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Economic, Commercial and Intellectual Property Laws · Foreign Trade Policy and Procedure

Importer-Exporter Code and Licensing of Imports and Exports

Updated 11 October 2026 · Fact-checked

Under the FTDR Act, 1992, no person may import or export without an Importer-exporter Code Number (Section 7). The Central Government can prohibit, restrict or regulate trade by Order (Section 3). The Director General can suspend or cancel the code after notice and a hearing (Section 8). To answer, state the provision, apply it, conclude.

Understand Importer-Exporter Code and Licensing of Imports and Exports

India's foreign trade is regulated by the Foreign Trade (Development and Regulation) Act, 1992. Its two aims appear in Section 3(1): development and regulation of foreign trade by facilitating imports and increasing exports. So the default is freedom to trade, and control is the exception.

That default is stated in Section 3(4). No permit or licence is needed to import or export any goods, and no goods are prohibited, except as required under the Act or its rules or orders. If an exam fact pattern asks whether a licence is needed, first ask: does any Order, rule or policy require one for these goods?

The first gate is the Importer-exporter Code Number (IEC). Under Section 7, no person shall make any import or export except under an IEC granted by the Director General (DGFT) or an officer he authorises, following the procedure he specifies. For services or technology, the IEC is needed only when the provider takes benefits under the foreign trade policy or deals with specified services or technologies.

The second gate is regulation of the goods themselves. Under Section 3(2), the Central Government may by Order published in the Official Gazette prohibit, restrict or otherwise regulate imports and exports, in all cases or in specified classes of cases, with exceptions. Goods covered by such an Order are deemed prohibited under Section 11 of the Customs Act, 1962 (Section 3(3)). This is why customs can stop and confiscate them. A licence under the Act includes a customs clearance permit and any other permission issued under it (Section 2(g)).

In practice, prohibited goods cannot be traded at all. Restricted goods can be traded only with a licence or authorisation or on the conditions laid down. The Act itself speaks of prohibiting, restricting or regulating. The detailed item lists sit in the foreign trade policy and ITC (HS) classification, not in the Act. The IEC application is made online to the DGFT as per the procedure the Director General specifies.

The third gate is enforcement. Section 8 lets the DGFT suspend or cancel the IEC. Even then, the person can trade only under a special licence (Section 8(2)). Section 9A allows quantitative restrictions to protect domestic industry, and Section 10 gives search and seizure powers.

Key rules to remember

IEC requirement
No import or export without an IEC granted by the DGFT or authorised officer
Section 7. For services or technology, the IEC is needed only if the provider takes foreign trade policy benefits or deals with specified services or technologies.
Control of trade by Order
Central Government Order in Official Gazette → prohibit, restrict or regulate imports and exports
Section 3(2). For services or technology, it applies only where the provider avails policy benefits or deals with specified services or technologies.
Deemed prohibition
Goods under a Section 3(2) Order = goods prohibited under Section 11, Customs Act, 1962
Section 3(3). The Customs Act then applies accordingly.
Freedom rule
No permit or licence needed, no goods prohibited, except as required under the Act, rules or orders
Section 3(4). Use it as your opening point.
Suspension or cancellation of IEC
Ground → written notice → reasonable opportunity to represent in writing (and hearing if desired) → order of suspension for a stated period, or cancellation
Section 8(1). Done by the DGFT or an officer authorised by him, who may also call for records or information.
Effect of suspension or cancellation
Trade only under a special licence granted by the DGFT
Section 8(2). The licence is granted in the prescribed manner and on prescribed conditions.
Quantitative restrictions
Serious injury or threat to domestic industry → notification → initial limit 4 years → extendable → maximum 10 years
Section 9A. No restriction on goods from a developing country while its share is up to 3%, or aggregate up to 9% for several such countries.

How to solve Importer-Exporter Code and Licensing of Imports and Exports questions

Use this order for any problem or theory question on IEC and licensing. It matches the ICSI style of provision, analysis, conclusion.

  1. 1Identify what is traded: goods, services or technology, and whether it is import or export.
  2. 2Check the IEC first. State Section 7 and whether the proviso for services or technology applies.
  3. 3Check whether any Order under Section 3(2) prohibits, restricts or regulates the item. If none, apply Section 3(4): no licence is needed.
  4. 4If the item is covered, say whether it is prohibited (cannot be traded) or restricted (licence or conditions). Add the Section 3(3) link to the Customs Act.
  5. 5If the facts show a breach, test the Section 8(1) grounds and the procedure: notice, representation, hearing, order.
  6. 6State the consequence: suspension for a stated period or cancellation, and the special licence rule in Section 8(2).
  7. 7Conclude in one clear sentence that answers the question asked.

Quickest way: Three-gate check

When to use it: Use it for short-note and case-based questions when time is short.

  1. Gate 1: Is there a valid IEC? (Section 7)
  2. Gate 2: Does any Order restrict or prohibit the item? (Section 3)
  3. Gate 3: Has any ground for suspension or cancellation arisen, and was the procedure followed? (Section 8)
  4. Write one line of law per gate, then the conclusion.

Common mistakes in Importer-Exporter Code and Licensing of Imports and Exports

  • Saying a licence is always required for every import or export.

    Students remember the licensing regime and forget the default rule.

    Fix: Open with Section 3(4): no licence is needed unless the Act, rules or orders require it.

  • Saying an IEC is needed for all services and technology.

    Students read Section 7 without its proviso.

    Fix: State that for services or technology the IEC is needed only when the provider takes policy benefits or deals with specified services or technologies.

  • Treating restricted and prohibited goods as the same.

    Both are controls under Section 3(2).

    Fix: Prohibited goods cannot be traded. Restricted goods can be traded only with a licence or on the conditions laid down.

  • Cancelling the IEC without notice in an answer.

    Students focus on the contravention and skip the procedure.

    Fix: Always mention the written notice with grounds, the reasonable opportunity to represent in writing and the hearing if the person desires.

  • Saying a person whose IEC is cancelled is barred from all trade for good.

    Section 8(2) is skipped.

    Fix: The person can still import or export under a special licence granted by the DGFT, in the prescribed manner and on prescribed conditions.

  • Confusing the DGFT with the Central Government for making Orders.

    Both appear in the same chapter.

    Fix: The Central Government makes Orders under Section 3. The DGFT grants and cancels the IEC under Sections 7 and 8.

Worked examples

Example 1

Sundaram Textiles Ltd, Tiruppur, starts exporting garments without obtaining an Importer-exporter Code Number. It argues that no licence is needed for garments. Advise the company.

Show the solution
  1. Provision: Section 7 says no person shall make any import or export except under an IEC granted by the Director General or an authorised officer.
  2. Distinguish the two ideas: Section 3(4) says no permit or licence is needed for goods unless required under the Act, rules or orders. That removes the need for a licence, not the need for an IEC.
  3. Application: garments are goods, so the services proviso does not help the company. The IEC requirement applies in full.
  4. Consequence: the exports were made in contravention of Section 7. The company must obtain an IEC through the DGFT procedure before exporting further.

Answer: The argument fails. Even if no licence is needed for garments, the company must hold an IEC under Section 7 before exporting.

Example 2

The DGFT has reason to believe that Bharat Exports Pvt Ltd has exported goods in a manner prejudicial to India's trade relations with a foreign country. Can the DGFT cancel its IEC, and what is the position of the company afterwards?

Show the solution
  1. Provision: Section 8(1)(b) covers the case where the DGFT or an authorised officer has reason to believe that an export was made in a manner prejudicial to India's trade relations with a foreign country.
  2. Procedure: the DGFT may call for records or information. He must give a written notice stating the grounds on which suspension or cancellation is proposed.
  3. The company must get a reasonable opportunity to make a written representation within the time specified in the notice, and to be heard if it desires.
  4. Power: after this, the DGFT may suspend the IEC for a period specified in the order, or cancel it.
  5. Effect: under Section 8(2), the company cannot import or export except under a special licence granted by the DGFT in the prescribed manner and on prescribed conditions.

Answer: Yes, the DGFT can suspend or cancel the IEC under Section 8(1)(b), but only after notice and a reasonable opportunity to be heard. Afterwards the company can trade only under a special licence.

Exam tips

  • Begin every answer with the section number: Section 7 for IEC, Section 3 for control of trade, Section 8 for suspension or cancellation.
  • Use the words of the Act: prohibiting, restricting or otherwise regulating. Do not invent lists of banned items. Give an example only if you are sure of it.
  • In case studies, check the notice-and-hearing procedure before concluding on cancellation. Examiners reward this.
  • Write the services and technology provisos in one line. They are a favourite trap.
  • Keep a final line that directly answers the question, such as whether the IEC can be cancelled or whether a licence is needed.

Practice questions from Foreign Trade Policy and Procedure

Importer-Exporter Code and Licensing of Imports and Exports in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Importer-Exporter Code and Licensing of Imports and Exports: frequently asked questions

Who grants the Importer-exporter Code Number?

The Director General of Foreign Trade, or an officer he authorises, grants it under Section 7. It is granted in accordance with the procedure the Director General specifies. Applications are made online to the DGFT.

What is the difference between restricted and prohibited goods?

Prohibited goods cannot be imported or exported at all. Restricted goods can be traded only with a licence or authorisation or on the conditions laid down. Both arise from Orders under Section 3(2), and the item lists are in the foreign trade policy.

Is an IEC needed for exporting services?

Not always. For services or technology, the IEC is necessary only when the provider takes benefits under the foreign trade policy or deals with specified services or technologies.

Can a person trade after the IEC is cancelled?

Only under a special licence. Section 8(2) says such a person cannot import or export except under a special licence granted by the Director General in the prescribed manner and on prescribed conditions.