Para 1.11.4 — GOODS_MANUAL

GOODS_MANUAL

“Notwithstanding anything contained in these Rules, Department of Expenditure may, by order in writing, impose restrictions, including prior registration and/ or screening, on procurement from bidders from, or bidders having commercial arrangements with an entity from, a country or countries, or a class of countries, on grounds of defence of India, or matters directly or indirectly related thereto including national security; no procurement shall be made in violation of such restrictions.”
2. Detailed provisions in this regard have been notified by the Department of Expenditure's OM No. F.7/10/2021-PPD (1) dated 23.02.2023 are as follows.
1.11.4 Restrictions/ Prior Registration on Entities from a Class of Countries (Rule 144 (xi), GFR 2017) 1. Requirement of registration: Rule 144 of GFR, 2017, has been amended to include a new sub-para
(xi) as follows:
a) Any bidder from a country that shares a land border with India will be eligible to bid in any procurement, whether of goods, services (including consultancy services and nonconsultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority. The information on Competent Authority is given in sub-para 10 below. b) Any bidder (including an Indian bidder) who has a Specified Transfer of Technology (ToT) arrangement with an entity from a country that shares a land border with India will be eligible to bid in any procurement, whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority, specified in subpara 10 below. Please also refer to sub-para 5 below. c) The requirement of registration for cases covered by para
(a) above has been applicable since 23.07.2020. The requirement of registration for bidders covered by para
(b) above will be applicable for all procurements where tenders are issued/ published after 01.04.2023. d) In tenders issued after 23.07.2020 or 01.04.2023, as the case may be, the requirements for registration of bidders and other relevant provisions of this Order shall be incorporated in the tender conditions.
3. Applicability: Apart from Ministries/Departments, attached and subordinate bodies, notwithstanding anything contained in Rule 1 of the GFRs 2017, the Order shall also be applicable:
a) to all Autonomous Bodies; b) to public sector banks and public sector financial institutions; c) to all Central Public Sector Enterprises; d) to all procurement in Public Private Partnership projects receiving financial support from the Government or public sector enterprises/ undertakings; e) Union Territories, National Capital Territory of Delhi, and all agencies/ undertakings thereof. f) The Order is not applicable: i) In projects that receive international funding with the approval of the Department of Economic Affairs (DEA), Ministry of Finance, the procurement guidelines applicable to the project shall normally be followed, notwithstanding anything contained in this order and without reference to the Competent Authority. Exceptions to this shall be decided in consultation with DEA. ii) On procurements made by Indian missions and by offices of government agencies/ undertakings located outside India. iii) On bidders (or entities) from those countries (even if sharing a land border with India) to which the Government of India has extended lines of credit or in which the Government of India is engaged in development projects. Updated lists of countries to which lines of credit have been extended or in which development projects are undertaken are given on the Ministry of External Affairs’ website31. iv) On procurement of spare parts and other essential service support like Annual Maintenance Contract (AMC)/ Comprehensive Maintenance Contract (CMC), including consumables for closed systems, from Original Equipment Manufacturers (OEMs) or their authorized agents, shall be exempted from the requirement of registration as mandated under Rule 144
(xi) of GFR, 2017 and Public Procurement orders issued in this regard32. v) A bidder is permitted to procure raw materials, components, sub-assemblies, etc., from vendors from countries that share a land border with India. Such vendors will not be required to be registered with the Competent Authority, as it is not regarded as “sub-contracting.” However, if a bidder proposes to supply finished goods procured directly/ indirectly from vendors from countries sharing a land border with
India, such vendors will be required to be registered with the Competent Authority33. (Please also refer to
Note below sub-para 4-f) below).
1. A person who procures and supplies finished goods from an entity from a country that shares a land border with India will, regardless of the nature of his legal or commercial relationship with the producer of the goods, be deemed to be an Agent for the purpose of this Order.
2. However, a bidder who only procures raw material, components, etc., from an entity from a country that shares a land border with India and then manufactures or converts them into other goods will not be treated as an Agent.
4. Definitions: a) “Bidder" for the purpose of the Order (including the term ‘bidder’, ‘consultant’ ‘vendor’ or ‘service provider’ in certain contexts) means any person, firm or company, including any member of a consortium or joint venture (that is an association of several persons, or firms or companies), every artificial juridical person not falling in any of the descriptions of bidders stated hereinbefore, including any agency, branch or office controlled by such person, participating in a procurement process. b) “Tender” for the purpose of the Order will include other forms of procurement, except where the context requires otherwise. c) “Transfer of Technology” means dissemination and transfer of all forms of commercially usable knowledge, such as transfer of know-how, skills, technical expertise, designs, processes and procedures, and trade secrets, which enables the acquirer of such technology to perform activities using the transferred technology independently. (Matters of interpretation of this term shall be referred to the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade, and the interpretation of the Committee shall be final.) d) “Specified Transfer of Technology” means a transfer of technology in the sectors and/ or technologies specified in sub-para 5 below, occurring on or after 23.07.2020. e) “Bidder (or entity) from a country which shares a land border with India” for the purpose of the Order means: i) An entity incorporated, established, or registered in such a country; or ii) A subsidiary of an entity incorporated, established, or registered in such a country or iii) An entity substantially controlled through entities incorporated, established, or registered in such a country or iv) An entity whose beneficial owner is situated in such a country or v) An Indian (or other) agent of such an entity; or vi) A natural person who is a citizen of such a country; or vii) A consortium or joint venture where any member of the consortium or joint venture falls under any of the above f) “Agent” for the purpose of the Order is a person employed to do any act for another or to represent another in dealings with third persons.
g) The beneficial owner for the purposes of point e
(iv) will be as follows: i) In the case of a company or Limited Liability Partnership, the beneficial owner is the natural person(s), who, whether acting alone or together or through one or more juridical person(s), has a controlling ownership interest or who exercises control through other means.
1) “Controlling ownership interest” means ownership of, or entitlement to, more than twenty-five per cent of shares or capital or profits of the company; 2) “Control” shall include the right to appoint the majority of the directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; ii) In the case of a partnership firm, the beneficial owner is the natural person
(s) who, whether acting alone or together or through one or more juridical persons, has ownership of entitlement to more than fifteen per cent of capital or profits of the partnership; iii) In the case of an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together or through one or more juridical persons, has ownership of or entitlement to more than fifteen per cent of the property or capital or profits of such association or body of individuals; iv) Where no natural person is identified under (4)
(a) or (4)
(b) or (4)
(c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official; v) In the case of a trust, the identification of beneficial owner
(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen per cent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. vi) To determine nationality while assessing the beneficial ownership of the bidder, the nationality mentioned in the beneficiary owner's passport should be considered. In case of the possibility of dual citizenship, nationality on all the passports should be considered through a suitable declaration. If nationality in any of the passports of the person whose beneficial ownership is being assessed is recorded to be from a country sharing a land border with India, the provisions contained under this Order shall apply. Hong Kong and Macau are to be considered as part of China for the purpose of this Order.
5. Sensitive Sectors/ Technologies (relevant only for the provisions on ToT arrangements; please refer to sub-para 2-b) above):
a) Certain sectors and technologies have been identified as sensitive from the national security point of view. The sectors listed in Schedule I to this Order are considered Category-I sensitive sectors. The sectors listed in Schedule II to this Order are considered Category-ll sensitive sectors. The technologies listed in Schedule III are considered sensitive technologies.
List of Category-II Sensitive sectors (Schedule-II)
S. No Sectors 1 Atomic Energy 2 Broadcasting/ Print and Digital Media 3 Defence 4 Space 5 Telecommunications
S. No Sectors 1 Power and Energy (including exploration/ generation/ transmission/ distribution/ pipeline) 2 Banking and Finance, including Insurance 3 Civil Aviation 4 Construction of ports and dams & river valley projects 5 Electronics and Microelectronics 6 Meteorology and Ocean Observation 7 Mining and extraction (including deep sea projects) 8 Railways 9 Pharmaceuticals & Medical Devices 10 Agriculture 11 Health 12 Urban Transportation List of Sensitive Technologies (Schedule-III) S. No Sectors 1 Additive Manufacturing (e.g., 3D Printing) 2 Any equipment having electronic programmable components or autonomous systems (e.g., SCADA systems) 3 Any technology used for uploading and streaming data, including broadcasting, satellite communication, etc. 4 Chemical Technologies 5 Biotechnologies, including Genetic Engineering and Biological Technologies 6 Information and Communication Technologies 7 Software
Chapter 1: Introduction –Principles and Policies
b) For Category-I sensitive sectors, bidders with ToT arrangement in any technology with an entity from a country that shares a land border with India shall require registration. c) For Category-ll sensitive sectors, bidders with ToT arrangement in the sensitive technologies listed in Schedule III, with an entity from a country that shares a land border with India, shall require registration.
List of Category-I Sensitive sectors (Schedule-I)
d) In Category-ll sensitive sectors, the Secretary (or an officer not below the rank of Joint Secretary to Government of India, so authorized by the Secretary) of the Ministry/ Department of the Government of India is empowered, after due consideration, to waive the requirement of registration for a particular item/ application or a class of items/ applications from the requirement of registration, even if included in Schedule III. The Ministry/ Department concerned shall inform the Department for Promotion of Industry and Internal Trade (DPIIT) and National Security Council Secretariat (NSCS) of their decision to waive the requirement of registration. Ministries/ Departments of the Government of India are not required to consult the DPIIT/ NSCS before deciding and are only required to inform the DPIIT/ NSCS of the decision. If DPIIT/NSCS raises any point, it should be considered in future procurements and ongoing procurement for which the waiver was granted need not be interrupted or altered. e) Based on security considerations, a Ministry/ Department in a Category II sensitive sector or other Ministries/ Departments may recommend to DPIIT the inclusion of any other technology in the list of sensitive technologies, either generally or for their Ministry/ Department.
6. Sub-contracting in works contracts: In works contracts, including turnkey contracts, contractors shall not be allowed to sub-contract works to any contractor from a country that shares a land border with India unless such contractor is registered with the Competent Authority. The definition of “contractor from a country which shares a land border with India” shall be as in sub-para 4.
(e) above. This shall not apply to sub-contracts already awarded on or before the date of the Order (i.e., 23rd July 2020).
[
Note: Procurement of raw material, components, etc. does not constitute sub-contracting] 7. Model Clauses/ Certificate regarding compliance: An undertaking shall be taken from bidders that the extant guidelines for participation in the tenders (which should include conditions for implementation of this Order) have been complied with. If such a certificate is given by a bidder whose bid is accepted and found to be false, this would be grounds for debarment and further legal action in accordance with law. Model Clauses and Model Certificates, which may be inserted in tenders / obtained from Bidders, are given in Annexure-33. While adhering to the substance of the Order, procuring entities are free to appropriately modify the wording of these clauses based on their past experience, local needs, etc.
8. Validity of registration: With respect to tenders, registration should be valid at the time of submission and acceptance of bids. With respect to supplies other than those by tender, registration should be valid at the time of placement of the order. If the bidder was validly registered at the time of acceptance / placement of the order, registration should not be a relevant consideration during contract execution.
9. Government e-Marketplace: GeM shall remove non-compliant entities from GeM unless/ until they are registered in accordance with this Order.
10. Competent Authority and Procedure for Registration: a) The Competent Authority for the purpose of registration under this Order shall be the Registration Committee constituted by the Department for Promotion of Industry and
Internal Trade (DPIIT)34. [Notified vide OM No. F.6/18/2019-PPD issued by Department of Expenditure dated 23.07.2020] b) The Registration Committee shall have the following members:
i) An officer not below the rank of Joint Secretary, designated for this purpose by DPIIT, who shall be the Chairperson; ii) Officers (ordinarily not below the rank of Joint Secretary) representing the Ministry of Home Affairs, Ministry of External Affairs, and those Departments whose sectors are covered by applications under consideration; iii) Any other officer whose presence is deemed necessary by the Chairperson of the Committee.
c) DPIIT has laid down the method of application, format, etc., for such bidders as covered by the Order. d) On receipt of an application seeking registration from a bidder covered by sub-para 2
(a) and 2
(b) above, the Competent Authority shall first seek political and security clearances from the Ministry of External Affairs and Ministry of Home Affairs, as per guidelines issued from time to time. Registration shall not be given unless political and security clearance have both been received. e) The Ministry of External Affairs and Ministry of Home Affairs may issue guidelines for internal use regarding the procedure for scrutiny of such applications. f) The decision of the Competent Authority to register such bidder may be for all kinds of tenders or for a specified type
(s) of goods or services and may be for a specified or unspecified duration of time, as deemed fit. The decision of the Competent Authority shall be final. g) Registration granted by the Competent Authority of the Government of India shall be valid not only for procurement by the Central Government and its bodies specified in sub-para 3 above but also for procurement by State Governments and their agencies/ public enterprises, etc. No fresh registration at the State level shall be required. h) The Competent Authority is empowered to cancel the registration already granted if it determines that there is sufficient cause. Such cancellation by itself, however, will not affect the execution of contracts already awarded. Pending cancellation, it may also suspend the registration of a bidder, and the bidder shall not be eligible to bid in any further tenders during the period of suspension. i) For national security reasons, the Competent Authority shall not be required to give reasons for rejection/cancellation of registration of a bidder.
34
(i) In respect of application of the Order to procurement by/ under State Governments, all functions assigned to DPIIT shall be carried out by the State Government concerned through a specific department or authority designated by it. The composition of the Registration Committee shall be as decided by the State Government. However, the requirement of political and security clearance as per para 10
(d) shall remain and no registration shall be granted without such clearance.
(ii) Registration granted by State Governments shall be valid only for procurement by the State Government and its agencies/ public enterprises etc. and shall not be valid for procurement in other states or by the Government of India and their agencies/ public enterprises etc.
11. Special Cases [In reference to sub-para 2-b) above]: a) In projects which receive international funding with the approval of the Department of Economic Affairs (DEA), Ministry of Finance, the procurement guidelines applicable to the project shall normally be followed, notwithstanding anything contained in the Order
and without reference to the Competent Authority. Exceptions to this shall be decided in consultation with DEA. b) This Order shall not apply to procurement by Indian missions and by offices of government agencies/ undertakings located outside India. c) This Order will not apply to bidders (or entities) from those countries (even if sharing a land border with India) to which the Government of India has extended lines of credit or in which the Government of India is engaged in development projects. Updated lists of countries to which lines of credit have been extended or in which development projects are undertaken are given on the website of the Ministry of External Affairs. d) A bidder is permitted to procure raw material, components, sub-assemblies etc. from the vendors from countries which shares a land border with India. Such vendors will not be required to be registered with the Competent Authority, as it is not regarded as “sub-contracting.” However, in case a bidder has proposed to supply finished goods procured directly/ indirectly from the vendors from the countries sharing land border with India, such vendor will be required to be registered with the Competent Authority35. e) Procurement of spare parts and other essential service support like Annual Maintenance Contract (AMC)/ Comprehensive Maintenance Contract (CMC), including consumables for closed systems, from Original Equipment Manufacturers (OEMs) or their authorized agents, shall be exempted from the requirement of registration.
12. Clarifications regarding the applicability of the restrictions under Rule 144
(xi) of the GFRs: a) The proprietary purchases are not excluded from the provisions of Rule 144
(xi) of GFR, 2017. b) The rule is applicable to all purchases irrespective of the order value. c) Sub-contracting is not permitted by any contractor to a contractor from a country sharing a land border with India unless registered with the competent authority. However, it is to be noted that procurement of raw materials, components, subassemblies, etc., does not constitute sub-contracting. In case a bidder has proposed to supply finished goods procured directly/ indirectly from the vendors from the countries that share a land border with India, such vendor will be required to be registered with the Competent Authority as per the provisions of Rule 144
(xi) of GFR, 2017. d) There is no bar on the contractor from procuring raw material from a firm that has been acquired by another firm belonging to a country that shares a land border with India. e) Contract Manufacturing outside India: If the bidder is getting the subject product manufactured outside India, this is treated as contract manufacturing, and beneficial ownership of the actual manufacturing entity must be verified. If the actual manufacturer does not meet the beneficial ownership criteria – then the bidder must submit DPIIT registration of such manufacturer to participate in the procurement. f) The hiring of Services: Suppose a Bidder (Indian/Foreign) who is not from a country sharing a land border with India offers services to a procuring entity by arranging equipment from another company. Then, the following scenarios may appear:
Chapter 1: Introduction –Principles and Policies
S. No Scenario Applicability of Rule 144
(xi) a) The equipment/ goods have been purchased or will be purchased from a company (manufacturer) from a country that shares a land border with India. The bidder has procured certain goods to offer the requisite services to a procuring entity. In such case, the bidder does not fall within the definition of the term “bidder” as defined under para 4-e) above. Hence, the provisions of Rule 144
(xi) of GFR, 2017 do not apply to this case. b) By entering into a MOU/ lease agreement with the company (who owns the equipment/ goods) from a country that shares a land border with India. Here, the bidding vendor proposes to hire services from a company that belongs to a country that shares a land border with India. This prima facie becomes the case of an indirect supply of services by a company that owns the equipment/ goods by introducing an intermediary. The intermediary merely acts as an agent to the company providing services of the equipment. In such a case, the company owning the equipment and indirectly supplying the services shall be required to be registered with the competent authority, thereby requiring the fulfilment of the provisions of Rule 144 (xi). c) By entering into an MOU/ lease agreement with the company (say ‘X’, who is the present owner of the equipment) from a country that does not share a land border with India. The equipment has been purchased from the manufacturer of the company (say ‘Y’), which is from a country that shares a land border with India. In this case, the actual supplier of services, prima facie, shall be ‘X.’ The status of ‘X’ in this case does not attract the provisions of Rule 144 (xi).
13. Illustrative examples of the applicability of the Restrictions under Rule 144
(xi) of GFR 2017 a) A vendor, say, ‘Party A’ from India, is procuring an item from their sister company, say, ‘Party B,’ which is registered in a country that does not share a land border with India. Both the parties, Party A and B, are owned by an entity, say, ‘Party C.’ Party C does not belong to a country sharing a land border with India. However, Party B has its production facility in a Country sharing a land border with India, and the manufactured item will be procured by Party A from its sister concern, i.e., Party B from the abovementioned production facility. The production unit is wholly owned by Party B. The
b) Taking an example of IT goods and services: i) If the contractor is only supplying the servers as it is from an OEM that belongs to a country sharing a land border with India, and there is no value addition done by the contractor, then the contractor acts as an agent for the OEM and registration of the OEM and the agent (contractor) both are required as per the provisions of Rule 144
(xi) of GFR 2017. ii) In case the contractor supplies value-added services on hardware and the contractor outsources the procurement of hardware, OEM registration is not required. iii) Where there is deployment of IT services that includes both hardware and software customization, and the contractor has sourced hardware, which is made in the country sharing a land border with India, the requirement of registration as per the provisions of Rule 144
(xi) is not applicable.
Party A now claims that the provisions of Rule 144
(xi) of GFR 2017 do not apply on it because both the Party A and B are not:
i) An entity incorporated, established, or registered in such a country, as Party A is registered in India and Party B is registered in a Country not sharing a land border with India; ii) A subsidiary of an entity incorporated, established, or registered in such a country as they are 100% owned subsidiary of Party C, which is incorporated, registered, and established in a country not sharing a land border with India; iii) An entity controlled through entities incorporated, established, or registered in such a country as they are 100% owned by Party C, which is registered and established in a country not sharing a land border with India; iv) An entity whose beneficial owner is situated in such a country as their beneficial owner is Party C; v) An Indian (or other) agent of such an entity; vi) A natural person who is a citizen of such a country; vii) A consortium or joint venture where any member of the consortium or joint venture falls under any of the above. Though it has a wholly owned subsidiary in a country that shares a land border with India but is not a JV or consortium (subsidiary does not qualify as JV or consortium) viii) In addition to the above, Party A claims that they are not procuring finished goods directly/ indirectly from the vendors from the countries sharing land borders with India as the item is being manufactured in their own production units. ix) In light of the above facts and the claims put forth by Party A, it is important to clarify to the procurers that Party A acts as an agent for Party B, which manufactures goods in a country sharing a land border with India. Party B supplies goods manufactured at premises established in a country that shares a land border with India. In such a case, registration is required for Party B (and not necessarily for Party A, who is only an agent and not from a country sharing a land border with India).

GOODS_MANUAL

“Notwithstanding anything contained in these Rules, Department of Expenditure may, by order in writing, impose restrictions, including prior registration and/ or screening, on procurement from bidders from, or bidders having commercial arrangements with an entity from, a country or countries, or a class of countries, on grounds of defence of India, or matters directly or indirectly related thereto including national security; no procurement shall be made in violation of such restrictions.”
2. Detailed provisions in this regard have been notified by the Department of Expenditure's OM No. F.7/10/2021-PPD (1) dated 23.02.2023 are as follows.
1.11.4 Restrictions/ Prior Registration on Entities from a Class of Countries (Rule 144 (xi), GFR 2017) 1. Requirement of registration: Rule 144 of GFR, 2017, has been amended to include a new sub-para
(xi) as follows:
a) Any bidder from a country that shares a land border with India will be eligible to bid in any procurement, whether of goods, services (including consultancy services and nonconsultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority. The information on Competent Authority is given in sub-para 10 below. b) Any bidder (including an Indian bidder) who has a Specified Transfer of Technology (ToT) arrangement with an entity from a country that shares a land border with India will be eligible to bid in any procurement, whether of goods, services (including consultancy services and non-consultancy services) or works (including turnkey projects) only if the bidder is registered with the Competent Authority, specified in subpara 10 below. Please also refer to sub-para 5 below. c) The requirement of registration for cases covered by para
(a) above has been applicable since 23.07.2020. The requirement of registration for bidders covered by para
(b) above will be applicable for all procurements where tenders are issued/ published after 01.04.2023. d) In tenders issued after 23.07.2020 or 01.04.2023, as the case may be, the requirements for registration of bidders and other relevant provisions of this Order shall be incorporated in the tender conditions.
3. Applicability: Apart from Ministries/Departments, attached and subordinate bodies, notwithstanding anything contained in Rule 1 of the GFRs 2017, the Order shall also be applicable:
a) to all Autonomous Bodies; b) to public sector banks and public sector financial institutions; c) to all Central Public Sector Enterprises; d) to all procurement in Public Private Partnership projects receiving financial support from the Government or public sector enterprises/ undertakings; e) Union Territories, National Capital Territory of Delhi, and all agencies/ undertakings thereof. f) The Order is not applicable: i) In projects that receive international funding with the approval of the Department of Economic Affairs (DEA), Ministry of Finance, the procurement guidelines applicable to the project shall normally be followed, notwithstanding anything contained in this order and without reference to the Competent Authority. Exceptions to this shall be decided in consultation with DEA. ii) On procurements made by Indian missions and by offices of government agencies/ undertakings located outside India. iii) On bidders (or entities) from those countries (even if sharing a land border with India) to which the Government of India has extended lines of credit or in which the Government of India is engaged in development projects. Updated lists of countries to which lines of credit have been extended or in which development projects are undertaken are given on the Ministry of External Affairs’ website31. iv) On procurement of spare parts and other essential service support like Annual Maintenance Contract (AMC)/ Comprehensive Maintenance Contract (CMC), including consumables for closed systems, from Original Equipment Manufacturers (OEMs) or their authorized agents, shall be exempted from the requirement of registration as mandated under Rule 144
(xi) of GFR, 2017 and Public Procurement orders issued in this regard32. v) A bidder is permitted to procure raw materials, components, sub-assemblies, etc., from vendors from countries that share a land border with India. Such vendors will not be required to be registered with the Competent Authority, as it is not regarded as “sub-contracting.” However, if a bidder proposes to supply finished goods procured directly/ indirectly from vendors from countries sharing a land border with
India, such vendors will be required to be registered with the Competent Authority33. (Please also refer to
Note below sub-para 4-f) below).
1. A person who procures and supplies finished goods from an entity from a country that shares a land border with India will, regardless of the nature of his legal or commercial relationship with the producer of the goods, be deemed to be an Agent for the purpose of this Order.
2. However, a bidder who only procures raw material, components, etc., from an entity from a country that shares a land border with India and then manufactures or converts them into other goods will not be treated as an Agent.
4. Definitions: a) “Bidder" for the purpose of the Order (including the term ‘bidder’, ‘consultant’ ‘vendor’ or ‘service provider’ in certain contexts) means any person, firm or company, including any member of a consortium or joint venture (that is an association of several persons, or firms or companies), every artificial juridical person not falling in any of the descriptions of bidders stated hereinbefore, including any agency, branch or office controlled by such person, participating in a procurement process. b) “Tender” for the purpose of the Order will include other forms of procurement, except where the context requires otherwise. c) “Transfer of Technology” means dissemination and transfer of all forms of commercially usable knowledge, such as transfer of know-how, skills, technical expertise, designs, processes and procedures, and trade secrets, which enables the acquirer of such technology to perform activities using the transferred technology independently. (Matters of interpretation of this term shall be referred to the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade, and the interpretation of the Committee shall be final.) d) “Specified Transfer of Technology” means a transfer of technology in the sectors and/ or technologies specified in sub-para 5 below, occurring on or after 23.07.2020. e) “Bidder (or entity) from a country which shares a land border with India” for the purpose of the Order means: i) An entity incorporated, established, or registered in such a country; or ii) A subsidiary of an entity incorporated, established, or registered in such a country or iii) An entity substantially controlled through entities incorporated, established, or registered in such a country or iv) An entity whose beneficial owner is situated in such a country or v) An Indian (or other) agent of such an entity; or vi) A natural person who is a citizen of such a country; or vii) A consortium or joint venture where any member of the consortium or joint venture falls under any of the above f) “Agent” for the purpose of the Order is a person employed to do any act for another or to represent another in dealings with third persons.
g) The beneficial owner for the purposes of point e
(iv) will be as follows: i) In the case of a company or Limited Liability Partnership, the beneficial owner is the natural person(s), who, whether acting alone or together or through one or more juridical person(s), has a controlling ownership interest or who exercises control through other means.
1) “Controlling ownership interest” means ownership of, or entitlement to, more than twenty-five per cent of shares or capital or profits of the company; 2) “Control” shall include the right to appoint the majority of the directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; ii) In the case of a partnership firm, the beneficial owner is the natural person
(s) who, whether acting alone or together or through one or more juridical persons, has ownership of entitlement to more than fifteen per cent of capital or profits of the partnership; iii) In the case of an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together or through one or more juridical persons, has ownership of or entitlement to more than fifteen per cent of the property or capital or profits of such association or body of individuals; iv) Where no natural person is identified under (4)
(a) or (4)
(b) or (4)
(c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official; v) In the case of a trust, the identification of beneficial owner
(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen per cent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. vi) To determine nationality while assessing the beneficial ownership of the bidder, the nationality mentioned in the beneficiary owner's passport should be considered. In case of the possibility of dual citizenship, nationality on all the passports should be considered through a suitable declaration. If nationality in any of the passports of the person whose beneficial ownership is being assessed is recorded to be from a country sharing a land border with India, the provisions contained under this Order shall apply. Hong Kong and Macau are to be considered as part of China for the purpose of this Order.
5. Sensitive Sectors/ Technologies (relevant only for the provisions on ToT arrangements; please refer to sub-para 2-b) above):
a) Certain sectors and technologies have been identified as sensitive from the national security point of view. The sectors listed in Schedule I to this Order are considered Category-I sensitive sectors. The sectors listed in Schedule II to this Order are considered Category-ll sensitive sectors. The technologies listed in Schedule III are considered sensitive technologies.
List of Category-II Sensitive sectors (Schedule-II)
S. No Sectors 1 Atomic Energy 2 Broadcasting/ Print and Digital Media 3 Defence 4 Space 5 Telecommunications
S. No Sectors 1 Power and Energy (including exploration/ generation/ transmission/ distribution/ pipeline) 2 Banking and Finance, including Insurance 3 Civil Aviation 4 Construction of ports and dams & river valley projects 5 Electronics and Microelectronics 6 Meteorology and Ocean Observation 7 Mining and extraction (including deep sea projects) 8 Railways 9 Pharmaceuticals & Medical Devices 10 Agriculture 11 Health 12 Urban Transportation List of Sensitive Technologies (Schedule-III) S. No Sectors 1 Additive Manufacturing (e.g., 3D Printing) 2 Any equipment having electronic programmable components or autonomous systems (e.g., SCADA systems) 3 Any technology used for uploading and streaming data, including broadcasting, satellite communication, etc. 4 Chemical Technologies 5 Biotechnologies, including Genetic Engineering and Biological Technologies 6 Information and Communication Technologies 7 Software
Chapter 1: Introduction –Principles and Policies
b) For Category-I sensitive sectors, bidders with ToT arrangement in any technology with an entity from a country that shares a land border with India shall require registration. c) For Category-ll sensitive sectors, bidders with ToT arrangement in the sensitive technologies listed in Schedule III, with an entity from a country that shares a land border with India, shall require registration.
List of Category-I Sensitive sectors (Schedule-I)
d) In Category-ll sensitive sectors, the Secretary (or an officer not below the rank of Joint Secretary to Government of India, so authorized by the Secretary) of the Ministry/ Department of the Government of India is empowered, after due consideration, to waive the requirement of registration for a particular item/ application or a class of items/ applications from the requirement of registration, even if included in Schedule III. The Ministry/ Department concerned shall inform the Department for Promotion of Industry and Internal Trade (DPIIT) and National Security Council Secretariat (NSCS) of their decision to waive the requirement of registration. Ministries/ Departments of the Government of India are not required to consult the DPIIT/ NSCS before deciding and are only required to inform the DPIIT/ NSCS of the decision. If DPIIT/NSCS raises any point, it should be considered in future procurements and ongoing procurement for which the waiver was granted need not be interrupted or altered. e) Based on security considerations, a Ministry/ Department in a Category II sensitive sector or other Ministries/ Departments may recommend to DPIIT the inclusion of any other technology in the list of sensitive technologies, either generally or for their Ministry/ Department.
6. Sub-contracting in works contracts: In works contracts, including turnkey contracts, contractors shall not be allowed to sub-contract works to any contractor from a country that shares a land border with India unless such contractor is registered with the Competent Authority. The definition of “contractor from a country which shares a land border with India” shall be as in sub-para 4.
(e) above. This shall not apply to sub-contracts already awarded on or before the date of the Order (i.e., 23rd July 2020).
[
Note: Procurement of raw material, components, etc. does not constitute sub-contracting] 7. Model Clauses/ Certificate regarding compliance: An undertaking shall be taken from bidders that the extant guidelines for participation in the tenders (which should include conditions for implementation of this Order) have been complied with. If such a certificate is given by a bidder whose bid is accepted and found to be false, this would be grounds for debarment and further legal action in accordance with law. Model Clauses and Model Certificates, which may be inserted in tenders / obtained from Bidders, are given in Annexure-33. While adhering to the substance of the Order, procuring entities are free to appropriately modify the wording of these clauses based on their past experience, local needs, etc.
8. Validity of registration: With respect to tenders, registration should be valid at the time of submission and acceptance of bids. With respect to supplies other than those by tender, registration should be valid at the time of placement of the order. If the bidder was validly registered at the time of acceptance / placement of the order, registration should not be a relevant consideration during contract execution.
9. Government e-Marketplace: GeM shall remove non-compliant entities from GeM unless/ until they are registered in accordance with this Order.
10. Competent Authority and Procedure for Registration: a) The Competent Authority for the purpose of registration under this Order shall be the Registration Committee constituted by the Department for Promotion of Industry and
Internal Trade (DPIIT)34. [Notified vide OM No. F.6/18/2019-PPD issued by Department of Expenditure dated 23.07.2020] b) The Registration Committee shall have the following members:
i) An officer not below the rank of Joint Secretary, designated for this purpose by DPIIT, who shall be the Chairperson; ii) Officers (ordinarily not below the rank of Joint Secretary) representing the Ministry of Home Affairs, Ministry of External Affairs, and those Departments whose sectors are covered by applications under consideration; iii) Any other officer whose presence is deemed necessary by the Chairperson of the Committee.
c) DPIIT has laid down the method of application, format, etc., for such bidders as covered by the Order. d) On receipt of an application seeking registration from a bidder covered by sub-para 2
(a) and 2
(b) above, the Competent Authority shall first seek political and security clearances from the Ministry of External Affairs and Ministry of Home Affairs, as per guidelines issued from time to time. Registration shall not be given unless political and security clearance have both been received. e) The Ministry of External Affairs and Ministry of Home Affairs may issue guidelines for internal use regarding the procedure for scrutiny of such applications. f) The decision of the Competent Authority to register such bidder may be for all kinds of tenders or for a specified type
(s) of goods or services and may be for a specified or unspecified duration of time, as deemed fit. The decision of the Competent Authority shall be final. g) Registration granted by the Competent Authority of the Government of India shall be valid not only for procurement by the Central Government and its bodies specified in sub-para 3 above but also for procurement by State Governments and their agencies/ public enterprises, etc. No fresh registration at the State level shall be required. h) The Competent Authority is empowered to cancel the registration already granted if it determines that there is sufficient cause. Such cancellation by itself, however, will not affect the execution of contracts already awarded. Pending cancellation, it may also suspend the registration of a bidder, and the bidder shall not be eligible to bid in any further tenders during the period of suspension. i) For national security reasons, the Competent Authority shall not be required to give reasons for rejection/cancellation of registration of a bidder.
34
(i) In respect of application of the Order to procurement by/ under State Governments, all functions assigned to DPIIT shall be carried out by the State Government concerned through a specific department or authority designated by it. The composition of the Registration Committee shall be as decided by the State Government. However, the requirement of political and security clearance as per para 10
(d) shall remain and no registration shall be granted without such clearance.
(ii) Registration granted by State Governments shall be valid only for procurement by the State Government and its agencies/ public enterprises etc. and shall not be valid for procurement in other states or by the Government of India and their agencies/ public enterprises etc.
11. Special Cases [In reference to sub-para 2-b) above]: a) In projects which receive international funding with the approval of the Department of Economic Affairs (DEA), Ministry of Finance, the procurement guidelines applicable to the project shall normally be followed, notwithstanding anything contained in the Order
and without reference to the Competent Authority. Exceptions to this shall be decided in consultation with DEA. b) This Order shall not apply to procurement by Indian missions and by offices of government agencies/ undertakings located outside India. c) This Order will not apply to bidders (or entities) from those countries (even if sharing a land border with India) to which the Government of India has extended lines of credit or in which the Government of India is engaged in development projects. Updated lists of countries to which lines of credit have been extended or in which development projects are undertaken are given on the website of the Ministry of External Affairs. d) A bidder is permitted to procure raw material, components, sub-assemblies etc. from the vendors from countries which shares a land border with India. Such vendors will not be required to be registered with the Competent Authority, as it is not regarded as “sub-contracting.” However, in case a bidder has proposed to supply finished goods procured directly/ indirectly from the vendors from the countries sharing land border with India, such vendor will be required to be registered with the Competent Authority35. e) Procurement of spare parts and other essential service support like Annual Maintenance Contract (AMC)/ Comprehensive Maintenance Contract (CMC), including consumables for closed systems, from Original Equipment Manufacturers (OEMs) or their authorized agents, shall be exempted from the requirement of registration.
12. Clarifications regarding the applicability of the restrictions under Rule 144
(xi) of the GFRs: a) The proprietary purchases are not excluded from the provisions of Rule 144
(xi) of GFR, 2017. b) The rule is applicable to all purchases irrespective of the order value. c) Sub-contracting is not permitted by any contractor to a contractor from a country sharing a land border with India unless registered with the competent authority. However, it is to be noted that procurement of raw materials, components, subassemblies, etc., does not constitute sub-contracting. In case a bidder has proposed to supply finished goods procured directly/ indirectly from the vendors from the countries that share a land border with India, such vendor will be required to be registered with the Competent Authority as per the provisions of Rule 144
(xi) of GFR, 2017. d) There is no bar on the contractor from procuring raw material from a firm that has been acquired by another firm belonging to a country that shares a land border with India. e) Contract Manufacturing outside India: If the bidder is getting the subject product manufactured outside India, this is treated as contract manufacturing, and beneficial ownership of the actual manufacturing entity must be verified. If the actual manufacturer does not meet the beneficial ownership criteria – then the bidder must submit DPIIT registration of such manufacturer to participate in the procurement. f) The hiring of Services: Suppose a Bidder (Indian/Foreign) who is not from a country sharing a land border with India offers services to a procuring entity by arranging equipment from another company. Then, the following scenarios may appear:
Chapter 1: Introduction –Principles and Policies
S. No Scenario Applicability of Rule 144
(xi) a) The equipment/ goods have been purchased or will be purchased from a company (manufacturer) from a country that shares a land border with India. The bidder has procured certain goods to offer the requisite services to a procuring entity. In such case, the bidder does not fall within the definition of the term “bidder” as defined under para 4-e) above. Hence, the provisions of Rule 144
(xi) of GFR, 2017 do not apply to this case. b) By entering into a MOU/ lease agreement with the company (who owns the equipment/ goods) from a country that shares a land border with India. Here, the bidding vendor proposes to hire services from a company that belongs to a country that shares a land border with India. This prima facie becomes the case of an indirect supply of services by a company that owns the equipment/ goods by introducing an intermediary. The intermediary merely acts as an agent to the company providing services of the equipment. In such a case, the company owning the equipment and indirectly supplying the services shall be required to be registered with the competent authority, thereby requiring the fulfilment of the provisions of Rule 144 (xi). c) By entering into an MOU/ lease agreement with the company (say ‘X’, who is the present owner of the equipment) from a country that does not share a land border with India. The equipment has been purchased from the manufacturer of the company (say ‘Y’), which is from a country that shares a land border with India. In this case, the actual supplier of services, prima facie, shall be ‘X.’ The status of ‘X’ in this case does not attract the provisions of Rule 144 (xi).
13. Illustrative examples of the applicability of the Restrictions under Rule 144
(xi) of GFR 2017 a) A vendor, say, ‘Party A’ from India, is procuring an item from their sister company, say, ‘Party B,’ which is registered in a country that does not share a land border with India. Both the parties, Party A and B, are owned by an entity, say, ‘Party C.’ Party C does not belong to a country sharing a land border with India. However, Party B has its production facility in a Country sharing a land border with India, and the manufactured item will be procured by Party A from its sister concern, i.e., Party B from the abovementioned production facility. The production unit is wholly owned by Party B. The
b) Taking an example of IT goods and services: i) If the contractor is only supplying the servers as it is from an OEM that belongs to a country sharing a land border with India, and there is no value addition done by the contractor, then the contractor acts as an agent for the OEM and registration of the OEM and the agent (contractor) both are required as per the provisions of Rule 144
(xi) of GFR 2017. ii) In case the contractor supplies value-added services on hardware and the contractor outsources the procurement of hardware, OEM registration is not required. iii) Where there is deployment of IT services that includes both hardware and software customization, and the contractor has sourced hardware, which is made in the country sharing a land border with India, the requirement of registration as per the provisions of Rule 144
(xi) is not applicable.
Party A now claims that the provisions of Rule 144
(xi) of GFR 2017 do not apply on it because both the Party A and B are not:
i) An entity incorporated, established, or registered in such a country, as Party A is registered in India and Party B is registered in a Country not sharing a land border with India; ii) A subsidiary of an entity incorporated, established, or registered in such a country as they are 100% owned subsidiary of Party C, which is incorporated, registered, and established in a country not sharing a land border with India; iii) An entity controlled through entities incorporated, established, or registered in such a country as they are 100% owned by Party C, which is registered and established in a country not sharing a land border with India; iv) An entity whose beneficial owner is situated in such a country as their beneficial owner is Party C; v) An Indian (or other) agent of such an entity; vi) A natural person who is a citizen of such a country; vii) A consortium or joint venture where any member of the consortium or joint venture falls under any of the above. Though it has a wholly owned subsidiary in a country that shares a land border with India but is not a JV or consortium (subsidiary does not qualify as JV or consortium) viii) In addition to the above, Party A claims that they are not procuring finished goods directly/ indirectly from the vendors from the countries sharing land borders with India as the item is being manufactured in their own production units. ix) In light of the above facts and the claims put forth by Party A, it is important to clarify to the procurers that Party A acts as an agent for Party B, which manufactures goods in a country sharing a land border with India. Party B supplies goods manufactured at premises established in a country that shares a land border with India. In such a case, registration is required for Party B (and not necessarily for Party A, who is only an agent and not from a country sharing a land border with India).

Para 1.11.4 — GOODS_MANUAL

Original Rule Text

Para 1.11.4 — GOODS_MANUAL

Original Rule Text