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Latest Developments in the area of Packaging & Labelling Laws in India-Corporate Law Newsletter

August 27, 2020
VOL XI
ISSUE No. 18
August 17, 2020

Knowledge Insight

Article Insight

Knowledge Insight


Legal Metrology Act, 2009 & Packaging & Labelling Laws in India

Understanding Legal Metrology Act, 2009 & Packaging & Labelling Laws in India

Objectives of the Act

The Legal Metrology Act, 2009 came into force on March 01, 2011 and the main objectives of the Act are to:

  1. Establish and enforce standards of weights and measures
  2. Regulate trade and commerce in weights, measures and other goods which are sold or distributed by weight, measure or number  

Standardisation of Weights and Measures:

The first part of the Legal Metrology Act, 2009 lays down the guidelines for standardization of weights and measures. The main objective being to ensure that the weights and measures manufactured, sold in the market to the consumers, used to weigh or measure products / commodities are of the prescribed standard.

Before adverting further, it is imperative to understand the following major definitions[1] as explained in the act.

  • Manufacturer:

In relation to any weight or measure, means a person who—

  • manufactures weight or measure,
  • manufactures one or more parts, and acquires other parts, of such weight or measure and, after assembling those parts, claims the end product to be a weight or measure manufactured by himself or itself, as the case may be,
  • does not manufacture any part of such weight or measure but assembles parts thereof manufactured by others and claims the end product to be a weight or measure manufactured by himself or itself, as the case may be,
  • puts, or causes to be put, his own mark on any complete weight or measure made or manufactured by any other person and claims such product to be a weight or measure made or manufactured by himself or itself, as the case may be.
  • Repairer:

Means a person who repairs a weight or measure and includes a person who adjusts, cleans, lubricates or paints any weight or measure or renders any other service to such weight or measure to ensure that such weight or measure conforms to the standards established by or under this Act;

  • Sale:

With its grammatical variations and cognate expressions, means transfer of property in any weight, measure or other goods by one person to another for cash or for deferred payment or for any other valuable consideration and includes a transfer of any weight, measure or other goods on the 5 hire-purchase system or any other system of payment by installments, but does not include a mortgage or hypothecation of, or a charge or pledge on, such weight, measure or other goods;

  • Weight or Measure:

Means a weight or measure specified by or under this Act and includes a weighing or measuring instrument.

  • Stamp:

Means a mark, made by impressing, casting, engraving, etching, branding, affixing pre-stressed paper seal or any other process in relation to, any weight or measure with a view to— (i) certifying that such weight or measure conforms to the standard specified by or under this Act, or (ii) indicating that any mark which was previously made thereon certifying that such weight or measure conforms to the standards specified by or under this Act, has been obliterated;

Standard units:

As per the Act, the weights and measures shall have the following units:

  1. length shall be the metre;
  2. mass shall be the kilogram;
  3. time shall be the second;
  4. electric current shall be the ampere;
  5. thermodynamic temperature shall be the kelvin;
  6. luminous intensity shall be the candela; and
  7. amount of substance shall be the mole

Any weight or measure which conforms to the standard unit of such weight or measure and also conforms to standard unit of weights and measures is applicable to:

  •  numeral which conforms to the units of weights and measures
  • No weight, measure or numeral, other than the standard weight, measure or numeral, shall be used as a standard weight, measure or numeral.
  • No weight or measure, shall be manufactured or imported unless it conforms to the standards of weight or measure specified under section

However, the above provision does not apply for any manufacturing done exclusively for export or for the purpose of any scientific investigation or research.

Inspection and Seizure:

The Legal Metrology Act, 2009 as we have understood till now aims to set and prescribes a few basic standards and in order to ensure these standards are followed by the manufacturers and / or anyone involved with the weights and measure, the Act gives power to the Director, Controller or any legal metrology officer to:

 (a) enter at any reasonable time into any such premises and search for and inspect any weight, measure or other goods in relation to which trade and commerce has taken place, or is intended to take place and any record, register or other document relating thereto;

(b) Seize any weight, measure or other goods and any record, register or other document or article which he has reason to believe may furnish evidence indicating that an offence punishable under the Act has been, or is likely to be, committed in the course of, or in relation to, any trade and commerce.

Responsibilities of a manufacturer, repair or dealer of a weight or measure:

The responsibilities of a manufacturer, repair or dealer as laid down under the Act are as follows:

  1. Maintenance of registers
  2. Register as an Importer if the weights or measures are being brought to India
  3. Ensure that all weights or measures even if imported conform to the standards of weights or measures.
  4. Obtaining the relevant licenses as prescribed under the Act.
  5. Ensure the weights and measures are verified timely from the government approved test centres.

Standardisation of Packaging and Labeling

While the first objective of the act gives an insight about the standardisation of weights and measures, the second objective of the Act is to standardise the packaging and labeling requirements on all “pre-packaged” commodities.

One of the major concepts required to be understood prior to understanding the declarations required to be mention is the definition and the meaning of a ‘pre-packaged’ commodity.

A ‘pre-packaged’ commodity means a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity.

What qualifies as a pre-packaged commodity?

Well, the above question as to whether a particular commodity qualifies as a pre‐packaged commodity or not has been discussed by various Courts including the Supreme Court.

The Madras High Court in Phillips India Ltd. v. Union of India[2] while discussing whether televisions, video and audio players or speakers can be classified as a ‘packaged commodity’ had observed that such products would not fall within the definition of pre‐packaged commodity as the products were packed only for the convenience of the consumers for safe transportation and for protection during storage and handling.

The Andhra Pradesh High Court in Eureka Forbes Ltd. v. Union of India[3] had observed that a product cannot be deemed to be a packaged good and put within the purview of the Standards of Weights and Measures Act, 1976 simply by virtue of the fact that the manufacturer or seller prints certain data on the product or places them in a box for the purpose of storage and transportation.

The Bombay High Court in Titan Industries Ltd. v. Union of India and Ors.[4] laid a twin test to determine whether a package is pre‐packed. The Bombay High Court had observed that:

“The test would be firstly whether by the very nature of the commodity it requires to be packed before it can be sold. Secondly, in the event a package is opened does it undergo any perceptible change or reduction in value? If these twin tests are met, then only can it be said that the package contains a pre‐packed commodity. Merely because the commodity is packed for protection during conveyance or otherwise or in the fancy package, would not result in the package becoming a pre‐packed commodity. The Rule, therefore, along with the explanation aims to include only those Pre‐packed commodities which by the very nature are required to be packed before they are sold.”

The Bombay High Court further observed that watches are removed from their package and displayed so that the customers can see them and try them and they do not lose any value because the package is opened. The Bombay High Court, therefore, found that watches cannot be considered a prepackaged commodity and as a result, the provisions of the Standards of Weights and Measures Act, 1976 will not apply on them.

However, the Hon’ble Supreme Court in Whirlpool of India Ltd. v. Union of India[5] held that refrigerator is covered under the term pre‐packed commodity. It was observed that:

“Even if the package of the refrigerator is required to be opened for testing, even then the refrigerator would continue to be a “pre‐packed commodity”. There are various types of packages defined under the Rules and ultimately Rule 3 specifically suggests that the provisions of Chapter II would apply to the packages intended for “retail sale” and the expression “package” would be construed accordingly”. The Supreme Court, therefore, found that refrigerators, were a pre-packaged commodity and it did not matter if a refrigerator’s packaging is opened for display and testing. The refrigerator would continue to be a pre-packaged commodity and the provisions of the Standards of Weights and Measures Act, 1976 would be applicable.

The Kerala High Court also ruled on the lines of the judgment of the Supreme Court in Whirlpool as in Union of India v. GodrejGE Appliances Ltd.[6], the Kerala High Court in para 19 observed that:

“Interpretation of the provisions of the aforesaid Acts and Rules is to be made from the point of view of the consumer and keeping in mind the object sought to be achieved by the enactment of the Acts and the framing of the Rules under the Standards Act. Viewed in that angle, it is abundantly clear that the intention of the manufacturer packer or retailer is hardly relevant in construing the various provisions of the Acts and Rules”. This interpretation of the Kerala High Court, therefore, is that the definition of pre‐packaged commodities includes commodities that are packaged only for the purpose of storage and transportation too.

In view of the above numerous judgements and views of the various High Courts and the Hon’ble Supreme Court, it can be interpreted and / or concluded that a pre-packaged commodity is any commodity which is packed and [SS2] / or covered merely for advertisement and / or transportation purpose.

Declarations on Pre-packaged Commodities

The declarations required to be mentioned on such pre-packaged commodities are mentioned in the Legal Metrology (Packaged Commodities) Rules, 2011.

Rule 6 of the Packaged Commodities Rules, 2011 enumerates the various declarations that are to be displayed on a pre-packaged commodity. To know more about the various declarations to be made on pre-packaged commodity click here.

It would be relevant to mention here that if any pre-packaged commodity is manufactured or sold without the statutory declarations, then the same may invite penalties under the relevant legal provisions. To know more about the various penalties imposed due to contravention of statutory provisions under the Legal Metrology Act, 2009 and Packaged Commodities Rules, 2011, click here.


[1] https://indiacode.nic.in/bitstream/123456789/4892/1/legalmetrology_act_2009.pdf

[2] [(2002) 1 Mad L.W (Cri.) 211]

[3] [AIR 2003 AP 275]

[4] [AIR 2006 Bom 336]

[5] [(2007) 14 SCC 468],

[6] [2009 (235) ELT 435 (Ker.)]


For more information on the issues related to Legal Metrology & Packaging & Labelling Laws in India please write to us at info@ssrana.com or submit a query.

To know more about the subject matter in India, click on the link below:

Legal Metrology in India

Meaning of pre-packaged commodity under The Legal Metrology Act, 2009

Penalty provided under the LM Act and PC Rules

 


Labelling Laws for Private Labels India

A private label product is a product sold by a retainer under its own packaging but is manufactured/ developed by a third party. Though there is no specific law regulating private labels in India, the Labelling laws for Private Labels in India can be derived from Legal Metrology Laws. Some retail businesses have a pre-built brand image in the market which is easily identifiable by the consumers. There can be instances where the retail businesses might be interested to carry out trade in certain demographic areas or can be interested in trading of such products which cannot be produced on their own. This can be due to non-availability of manufacturing facility, or other reasons. In such circumstances, products are brought into the market through private label process.  

As stated above, even though the manufacturing/ development of the product is done by third party, the retail business owner is responsible for packaging it under its own brand name. However, the retail business owner and the manufacturer can mutually agree on the party carrying out the compliances. For instance, a company manufacturing health and wellness products wishes to enter the market of beauty products, however, it does not have the required amenities for its manufacture. In this situation it can engage an entity to manufacture beauty products for itself and it can sell such products manufactured by the third party under its own label. The entities can then mutually decide the distribution/share of revenue amongst themselves by way of an agreement.

PROs and CONs of Private Label

There can be several merits and demerits of a private label arrangement. Merits may include control over production, price and branding, wherein production can be carried out in a hassle free manner as requisite compliances for manufacturing unit will have to be borne by the manufacturer. However, private label process can also be a challenge as availability of the products become entirely dependent on the manufacturer.

Private label branding can also assist foreign companies to establish their brands in India. Foreign retail companies can sell their products in India through the private label process after choosing a domestic manufacturer to carry out production for its products in India.

Legal Metrology Compliances

The Legal metrology (Packaged Commodities) Rules, 2011 makes it mandatory for the labels to mention mandatory labels on the packaged product offered for sale by the retail business owner. These declarations include generic name of the product, name and address of the packer and manufacturer, net quantity, date of manufacturing, etc.

Also read:

Legal Metrology- Labelling and Packaging Laws in India

E-commerce now come under the purview of Legal Metrology Act

Private Label Agreements

Private label process can be implemented through a contract/ agreement with the manufacturer, clearly defining the terms of relationship between the retail business owner and the manufacturer. A well-structured private label agreement contains specifications related to product orders, payment terms, indemnification and other relevant general clauses.

Private label and startups

Startups are entities which are infants for the larger industry. Private labelling can therefore assist startups in a much elaborated and well developed manner. Third party vendors or entities can provide the required material assistance to the startups and the startups can accordingly collaborate with these entities for their product development. In this way, startups can incur production and product management at lower risks than what could involve much higher costs and compliances which could be difficult for a startup to bear with initially.

Private Labelling and E-commerce

Private labelling can also assist ecommerce entities for customized product development. Recently, an ecommerce mega giant launched its own range of products which were produced under private labelling. The ecommerce entities already have a well-established marketing platform and private label could help them in convenient product placement.

 


Understanding Legal Metrology & its Meaning in India

Metrology refers to the science of measurement. Legal Metrology refers to the units and methods of weighment and measurement, subject to laws and regulations. To provide a uniform standard of weights and measures, the Standards of Weight and Measurement Act, 1976 and the Standards of Weights and Measures (Enforcement) Act, 1985 were enacted. However, advancement in science and technology brought about improvement in the scope of weights and measures. Therefore, to standardize weights and measures in trade and commerce and keep up with the advances in science and technology, the Legal Metrology Act, 2009 was enacted, repealing the Standards of Weight and Measurement Act, 1976 and the Standards of Weights and Measures (Enforcement) Act, 1985. Similarly, Legal Metrology (Packaged Commodities)
Rules, 2011 (“PC Rules”) were enacted underlying the rules relating to mandatory declarations on packaged commodities, registrations of manufactures/packers/importers, provisions relating to wholesale and retail dealers, Power of Government to inspect the premises, penalty etc. which are being amended from time to time to ensure that the law keeps pace with changes in technology.

The Legal Metrology Act, 2009

The Legal Metrology Act, 2009 (“LM Act”) establishes uniform weights and measuresand regulates trade and commerce in weights, measures and other goods which are sold or distributed by weight, measure or number. Every manufacturer or
importer of goods sold by weight, measure or number has to obtain approval of the model of a weight or a measure from the competent authorities before manufacturing or importing.

The Legal Metrology (Packaged Commodities) Rule The PC Rules governs the packaging and labelling of commodities. Chapter II of the PC Rules contains provisions applicable to packages intended to be sold for retail sale. Retail sale means the sale, distribution or delivery of commodities through retail sales shops, agencies or other instrumentalities for consumption by an individual or group of individuals or any other consumer. Recently, The Legal Metrology (Packaged Commodities) Amendment Rules, 2011 have been amended and the new The Legal Metrology (Packaged Commodities) Amendment Rules, 2017 were notified on June 23, 2017, which shall come into force from January 01, 2018.  The amended PC Rules seek to enhance protection of consumers while balancing the requirement of ease of doing business.  

For more information on the issues related to Legal Metrology in India please write to us at info@ssrana.com or submit a query.

To know more about the subject matter in India, click on the link below:

Legal Metrology in India

 


Legal Metrology Laws in India

The Legal Metrology Laws in India is primarily governed by the Legal Metrology Act, 2009 (LM Act) and the Legal Metrology (Packaged Commodities) Rules, 2011 (PC Rules). Some of the intrinsic provisions under these laws are enumerated below:

Packer of Pre-Packaged Commodity

Any person or a firm, who pre-packs any commodity whether in a bottle, tin, wrapper or otherwise in units suitable for sale, is a Packer.

Manufacturer of Pre-Packaged Commodity

Manufacturer means a person who or a firm which produces, makes or manufactures such commodity and includes a person or firm which puts, or causes to be put, any mark on any packaged commodity, not produced, made or manufactured by him or it, and the mark claims the commodity in the package to be a commodity produced, made or manufactured by such person or firm as the case may be

Base units of weights and measures & numeration:

Section 5 of the LM Act mandates that every unit of weight or measure shall be in accordance with Metric System based on the International System of Units.[1] The base units of weights and measures are as follows[2]:

  • length shall be the metre
  • mass shall be the kilogram
  • time shall be the second
  • electric current shall be the ampere
  • thermodynamic temperature shall be the kelvin
  • luminous intensity shall be the candela
  • amount of substance shall be the mole

Further, the LM Act provides that the base unit of numeration shall be the unit of International form, which is the stand unit of numeration. Further, every numeration shall be made in accordance with the decimal system. The decimal multiples and sub-multiples of the numerals shall be of such denominations and be written in such manner as may be prescribed. [3]

Declarations to be made on Packaging

Rule 6 of the PC Rules requires that all pre-packaged commodities have to bear certain declarations and particulars, and no person shall manufacture, pack, sell, distribute, offer, expose or possess for sale any pre-packaged commodity without such declarations. Any pre-packaged commodity that is sold, manufactured without the declarations will invite penalties under the Act.

Therefore, all packages shall be affixed with a label that is legible and prominent, and such label shall contain the following declarations:

  1. Name and complete address of the manufacturer. If the manufacturer is not the packer, then the name and address
    of manufacturer and packer are to be mentioned. Also, the name and address of the importer shall be mentioned for imported packages;   
  2. The common or generic name of all commodities or products contained in the package;
  3. The net quantity of the commodity in the package or the number of commodities in the packaged commodity;
  4. The month and year of manufacture or pre-packing or import of the packaged commodity;
  5. The retail sale price;
  6. The dimensions of the commodities;
  7. Name, address, telephone number, e-mail
    address of the Contact person in case of consumer complaints.  

Wholesale packages (Rule 24)

All wholesale packages have to bear a legible, definite, plain and conspicuous declaration as to:

  1. The name and address of the manufacturer or importer. If manufacturer or importer is not the packer, then the name and address of the packer;
  2. The identity of the commodity contained in the package; and
  3. The total number of retail package or the net quantity of the commodity contained in the wholesale package.

Commodities exempted under the PC Rules (Rules 3 and 26)

The provisions of Chapter II of the PC Rules do not apply to the following kind of packages:

  1. Packaged commodities meant for industrial consumers or institutional consumers. Institutional consumer means consumers like transportation, Airways, Railways, Hotels, Hospitals or any other service institutions who buy packaged commodities directly from the manufacturer for use by that institution. Industrial consumer means the industrial consumer who buy packaged commodities directly from manufacturer for use by that industry;
  2. Packages of commodities containing quantity of more than 25 kilograms or 25 litres;
  3. The net weight or measure of the commodity is 10 grams or 10 millilitre or less, if sold by weight or measure;
  4. Any package containing fast food items packed by restaurant or hotel and the like;
  5. It contains scheduled formulations and non-scheduled formulations covered under the Drugs (Price Control) Order, 2013 made under section 3 of the Essential Commodities Act, 1955; and
  6. Agricultural produce in packages above 50 kilograms.

Director Nomination

Section 49 of the LM Act provides that a director may be nominated in respect of aCompany who will be held responsible when the Company commits an offence under the Act. Such nomination is made by filing requisite form along with the Board Resolution for appointment of such Director and the consent letter of such Director, to the Director of Legal Metrology or concerned Controller of Legal Metrology.

It is advisable to nominate a director because if no such director has been nominated, then all directors who, at the time at which the offence was committed, were in charge of and were responsible to the Company, shall be held guilty of the offence and shall be liable to be proceeded against and punished under law.[4] 

Registration of manufacturers, packagers and importers

Rule 27 of the PC Rules provides that every individual, firm, Hindu undivided family, society, company or corporation which pre-packs or imports any commodity for sale, distribution or delivery any commodity is mandatorily required to obtain registration of their name and complete address by making an application along with requisite fees to the Director of Legal Metrology or the Controller of Legal Metrology for registration of its name and complete address.[5]

For more information on the issues related to Legal Metrology Laws in India please write to us at info@ssrana.com or submit a query.

To know more about the subject matter in India, click on the link below:

Legal Metrology in India


[1] Section 4 of the Act

[2] Section 5 of the Act

[3] Section 6 and 7 of the Act

[4] Section 49 of the Act

 


Penalty provided under the Legal Metrology Act, 2009 and Legal Metrology (Packaged Commodities) Rules, 2011

According to the recent amendments in the Legal Metrology (Packaged Commodities) Rules, 2011 the provisions relating to amount of fine imposed for contravention with the said Rules have been amended. The Rules state that whoever contravenes any provisions of these rules, for which no punishment is provided, shall be punished with fine of Five Thousand Rupees.

Compounding of offences: The amendment also revised the sum of compounding of offences committed under the Act shall be as follows:

  • Section 29 of The Legal Metrology Act, 2009 lays down the Penalty for quoting or publishing, etc., of non-standard units. It states that
  • Whoever violates section 11 shall be punished with fine which may extend to ten thousand rupees and, for the second or subsequent offence, with imprisonment for a term which may extend to one year, or with fine, or with both.
  • Section 36 of The Legal Metrology Act, 2009 lays down the Penalty for selling, etc., of non-standard packages. It states that:
    • Whoever manufactures, packs, imports, sells, distributes, delivers or otherwise transfers, offers, exposes or possesses for sale, or causes to be sold, distributed, delivered or otherwise transferred, offered, exposed for sale any pre-packaged commodity which does not conform to the declarations on the package as provided in this Act, shall be punished with fine which may extend to twenty-five thousand rupees, for the second offence, with fine which may extend to fifty thousand rupees and for the subsequent offence, with fine which shall not be less than fifty thousand rupees but which may extend to one lakh rupees or with imprisonment for a term which may extend to one year or with both.
    • Whoever manufactures or packs or imports or causes to be manufactured or packed or imported, any pre-packaged commodity, with error in net quantity as may be prescribed shall be punished with fine which shall not be less than ten thousand rupees but which may extend to fifty thousand rupees and for the second and subsequent offence, with fine which may extend to one lakh rupees or with imprisonment for a term which may extend to one year or with both.

For more information on the issues related to Legal Metrology in India please write to us at info@ssrana.com or submit a query.

To know more about the subject matter in India, click on the link below:

Legal Metrology in India

Article Insight

 


Country Of Origin To Be Specified On E-Commerce Websites For Product Listings

By Vibhuti Vasisth and Nishtha Das

Demands for specifying the Country of Origin (“COO”) of products sold online has gained ground in view of Prime Minister’s vision of “Atmanirbhar Bharat” and “Make in India”. The Domestic traders’ associations have been at the forefront of these demands.

The Ministry for Commerce and Industry has mandated that the Government e-Marketplace (“GeM”), which experienced INR 55,048 crores worth of transactions till date to adopt the said approach in the interest of creating an ‘Aatmanirbhar Bharat’. The sources[1] report that the Ministry has stated in its statement[2] that “Sellers who have already uploaded their products before introduction of this new feature on the GeM, are being reminded regularly to update the country of origin. It’s with a warning that their products will be removed from the GeM if they fail to update.”

Furthermore, the Department for Promotion of Industry and Internal Trade (“DPIIT”) had asked various e-commerce giants, for a meeting which was scheduled for July 08, 2020, to discuss the ‘concerns relating to displaying origin of the products’ on online retail platforms. This follows the GeM platform’s policy that makes it mandatory for its listed sellers to specify the country of origin while registering new products on its portal[3]. The said meeting was likely to discuss and set the time frame for implementation of the rule, and to ensure that existing listings on e-commerce platforms are compliant with the new rule.

Government asks e-commerce websites to display Country of Origin on Product Listings

Recent reports suggest that the Government has asked e-commerce websites to display Country of Origin of new products listed by sellers on their websites by August 01, 2020, and for legacy items by October 01, 2020. The e-commerce companies sought more time to implement the changes, which are part of the government’s plan to curb imports. The e-commerce platforms said the measures should be introduced in a phased manner with the involvement of manufacturers and sellers in the process[4]. Certain points relating to the feasibility of the move and lack of clarity in the Legal Metrology (Packaged Commodity) Rules, were also raised.

Further, as reported, one of the issues relied upon during the said meeting was in the context of non-packaged goods. At present there is no requirement to display country of origin on non-packaged goods. The DPIIT would be discussing the introduction of relevant legal provisions with the Ministry of Consumer Affairs on listing such information[5].

What is a Country of Origin and its relevance?

A Country of Origin (“COO”), is representative of the country or countries of manufacture, production, design, or brand origin where an article or a product comes from[6]. For various multinational brands, a COO may include multiple countries describing the value-creation process.

There are divergent rules of origin under various national and international laws. Country of Origin labeling (“COOL”) is also known and considered as a place-based branding, the made-in image or the “nationality bias”, in certain cases. For instance, certain regions may adopt unique local terms such as ‘terroir’ used to describe wine appellations based on the region where grapes were grown and the wine was manufactured.

The Law in India relating to disclosure/specification of Country of Origin

The Indian laws and regulations enumerate the statutory provisions pertaining to declaration of ‘country of origin’ or ‘country of manufacture’ on imported products. However, no law in India discusses the aspect of display/ disclosure of “country of origin” on the seller’s website.

The issue relating to display of “country of origin” on e-commerce websites has gained momentum recently in the wake Prime Minister’s vision of “Atmanirbhar Bharat” and subsequent efforts of the Indian Government to weed out availability and dependence on imported products and goods in India.

Delhi HC issues notice in Plea seeking disclosure of “country of origin” on E-commerce website

In a recent development, the Hon’ble Delhi High Court on July 01, 2020 has issued notice to the Centre in a case, wherein the Petitioner sought directions to the Centre to display the name of manufacturing country on E-commerce websites[7].

Law in India relating to disclosure of “Country of Origin” on Imported Products

In India, as per the Customs Tariff Rules, for products not wholly obtained or produced in India shall be considered as originating in the exporting beneficiary country if: the total value of the non-originating materials used in the manufacture of the export product does not exceed seventy per cent of the FOB value or ex-works value of the product so produced or obtained (that is, the local value added content in the exporting beneficiary country is at least thirty per cent); and the final process of manufacture is to be performed within the territory of the exporting beneficiary country[8].

The Legal Meteorology (Packaged Commodities) Rules, 2011 also require a declaration of ‘country of origin’ or ‘country of manufacture’ or ‘country of assembly’ on the imported products. This is aimed at curbing false and misleading claims by the brands to deceive the customers, as also to give complete information of the product to a potential buyer.

Furthermore, the requirement of indicating origin of goods imported/exported can also be traced under

Section 71, the Geographical Indications of Goods (Registration and Protection) Act, 1999Under both the aforementioned statutes, the Central Government may, by notification in the Official Gazette, require that goods of any class specified in the notification which are made or produced beyond the limits of India and imported into India, or, which are made or produced within the limits of India, shall, from such date as may be appointed by the notification not being less than three months from its issue, have applied to them an indication of the country or place in which they were made or produced, or of the name and address of the manufacturer or the person for whom the goods were manufactured.

The objectives of compulsory marking the origin of a product are many. If the provisions are construed from the context of the respective legislations, one of the main objectives is the prevention of falsification of marks. This will also help in preventing passing locally manufactured goods off as imported goods. The other objective is to check for parallel importing of the goods to the domestic market. The said rule also plays a progressive role in/for a country or region.

Key take-away

Specifying the Country of Origin is an important factor when it comes to product evaluation processes as well as for product purchase decisions. Its importance also depends on the amount of information that the consumers have about the product and the product category.

Soon after GeM’s policy discussion with the e-commerce websites, an overwhelming and welcoming response was received by various e-commerce majors, stating their commitment to promote India-made products and the local manufacturing sector in the country. However, reluctance in terms of specifying Country of Origins for old listings on the websites could be seen, and a unanimous decision on this aspect is yet to be arrived at.

It was further reported that certain e-commerce websites mentioned that smaller sellers would be worse hit due to such increased compliance pressure, especially at a time when they are having trouble selling goods offline due to the present pandemic Another executive with an e-commerce platform said that 90% of the listings can become compliant with the new rule by the end of July, but smaller ones will find it difficult[9].

This article is intended to provide an overview of the relevant-applicable legal framework and a free resource for our clients and the wider business community. Should you need to discuss any issue in detail, the author strongly recommends to seek specific legal advice relevant to your business scenario. Please feel free to reach out to us at info@ssrana.in.

[1] https://www.business-standard.com/article/companies/govt-s-e-commerce-portal-asks-sellers-to-specify-country-origin-of-products-120062300554_1.html

[2] https://pib.gov.in/PressReleasePage.aspx?PRID=1633511#.XvGgA5Ze_90.twitter

[3] https://www.indiatoday.in/business/story/make-in-india-filter-debuts-on-govt-e-commerce-site-as-demand-to-ban-chinese-goods-grows-1692016-2020-06-23

[4] https://economictimes.indiatimes.com/news/economy/foreign-trade/display-country-of-origin-by-aug-1-govt-to-ecomm/articleshow/76864214.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[5] ibid

[6] “Country-of-origin fit: When does a discrepancy between brand origin and country of manufacture reduce consumers’ product evaluations?”. Journal of Brand Management. 23 (4): 1–16. 2016. doi:10.1057/bm.2016.13.

[7] https://www.indiatoday.in/india/story/delhi-high-court-pil-centre-country-of-origin-1695822-2020-07-01

[8] https://www.cbic.gov.in/resources//htdocs-cbec/customs/cs-act/formatted-htmls/csnt29rules-2015.pdf;jsessiodetermination nid=0B5F658ED16259DF99BB4F13073DC7E0

[9] supra 4

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Addition of product categories to “Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order

The Bureau of Indian Standards (BIS) is the national standard body of India established under the BIS Act, 2016. The main object of the Act is to set standards, marking and quality certification for products available in the market. The organisation has chalked down a list of products / equipment’s that require mandatory certification under the BIS before they are made available in the market for sale.

The Bureau of Indian Standards vide its powers conferred under the Bureau of Indian Standards Act, 1986 and the Bureau of Indian Standards Rules, 1987 vide its notification dated April 01, 2020 has now included the following products to the Schedule of the “Electronic and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012.[1]

  • Standalone LED Modules for General Lighting
  • Lighting Chain (Rope Lights)
  • Keyboard
  • Induction Stove
  • Automatic Teller Cash dispensing machines
  • USB Type external hard disc drives
  • Wireless headphones and Earphones
  • USB Tyre External Solid- state Storage devices (above 256 GB Category)
  • Electronic musical systems with input power below 200 watts
  • Standalone switch mode power supplies (SMPS) with input voltage 48 V max
  • Television other than Plasma / LCD/ LED Tv’s
  • Rice Cooker

It has been further clarified by the BIS Department that for all the product categories notified under the “Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012”, a transition period of three months (max), from the date of coming into effect of the Order for the particular product category, would be available to the representative of the foreign manufacturing unit having liaison office or branch office located in India for affixing Standard Mark at the ports which are already having unique registration number from the Bureau for clearance of goods from customs.

Manufacturers of Electronics and Information Technology Goods should obtain BIS certification

Further, for the product categories mentioned in the Schedule, the latest standards as published and notified by the BIS from time to time would apply on expiry of six months from the date of notification of such standards by BIS and for goods already registered till such time, the surveillance testing as and when carried would be as per the latest standards. Further, renewal of registration would be done to the latest standards as per the provisions of the Compulsory Registration Scheme on expiry of validity of registration cycle.

In view thereof, it is advisable that all manufacturers / brand owners obtain the unique registration and in case the same has been obtained, affix the same to avoid any non – compliance / contravention of the provisions. In case of any contravention / non-compliance, the person in charge of compliance as well as the company would be guilty of the offence.

[1] http://egazette.nic.in/WriteReadData/2020/218993.pdf

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Impact of GST on Unsold Pre-packaged Products

The Director of Legal Metrology vide notification dated April 01, 2020[i]  has issued directions with respect to unsold pre-packaged products. The directions issued by the Ministry in this regards are as under:

  • The Central Government has permitted the manufacturers or packers or importers of pre-packaged commodities to declare the revised retail sale price (MRP) on the unsold stock manufactured / packed / imported prior to the revision of GST, after inclusion of the increased amount of tax due to GST (if any), in addition to the existing retail sale price (MRP) upto September 30, 2020 or till such date the stock is exhausted.
  • The declaration of the change in MRP shall be made in either of the following manners after complying with the conditions as mentioned below:
  • Stamping
  • Putting stickers
  • Online printing
  • Conditions to be complied prior to revising the MRP:
    • The difference between the retail sale price originally printed on the packaged and the revised price shall not be higher than the extent of the increase in the tax (if any)
    • The original MRP shall be continue to be displayed.
    • Overwriting of the MRP is not permissible
    • Manufacturers or packers or importers shall make atleast two advertisements in one or more newspaper informing the revision in the MRP.
    • The manufacturers or packers or importers shall inform the dealers and the director of Legal Metrology in Central Government and Controllers of Legal Metrology in the States and Union Territories, indicating the change in the prince of the package.

Further, it has also been clarified in the notification that the packaging material or wrapper which could not be exhausted by the manufacturer or packer or importer prior to the revision of GST, may be used for the packaging material upto September 30, 2020 or till such date the packaging material or wrapper is exhausted, whichever is earlier after making the corrections in the MRP in the manner as mentioned above.

[i] https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/LM_01042020.pdf

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Bureau of Indian Standard- Product Certification Schemes

By Vikrant Rana and Rupin Chopra

The Bureau of Indian Standards (hereinafter referred to as ‘BIS’) through BIS Act, 2016 operates a product certification scheme for standardization of goods that enter the market for sale to consumers. The Government had introduced the product certification scheme to ensure that goods made available to consumers are of a standard quality and safe for being used, as per the prescribed standards/ parameters. These parameters/ standards prescribed by BIS, have to be adhered to prior to the products being made available to consumers.

The product certification scheme under BIS requires the manufacturers to obtain the registration prior to the sale of products in the market. The registration is essentially voluntary in nature. However, keeping into consideration the public health and safety concerns, the government has identified certain products that require mandatory certification.

BIS grants a license on application basis, although the execution of compulsory certification is maintained by competent authorities as notified in the Quality Control Orders provided by the Government from time to time. BIS operates the certification scheme through a network of 34 Branch Offices (BO) set up in different State capitals or major industrial towns and 5 Regional Offices (RO) overseeing the work of the branch offices. Further, to ensure that the required standards are adhered, BIS has identified testing laboratories for undertaking the testing of products.

Under the product certification scheme, BIS grants the certification to use the standard quality mark for products. However, the mark can only be granted post confirmation that the product adheres to the standards prescribed by BIS for such product. The product certification scheme aims at providing third party assurance of quality, safety and reliability of the products to the consumer. The presence of the certification mark, on a product is an assurance of conformity of the specifications.

How to obtain Product Certificate Scheme?

BIS can either be obtained through ‘Normal Procedure’ or ‘Simplified Procedure’. Under the Normal Procedure, license is granted provided preliminary inspection is satisfactory, samples drawn are found to be conforming to the prescribed standards, the applicant adheres to the defined schemes of testing and the payment of marking fee is complete.

Under the Simplified Procedure, the applicant is required to submit test report/s from designated laboratories along with the application. License is granted provided the testing of products is found to be satisfactory, applicant agrees to implement the defined schemes of testing and payment of marking fee is completed.

The product certification is valid for a period of 2 years and can be subsequently renewed on completion of 2 years and payment of the renewal fee.

Even though product certification is voluntary, the government has listed out certain categories of products that require compulsory certification.

Compulsory Registration Scheme for Electronic Products

In 2012 Compulsory Registration Scheme (CRS) was introduced by Department of Electronics and Information Technology (DeitY) now called Ministry of Electronics and Information Technology (MeitY) along with BIS. The CRS initially covered 15 electronic and consumer products and added another 15 products in 2014. Under CRS it is mandatory for manufacturers to get their products registered before launching them in market. Products such as mobile phones, laptops, adapters, tablets, power banks, etc. are covered under CRS.

ISI

ISI (Indian Standards Institute) mark is a product certification scheme by BIS. ISI mark is used for industrial items in India post ascertainment of the product’s compliance with the required standards. The ISI mark is compulsory for certain items to be sold in India. The ISI mark can only be used on products post grant of license from the BIS.

The product certification scheme of BIS aims at providing Third Party Guarantee of quality, safety and reliability of products to the customer. Presence of ISI certification mark, known as Standard Mark, on a product is an assurance of conformity to the specifications. The conformity is ensured by regular surveillance of the licensee’s performance by surprise inspections of products and testing of samples, drawn both from the market and factory. The manufacturer is permitted to self-certify the licensed products after ascertaining its conformity to the standards.

On April 29 2019, BIS laid down the guidelines for Grant of License (hereinafter referred to as ‘GoL’) for an ISI mark. BIS grants a licence based on successful assessment of the manufacturing infrastructure, production process, quality control, and testing capabilities of a manufacturer through a visit to its manufacturing premises. Conformity of the product to the relevant standard(s) is also established through third party laboratory testing or testing in the manufacturing premises or a combination of both.[1]

An application for GoL can be obtained in two ways:

Option 1.

The application shall be made as specified in BIS Conformity Assessment Regulations 2018. Subsequently, a visit is made to the factory of the applicant for assessment of the manufacturing infrastructure, production process, quality control and testing capabilities, and samples will be drawn for testing in third party testing laboratories.

Option 2.

The application shall be made as specified in BIS Conformity Assessment Regulations, 2018. Along with the above application, the applicant is required to submit the conforming test report(s) of the product samples manufactured by the applicant and raw material(s) (if applicable) issued by a third party testing laboratory. Subsequently, a visit is made to the factory of the applicant for assessment of the manufacturing infrastructure, production process, quality control and testing capabilities, and drawing of samples for testing in the third party testing laboratories.

The license to use the ISI mark is granted for not less than one year and up to two years. The ISI mark license can also be renewed for a period of minimum one year and up to five years.

Misuse of ISI mark and consumer complaints

In case of any complaint regarding the quality of products with ISI mark, the consumer may contact the nearest office of the BIS.

After receipt of the complaint, BIS provides redressal by way of replacement/repair of the product in case the complaint is found to be genuine. Necessary actions are taken to ensure that corrective measures are followed by erring manufacturers in order to ensure that consumers do not face inconvenience.

Section 33 of the BIS Act, lays down penalties for any person using the ISI mark in contravention of the provisions of the BIS Act. Such person shall either be punishable with an imprisonment of one year or fine of Rs. 50,000 or with both.

List of products that require mandatory ISI certification

Product category Sub-Category
Cement Different kinds of Portland cement, sulphated cement
Household Electrical Goods RCCB, RCVO, lamps, iron, water heaters, electric stoves, room heaters, switches, cables, batteries
Food and Related Products baby formula, processed cereal based foods, different kinds of milk-powder, various kinds of condensed milk, packaged natural mineral water, infant milk substitutes, milk-cereal based weaning foods, hexane, food grade, plastic feeding bottles,
Diesel Engines Performance requirements for Constant speed compression ignition (diesel) engines for general Purposes (up to 19 kW)
Oil Pressure Stove Offset burner, multi-burner oil pressure stove
Automobile Accessories Pneumatic tyre tubes and it sub-categories
Cylinder accessories LPG Cylinders, Valves and Regulators
Medical equipment Thermometers, Medical x-ray
Steel Products steel tubes, steel bars, steel wires, galvanized steel sheets, steel ply, structural steel
Electric Transformers Outdoor type Oil immersed Distribution Transformers upto and including 2500 kVA

The official website of Bureau of Indian Standard (BIS) can be accessed here

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[1] BIS Guidelines for Grant of License No. CMD-I/2:12:1, April 12, 2019

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