Is Export Routing via Third Countries Legal? Insights from India’s Customs and Trade Law By Adv. C.V. Manuvilsan | Lex Loci Associates
Is Export Routing via Third Countries Legal? Insights from India’s Customs and Trade Law
By Adv. C.V. Manuvilsan | Lex Loci Associates
Is Export Routing via Third Countries Legal?
Understanding the Customs and Trade Law Risks for Indian Exporters
In the ever-evolving world of international trade, Indian exporters are increasingly seeking alternative routes to access sensitive markets, especially where direct exports face tariff barriers or restrictions. A recent case involving an exporter shipping diamonds and CVD stones to Thailand, with plans to re-export to the United States, brings to light important questions:
- Is such export rou
ting legal under Indian law? - What are the risks under the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992?
- Can the Directorate of Revenue Intelligence (DRI) seize goods and arrest transporters in such cases?
Let’s break down the legal position and compliance expectations.
🔍 The Legal Route vs. Risky Shortcuts
Exporting via a third country like Thailand is not illegal per se. Indian trade laws do not prohibit exporters from choosing commercially viable transit points. However, full and truthful disclosure is non-negotiable.
If an exporter:
- Declares Thailand as the final destination, but the actual buyer or end-use lies in the U.S., and
- Fails to disclose this to authorities,
…it may be treated as misdeclaration, inviting penalties and seizure under Section 113 of the Customs Act.
⚖️ What the Law Says
📌 Customs Act, 1962
- Section 110: Allows seizure if goods are liable for confiscation.
- Section 113: Covers fraudulent export or misdeclaration.
- Section 135: Penalises fraudulent intent or abetment.
📌 FTDR Act, 1992 & Foreign Trade Policy
- Exporters must comply with the SCOMET regime for dual-use goods (like CVD stones).
- Misleading or incomplete documentation can attract penalties under Section 11.
🚨 DRI’s Powers: When Are Arrests Justified?
In the cited case, the DRI not only seized the goods but arrested the carrier. Under Section 104 of the Customs Act, DRI may arrest persons who knowingly abet export fraud. However, if the carrier was merely executing transport instructions without knowledge of any illegality, the arrest could be challenged as excessive or arbitrary.
Courts have held that arrest must be backed by material evidence, not suspicion alone.
🌐 India’s International Obligations Matter
As a member of the Wassenaar Arrangement, India must regulate exports of sensitive or dual-use items. Using routing mechanisms to circumvent end-use disclosure can:
- Harm India’s trade credibility,
- Trigger inquiries under global export control regimes,
- Lead to enforcement action under foreign compliance laws (e.g., U.S. sanctions).
✅ How Exporters Can Stay Compliant
If you're exporting sensitive goods or using third-country routes, here’s how to avoid trouble:
- Declare actual final destination and end-user truthfully.
- Check DGFT Notifications and ensure SCOMET classification compliance.
- Avoid shell companies or fictitious buyers.
- Maintain a clear trail of documentation — purchase orders, invoices, contracts.
- If in doubt, consult a trade compliance lawyer.
📌 Conclusion: Transparency is Your Best Shield
In cross-border trade, the line between commercial strategy and regulatory violation is thin. Exporters must recognise that non-disclosure, even if not overtly fraudulent, can be treated as an offence under Indian customs law.
The DRI, DGFT, and Customs authorities are well within their rights to investigate — but only if backed by credible evidence and procedural compliance.
🖋️ About the Author
Adv. C.V. Manuvilsan
Founder, Lex Loci Associates
Based in Kerala, Advocate Manuvilsan advises businesses and exporters on Indian regulatory law, trade compliance, and strategic dispute resolution.
📞 Need Assistance?
If you are facing customs investigation, export seizure, or compliance scrutiny — we can help.
📧 cvmanuvilsan@gmail.com| ☎ +91-9846288877
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