Govt Notifies Norms To Facilitate E-Commerce Firms Undertaking Inventory-Based Online Exports

An e-commerce company with foreign investment that seeks to undertake inventory-based operations exclusively for exports can procure goods only against confirmed export orders, as speculative stockpiling for outbound shipments is not permitted, according to a notification.

On July 23, the government permitted FDI (foreign direct investment) in an inventory-based e-commerce model exclusively for export purposes to boost India's outbound shipments. These firms will have to export goods manufactured or produced in India.

Notifying norms for the implementation of this decision, the Directorate General of Foreign Trade (DGFT) said an e-commerce company, with foreign investment, will have to register as an 'Exporter-on-Record' with the government to keep goods in stock only for exports through the online medium.

It said that eligible e-commerce entities can undertake export-only inventory operations through a registered Exporter-on-Record (EOR).

The EOR can procure made-in-India goods from Indian Sellers-on-Record (SOR) against confirmed overseas orders for exports.

"By leveraging a registered EOR, Indian sellers can access overseas markets while delegating export documentation, customs formalities, destination- country regulatory compliance, product testing and certification, packaging, labelling, fulfilment, logistics and reverse logistics, to the EOR," the Commerce Ministry said.

According to the notification, EOR means an entity holding a valid IEC (import export code) and GSTIN (Goods and Services Tax Identification Number), registered with DGFT under the inventory-based cross-border e-commerce facilitation framework.

They can buy domestic goods from one or more Sellers-on-Record for export purposes.

"...such operations shall be carried out through a separate legal entity incorporated for this purpose. At the time of registration or amendment as the Exporter-on-Record, such entity shall disclose its shareholding pattern and the nature of its ownership or control relationship with the e-commerce entity," the notification said.

It added that the seller will supply goods produced in India to the EoR against a confirmed export order and he/she will be responsible for ensuring and declaring the correct origin of goods.

The guidelines also ensure timely payment to sellers, transparency in overseas sales, and clear accountability for export compliance.

It includes several safeguards to ensure that the benefits of e-commerce exports accrue to Indian manufacturers and MSMEs while maintaining regulatory oversight.

The key features include that export inventory will have to be procured only against confirmed export orders and speculative inventory build-up for export purposes is not permitted.

It said that export inventory must be distinctly identified, segregated and maintained through a digital repository ensuring complete traceability; and the export inventory cannot be diverted for sale in the domestic market.

Payment to Indian sellers will have to be made within the prescribed timeline and cannot be made contingent upon receipt of payment from overseas buyers.

Returned or rejected consignments have to be re-exported, or returned to the seller or disposed of in accordance with the prescribed procedures.

"The framework is expected to facilitate greater participation of Indian manufacturers, traders and MSMEs in global e-commerce supply chains by providing access to organised fulfilment networks while ensuring transparency, timely payment, effective pass-through of export benefits and robust regulatory oversight," the ministry said.

On dispute resolution, it said any dispute or grievance between the EOR and the seller would be referred to the DGFT's regional authority.

The government is looking at ways to boost exports through the e-commerce medium. As per estimates, the country's e-commerce exports are less than $5 billion currently compared to China's staggering $350 billion.

The global e-commerce trade is about $800 billion and is estimated to reach $2 trillion by 2030.