What is DGFT and what does it do?

The Directorate General of Foreign Trade (DGFT) is the Indian government authority that regulates all imports and exports under the Foreign Trade (Development and Regulation) Act, 1992. Every entity importing goods into India must comply with DGFT's rules, hold a valid Importer Exporter Code, and meet the policy conditions attached to their product's ITC(HS) classification. Failure to comply results in detention of goods at the port, financial penalties up to five times the value of the consignment, and potential cancellation of import privileges.

What is DGFT?

The Directorate General of Foreign Trade is the apex body within the Ministry of Commerce and Industry, Government of India, responsible for administering all policy, licensing, and regulatory functions related to India's foreign trade. Its statutory authority flows from the Foreign Trade (Development and Regulation) Act, 1992, commonly abbreviated as the FT(DR) Act. Section 6 of that Act empowers the Director General of Foreign Trade to issue, suspend, and cancel licences and authorisations related to import and export activities.

DGFT operates through a network of Regional Authorities located in major commercial cities across India, including Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, and Ahmedabad. These Regional Authorities are the operational points of contact for importers and exporters seeking licences, authorisations, and other DGFT services.

The current operative policy instrument is the Foreign Trade Policy 2023 to 2028 (FTP 2023), which came into effect on 1 April 2023. This policy document, along with its Handbook of Procedures, sets out the rules that govern what may be imported, under what conditions, and through which channels. Every import transaction in India is subject to FTP 2023 unless a specific exemption applies.

DGFT administers the Importer Exporter Code (IEC), which is the foundational registration required for any entity to legally import or export goods from India. The IEC is issued permanently but requires an annual update of entity details on the DGFT portal at dgft.gov.in.

Implications for businesses operating in India

Foreign manufacturers and exporters shipping goods to India must understand that DGFT's reach begins before the shipment leaves their country. The policy conditions attached to each product under the ITC(HS) Schedule determine whether the goods are freely importable, restricted, prohibited, or canalised. A foreign exporter who ships a restricted item to India without the Indian importer first obtaining a valid DGFT import licence will find the consignment detained at the Indian port of entry. The commercial consequences include demurrage charges, contractual penalties, and reputational damage, but the legal liability under Indian law falls squarely on the Indian importer.

Indian importers bear the primary compliance obligation. Beyond the IEC, importers must verify the ITC(HS) classification of every product they import and confirm the applicable policy condition before placing a purchase order. Many importers incorrectly assume that a product freely imported in the past remains freely importable. DGFT regularly updates policy conditions, and importers must ensure that all conditions attached to an authorisation are fulfilled within the stipulated time frame.

A misclassification, whether deliberate or inadvertent, that places goods in a more permissive policy category than their correct one exposes the importer to adjudication under Section 11 of the FT(DR) Act.

How DGFT compliance works

Every import compliance exercise under DGFT begins with two determinations: the correct ITC (HS) code for the product and the policy condition assigned to that code in Schedule I of the ITC (HS) Classification. This lookup is performed on the DGFT portal at dgft.gov.in or accessindiaplatform.com. The portal reflects the current policy position and is updated when notifications are issued.

Once the ITC (HS) code and policy conditions are confirmed, the importer must obtain the Importer Exporter Code if one is not already held. IEC registration is completed online through the DGFT portal at dgft.gov.in or accessindiaplatform.com by submitting PAN details, bank account information, and a digital signature. The fee for IEC registration is Rs. 500. The IEC is issued electronically and is permanent, but the holder must update entity details annually through the IEC modification module, failing which the IEC may be deactivated.

If the product is classified as Free in Schedule I, the import may proceed without any further DGFT authorisation, provided all other applicable regulatory clearances are in place. If the product is classified as Restricted, the importer must apply for an import licence from the competent DGFT Regional Authority before the goods are shipped. The application is filed through the DGFT portal, with supporting documents including the IEC, Authorisation Request Form (ANF), relevant product specifications, and the applicable fee.

If the product is Canalised, it can only be imported through designated canalising agencies such as MMTC Limited or the State Trading Corporation of India. The private importer cannot import the goods directly, regardless of any other licence or authorisation they may hold.

Common procedural errors include applying under the wrong authorisation category, submitting incomplete ANF forms, and failing to attach mandatory documents such as the end-use certificate or technical specifications. These errors result in queries from the Regional Authority, which delay issuance and can push the import timeline past the shipment date already committed to the overseas supplier.

Legality and risks

The legal obligation to comply with DGFT's import regime is created by the Foreign Trade (Development and Regulation) Act, 1992. Section 3 of the FT(DR) Act prohibits the import of any goods in contravention of the Act or any order made under it. Section 9A provides for financial penalties of up to five times the value of the goods involved in the violation. Section 11 governs the adjudication process, under which a DGFT officer examines the alleged contravention, hears the importer, and issues an order that may include penalty, confiscation of goods, or suspension or cancellation of the IEC.

At the port, enforcement is coordinated between Customs and DGFT Regional Authorities, operating through Customs' Risk Management System (RMS). A customs officer examining a bill of entry who finds that the declared ITC(HS) code corresponds to a restricted or prohibited item will detain the consignment immediately. The importer is then required to either produce the requisite DGFT authorisation or face a show-cause notice under the Customs Act, 1962 and the FT (DR) Act simultaneously.

Confiscation of goods is not a theoretical outcome. Goods imported without the required DGFT licence are liable to absolute confiscation under Section 111 of the Customs Act, 1962, read with the relevant provisions of the FT(DR) Act. The IEC holder also faces debarment, which prevents all future import and export activity until the matter is resolved.

Word of counsel

Importers are advised that DGFT policy conditions are amended by way of notifications that take effect immediately upon publication in the Official Gazette. There is no grace period and no prior notice to existing licence holders or importers. The correct practice is to re-verify the ITC (HS) policy condition for every product before every purchase order, not once per year and not on the basis of historical clearances.

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