Why is MIP (Minimum Import Price) Not Exempted for Imports Under the MOOWR Scheme — Even When Goods Are Meant Only for Export?

That’s a very thoughtful and nuanced question. Let's break this down with a detailed and critical explanation.

Background Concepts

Minimum Import Price (MIP):

• MIP is a policy tool enforced by the DGFT (Directorate General of Foreign Trade), which sets a floor price for imports of specific goods.
• Imports below this threshold are restricted to protect domestic industry from cheap, often dumped, goods.

MOOWR Scheme (Manufacture and Other Operations in Warehouse Regulations), 2019:

• Administered by CBIC, MOOWR allows manufacturers to import raw materials and capital goods without payment of customs duty, provided the final goods are:

  • Exported, or
  • Cleared into the domestic market with applicable duty.

Key Benefit of MOOWR: Full deferment of Basic Customs Duty, IGST, and cess on imported goods, as long as they stay in the bonded warehouse.

So Why No MIP Exemption for MOOWR Imports Even When Meant for Export?

The core issue is that MIP is not a customs duty or financial levy—it is a non-tariff trade restriction. Let's explore the reasons in depth:

1. MIP is a Trade Policy Restriction, Not a Fiscal Measure

• MIP is imposed by DGFT under the Foreign Trade Policy, not by Customs or CBIC.
• It’s not a duty or tax, but a restriction on price of imported goods—meaning even duty-free or bonded imports must comply.

Even if customs duty is exempted or deferred under MOOWR, the import itself is not allowed if it violates the MIP floor price.

2. DGFT Restrictions Apply Regardless of End Use (Export or Domestic)

• MIP restrictions are entry-point controls under the EXIM Policy—they apply at the time of import, irrespective of the final use (export vs. domestic sale).
• The intent of MIP is to stop low-priced goods from entering the Indian market at all, as even temporary inflow may distort domestic prices.

Export-intent alone doesn't override DGFT's import restrictions, unless specifically exempted.

3. DGFT Does Not Currently Provide MIP Exemption for MOOWR Scheme

• While SEZ, EoU, and Advance Authorization schemes often get explicit exemptions from import restrictions (including MIP or quota rules), MOOWR does not currently have a parallel exemption notification from DGFT.
• Therefore, customs may allow duty-free import, but DGFT licensing restriction still bars goods priced below MIP.

4. MIP is Designed to Prevent Dumping-Like Behavior, Even Indirectly

• Even if goods are eventually exported, the presence of low-priced imports in Indian bonded warehouses might:

  • Create pricing benchmarks that affect local market behavior.
  • Allow for diversion risks or grey-market leakages.

• As such, MIP works as a pre-emptive trade barrier, not just a market-access control.

5. Risk of Misuse Without MIP Control

• If MIP is exempted for MOOWR users, it could create a backdoor for:

  • Importing under-priced goods duty-free into bonded warehouses.
  • Diverting or substituting them into the domestic market through fraudulent means.

• Such leakage would undermine domestic industry protection goals of MIP.

Policy Misalignment? Yes — But Not Without Reason

There is an inherent policy mismatch here:

• Ideally, genuine export-manufacturing units under MOOWR should not be hurt by MIP restrictions.
• But unless explicit exemption is provided by DGFT, customs officers are bound to enforce MIP rules for all importers, including MOOWR units.

What Could Be Done? (Policy Suggestions)

1. DGFT Exemption Notification:

   • DGFT could issue a clarification or exemption stating that MIP is not applicable to MOOWR units only when goods are fully exported.

2. Conditional MIP Waiver:

   • Allow MIP-free imports under MOOWR with strict compliance conditions:

• Bonded warehousing controls,
• End-use verification,
• Export obligation.

1. Apply Advance Authorization Parity:

   • MOOWR units could be treated at par with Advance Authorization holders for such policy purposes.

2. Separate Licensing Route:

   • MOOWR units could be allowed to import MIP-restricted goods with prior DGFT license, proving genuine export need.

Conclusion

The absence of MIP exemption under the MOOWR scheme, even for 100% export-bound goods, stems from the trade policy intent of MIP—to restrict inflow of underpriced goods regardless of duty implications.

While this seems counterintuitive for an export promotion scheme like MOOWR, the legal architecture separates DGFT's trade controls from Customs' fiscal concessions.

To align MOOWR more closely with Make in India and export facilitation, a policy harmonization is needed—ensuring that legitimate exporters aren’t penalized under a restriction meant to protect the domestic market.