Clearing the hurdles: Compliance and ambiguities in the BIS Act 2016

The Bureau of Indian Standards Act, 2016 (“BIS Act”) was enacted to establish and empower the Bureau of Indian Standards (“BIS”) as the national standards body responsible for standardization, conformity assessment, and quality assurance of goods, articles, processes, systems, and services in India, with the overarching goal of promoting quality, safety, and consumer protection, as well as facilitating trade and international cooperation in standardization.

BIS formulates Indian Standards through a collaborative process within technical committees.

Currently, the BIS has developed a catalog of more than 21,000 Indian Standards. The majority of these standards are voluntary in nature, but some are enforced as mandatory through the issuance of Quality Control Orders (“QCOs”).

BIS possesses the authority to grant two types of permissions: (i) a license to use or apply a Standard Mark when goods conform to an Indian Standard, and (ii) a certificate of conformity, which is required when demonstrating conformity without the use of a Standard Mark.

The BIS Act also empowers the Central Government to make use of a Standard Mark on specific products compulsorily by issuing QCOs. In the case of such notified products, the Act prohibits any individual from manufacturing, importing, distributing, selling, hiring, leasing, storing, or displaying these goods for sale without a Standard Mark.

This has far reaching consequences. It places an onerous obligation on various entities within the transaction chain, including those who "manufacture," "import," "distribute," "sell," or "store” or "exhibit for the purpose of sale" to comply. This reflects the intention to hold everyone in the supply chain accountable for conformity with the Indian Standards, not just the initial manufacturer or the final seller.

Anyone who violates these regulations faces penalties, including imprisonment for a period of up to two years or a fine not less than two lakh rupees for the initial violation and not less than five lakh rupees for subsequent violations. The fine may extend up to ten times the value of the goods or articles that were produced, sold, offered for sale, or affixed with a Standard Mark, including Hallmark, or a combination of both.

Yet many of Indian Standards prescribed are outdated and fail to align with modern manufacturing practices, creating significant challenges for industries.

One pressing legal issue arising from this situation is the dilemma faced by companies in various sectors. If they choose to follow updated, contemporary industry standards rather than the outdated Indian Standards mandated under the BIS Act, they risk being in non-compliance with the provisions of the BIS Act. The consequences of non-compliance are severe, including fines, imprisonment, and damage to reputation. Companies may also face challenges in accessing government procurement contracts or exporting their products.

The footwear industry stands out as a prime example. In the rapidly evolving landscape of materials, designs, and production techniques within the footwear sector, Indian Standards have fallen behind. This misalignment not only impedes the industry's ability to compete on the international stage but also hampers its capacity to meet the ever-changing demands of consumers while ensuring the safety of its products.

While compliance with the BIS standards protects consumers and should be prescribed, the need of the hour is to update and modernize Indian Standards. This process should involve industry stakeholders, experts, and regulatory authorities collaborating to revise and adapt standards to current needs.

While the need to update Indian Standards to align with global best practices is evident, it's crucial to recognize that the transition to these updated standards can be challenging for companies, particularly when it involves significant infrastructural upgrades. This highlights a critical distinction: on the one hand, there's a push for updated and modernized standards, but on the other hand, there may not be sufficient time and support provided to companies to make the necessary infrastructural changes.

The process of upgrading infrastructure to meet new standards can be resource-intensive, both in terms of finances and time. Companies often need to invest in new machinery, technologies, and processes to comply with updated standards effectively. This requires careful planning, significant financial resources, and sometimes even retraining of the workforce.

In some cases, when updated standards are introduced abruptly or with tight deadlines, companies may struggle to make the required changes promptly. This can lead to compliance challenges and potentially disrupt their operations. It's essential to strike a balance between the urgency of updating standards for improved product quality and safety and providing businesses with a reasonable transition period to adapt their infrastructure.

To address this issue effectively, regulatory authorities and BIS should consider phased implementation of updated standards, allowing companies sufficient time to make necessary upgrades without compromising product quality and safety. Moreover, offering guidance, financial incentives, and technical assistance to businesses during this transitional period can help mitigate the challenges associated with infrastructural changes.

Another pressing issue pertains to products that were manufactured or imported into India before the effective date of implementation of the QCOs, but do not conform to the existing Indian Standards. The lack of clarity surrounding the status of such products in inventory poses a substantial concern for businesses. Companies often make substantial investments in inventory, and the inability to determine the fate of these products can lead to financial strain and operational inefficiencies.

To compound the problem, the language of the provision is ambiguous as to application of the standards to goods manufactured before the QCO implementation.

The FAQs regarding the changeover guidelines for implementing revised standards for batteries/cells provided valuable clarifications for that industry. The “FAQs on Changeover Guidelines for Implementation of revised Standards of Batteries / Cells i.e., IS 16046 (Part 1): 2018/IEC 62133-1:2017 - for Nickel Systems and IS 16046 (Part 2): 2018/ IEC 62133-2:2017 - for Lithium Systems” (updated as on November 14, 2019) specify that manufacturing products without complying with the Indian Standards after the last date of implementation is not allowed. Additionally, they provide guidance for stockists, allowing the sale of products manufactured or imported before the last date of implementation.

Further, the introduction of a 'Grandfathering Clause' in Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012 was a significant step to address concerns related to products manufactured or imported before the implementation of QCOs. This clause essentially exempts such pre-existing products from the provisions of the QCO, providing clarity and continuity for businesses.

The absence of such FAQs or clauses for other QCOs can indeed pose challenges for businesses and stakeholders in understanding compliance requirements. To mitigate this ambiguity, regulatory authorities should provide similar FAQs or clarification clauses for other QCOs where necessary. This would enhance transparency, provide clear guidance to industry players, and promote smoother transitions to updated standards and regulations. It's essential for regulatory bodies to ensure that compliance procedures are as clear and accessible as possible to facilitate legal and regulatory adherence by businesses. Until the same is issued, industry players may consider making appropriate representations to the regulatory bodies for providing clarity on the above aspects.

About the authors:Pooja Vijayvargiya is an Associate Partner and Ayushi Agrawal is an Associate at Lakshmikumaran & Sridharan.