because the importer has accepted a binding restriction on the lot after clearance.

Three permitted end uses recur in the gazette text. R&D quantities cover product-development cycles where the importer is engineering a finished good incorporating the component, testing prototypes against the IS standard, or performing failure-mode analysis for benchmarking. Type-approval samples cover the consignments drawn for testing at a BIS-recognised laboratory in support of an application under the Foreign Manufacturers Certification Scheme (FMCS) or the Compulsory Registration Scheme (CRS); the test report on those samples is the foundational evidence in the licence file. Pre-production testing covers the trial runs an Indian manufacturer performs before commercial launch — line-conformance runs, packaging validation, and first-article inspection samples drawn for the BIS factory audit under the ISI Mark Scheme.

What the exemption does not cover is commercial inventory under any guise. A consignment of 5,000 structural steel parts under HSN 7308 90 90 cannot be cleared as R&D regardless of the buyer's description. A container of line printers under HSN 8443 32 10 is commercial inventory whether the bill of entry calls it a "demo lot" or a "showroom display". The Central Board of Indirect Taxes and Customs (CBIC) reads the quantity against the declared use and the importer's recent history; an R&D claim by an importer with no prior FMCS or CRS file for the heading is a flagged claim.

The Rule 21 / DPIIT track

Rule 21 of the BIS Conformity Assessment Regulations, 2018 vests the Director General of BIS with the power to permit, by written order, the import of goods without the standard mark where four conditions are met: the importer has filed an application under the relevant scheme, the quantity is reasonable in relation to the stated purpose, the goods are not sold or otherwise disposed of without prior approval, and the records of receipt and end use are maintained in a form open to inspection by a BIS officer.

The application is filed on the BIS portal at manakonline.in against the regional office having territorial jurisdiction over the importer's premises. The applicant identifies the IS standard, the HSN code, the quantity sought, the declared end use, the consignee's premises, and the FMCS or CRS application reference number where the goods are samples drawn against a pending licence file. The Director General, acting through the Deputy Director General (Certification) or the regional head under delegated authority, issues a no-objection certificate (NOC) that the importer presents to CBIC at the port of arrival. The NOC carries a reference number, a validity window, the consignee address, and the disposal undertaking the importer has accepted.

The parallel DPIIT track operates through the Department for Promotion of Industry and Internal Trade office memorandum dated 06-02-2020, read with the clarifications dated 12-08-2021 and 22-03-2023, and supplemented by Directorate General of Foreign Trade (DGFT) Notification No. 25/2015-2020. The DPIIT window applies to imports of QCO-notified inputs by manufacturers who hold a BIS licence under a different scheme or who are within a published procurement cycle for the same heading. Clearance is communicated to CBIC through a flagged entry on the Indian Customs Electronic Data Interchange Gateway (ICEGATE), and the consignment clears against the importer's Importer Exporter Code (IEC) without a separate paper NOC. The DPIIT route is faster where the importer's profile already supports the claim; the Rule 21 route is the path of record otherwise.

Quantity ceilings and end-use undertakings

The quantity test is the most frequently litigated element of the Rule 21 application. The regulation does not specify a numerical cap; "reasonable in relation to the stated purpose" is the standard. Internal BIS practice, drawn from regional-office orders published between 2021 and 2025, has settled on operating norms. A pre-production R&D claim on a discrete component — printed-circuit boards, sensors, fasteners — typically clears at a 200-piece ceiling per IS standard per application. A type-approval claim aligned to a pending FMCS file clears at the sample size specified in the IS standard's sampling-plan annex, with a 10 to 25 per cent buffer for re-testing. A laboratory-evaluation claim clears at the smallest quantity the test protocol requires.

The end-use undertaking is filed as a sworn affidavit on stamp paper, executed before a notary, uploaded with the application. The affidavit identifies the goods by serial, batch, or lot number, the premises where they will be held, the completion date, and the disposal route. Three disposal routes are accepted in practice: re-export under the bill-of-export procedure with proof of physical export filed within ninety days of completion, supervised destruction at the importer's premises witnessed by a BIS officer with a panchnama drawn under Section 100 of the Code of Criminal Procedure, 1973, or transfer to a BIS-recognised laboratory for permanent retention as a reference sample. Sale, loan, demonstration, or display in any commercial setting is outside the disposal envelope and reopens the licence-route question.

When CBIC will let goods through without a CM/L number

CBIC clears uncertified goods under three statutory routes parallel to Rule 21.

The first is an in-progress FMCS or CRS application. Where the importer produces, against the bill of entry, the BIS application acknowledgement number, the inspection-allocation memo, and the laboratory-allotment letter, CBIC clears the consignment against a provisional duty assessment under Section 18 of the Customs Act, 1962, with a bank guarantee equal to the differential duty and the value of the goods. The provisional clearance runs until the licence is granted or rejected; on rejection, the guarantee is invoked and re-export is directed. This is the Itron precedent — drawn from the 2020 Bombay High Court order in W.P. (L) No. 4283 of 2020 concerning water meters under HSN 9028 20 00 — where the Court directed release against a bank guarantee pending grant of the BIS licence, recognising the FMCS application as filed in good faith and the goods as time-sensitive.

The second is a DGFT-administered procurement window for QCO-notified goods where the public-procurement contract is in force and the QCO transition window has not closed. The DGFT public notice route is sector-specific and is in use for medical devices, power transformers under the Electrical Equipment (Quality Control) Order, 2025, and certain steel grades under the Steel and Steel Products Quality Control Order, 2024.

The third is an exemption recorded on the QCO notification itself. Several QCOs carry a paragraph exempting "samples for export production, R&D, or testing" from the certification requirement, subject to record-keeping. The text varies across QCOs and must be read against the specific S.O. notification; generic reliance on "the standard R&D exemption" is rejected at first check.

The compounding fallout if exemption goods leak into the market

The exemption is conditional. Where the end-use undertaking is breached — by sale of the R&D sample, by use of the type-approval lot in commercial production, or by disposal of the laboratory reference sample to an unintended recipient — the goods revert to unlicensed imports under Section 17(1)(b) of the BIS Act, 2016. The penalty stack runs in full. Section 29 imposes a monetary penalty up to ₹2 lakh on the first count; Section 30 imposes a separate penalty up to ₹5 lakh on misuse of indicating words; Section 31 imposes criminal liability of imprisonment up to two years on the repeat offender. Section 32 makes the body corporate liable and, where the offence is attributable to neglect by a director or officer, makes that officer personally liable. The signatory to the Rule 21 affidavit is, by his own deed, the officer whose neglect is established on the face of the disposal record.

The Customs Act, 1962 runs on the same facts. Section 111(d) provides for confiscation of goods imported contrary to a prohibition; Section 111(o) covers goods exempted subject to a condition where the condition has not been observed. Section 114A imposes a penalty equal to the duty short-levied where suppression is established. The two proceedings run as parallel tracks; neither extinguishes the other, and Itron-style relief is not available against a breach of the undertaking that secured the clearance.

A Word of Counsel

Rule 21 is a written record before it is anything else. The quantity, the end use, the consignee premises, and the disposal route are fixed by the affidavit, and any deviation between the affidavit and the actual receipt or disposal is the prosecution's case for breach of undertaking. Where the goods are samples for an FMCS or CRS file, reconcile the Rule 21 quantity to the sampling-plan annex in the IS standard before the affidavit is sworn; an "R&D" claim of fifty pieces against an IS standard that prescribes a sample size of five draws the wrong kind of attention. Where the disposal route is destruction, schedule the BIS officer's witness visit within the affidavit's stated completion date — a destruction that slips past the affidavit window without an extension order is treated as commercial diversion until proved otherwise.

What to Do Next

Treat the Rule 21 NOC and the DPIIT clearance as line items in the import calendar, not fallback options invoked at the port. File the Rule 21 application in tandem with the FMCS or CRS application, not after the consignment is on water. Map sample quantities against the IS standard's sampling-plan annex before the affidavit is drafted. Maintain the receipt-and-disposal register at the consignee premises in the form prescribed by the regional BIS office, signed by a named officer of the importer on receipt, on each stage of consumption, and on final disposal. Where a disposal route changes mid-cycle, file a written intimation before the change.

Speak to an Expert. Access India's BIS exemption practice runs from the Rule 21 affidavit through DPIIT coordination to bank-guarantee structuring for Itron-style provisional clearance, and on through closure of the end-use undertaking. Begin at /contact.