BIS Certification: Killer Blow For Small Importers?

With such high reliance on imports, the government needs to ensure that the new initiative is made simpler, smoother and faster for all genuine manufacturers

Government of India recently issued the Requirements for Compulsory Registration order(RCRO) 2012, which made it mandatory for 15 categories of electronic and IT products to be registered under the Bureau of Indian Standards (BIS) by April 3, 2013. The deadline was further extended to July 3, 2013 after the opposition by MAIT and other industry players. Recently government has further pushed the deadline for next three months.

However, even after 60 days of the extension, there are still unresolved bottlenecks in the overall certification process, and till date, not a single test report from the test labs have been accepted by BIS. The government has taken this move to check the sales of substandard and spurious electronic items in the country, which were considered not only to be a health hazard but also a security risk.

This also comes at a time when the industry is reeling under the impact of slow consumer as well as corporate sales of electronic items in the country, along with depreciating rupee that will add to companies' import bill. Even though the first quarter of the calendar year 2013 was better in terms of sales, the overall personal computer shipments grew by just three per cent over the corresponding period last year at 2.71 million units, according to market research firm IDC India.

According to a missive by the department of electronics and information technology, major electronics products can not be sold or imported into the country unless they are tested for quality standards and certified by the BIS. However, despite a three-month extension in the original deadline and around 1,500 applications, BIS has registered just one product so far. This massive delay is worrying the industry till no end. Already most of the imported branded products are globally certified before worldwide launches, but these products are being returned with a ‘volley of questions' by the labs.

The country's electronics industry is on the edge with the sale of products such as laptops facing a possible blackout from next month onwards as this would create a shortage of electronics product in the country and thus consumers, and many government and private IT projects would be impacted.

Although most of the IT product manufacturers have welcomed the step, at the same time, they have also questioned on the capabilities of testing labs infrastructure, in terms of current information structure and process requirements. The number of testing centers as of now is also less and considering the huge market for imports and manufactured IT products in India, these do not look enough. There were also delays in communicating the process and deadlines and there are concerns in the industry that like many laws and policies in our country, BIS should not become another project that is noble in thought but plagued by poor implementation and management at execution level that ends being just another hurdle for companies wanting to do business in India.

This policy will make import patterns more regularized and scrutinized with clauses to curb the import of inferior goods reducing number of low quality goods in the market. But it wouldn't affect the distribution models and supply chain for most in the industry apart from those involved in selling low quality goods.

Will this certification make sense for import driven country?

India already have such certifications in other areas like ISI. The BIS hallmark is a hallmarking system for gold as well as silver jewellery sold in India certifying to the purity of the metal. Similarly, BIS standards are applicable to all products that are consumed. For eg. milk powder, drinking water, LPG Cylinders, Thermometers etc., certification is mandatory as these products are concerned with health and safety. It certifies that the piece of jewelery or the quality of the products conforms to a set of standards laid by the BIS.

However, the learning from them is that such standard or certification is one of the hundred things required to win customer / consumer confidence for your offering and not the only thing. We do have spurious brands with ISI mark/certification in such matured area's too, say packaged drinking water as an example.

On IT products front, India does not do much manufacturing of most of the volume products. We rely mainly on imports since our domestic market volumes do not make it viable for investing in manufacturing of such IT products. With such high reliance on imports, the government needs to ensure that the new initiative is made simpler, smoother and faster for all genuine manufacturers with an objective to ensure we do not cause gap in availability of quality offerings.

Why product companies are in a fix over this?

One of big issue about the RCRO-the cost of testing and certifying a single model (or SKU) which is currently `1.5 lakh. Presently, OEMs need to pay a hefty sum to get their products certified. Vendors will be careful while launching new models and will limit the number of SKUs of their products or they will end up paying a lot of money for certification.

Lenovo had submitted more than 70 products 5-6 months ago. The designated test lab also tested those products and provided reports for 50 products. However, none of these products have got BIS certification till now.

According to JV Ramamurthy, president, MAIT, out of 1,400 products told to get BIS certification they have received only one with this certification. The government has assigned only 9 labs to dot the tests.The labs must have thorough knowledge regarding the parameters of test and how to test. But they do not have clear awareness about these things. The government has reportedly taken the initiative to control he dumping of IT products in Indian industry.

S Rajendran, chief marketing officer, Acer India said, "The move to provide quality products to the end customers is a good intent, but the policy is botched up, in terms of implementations one its a duplications of efforts all these products are anyways certified for global markets like US and UK, these products are more in demands in India. Thus I don't understand, why do we want to duplicate the efforts and incur extra cost?. Moreover, this certification process will hit the supply of the fast moving products as time to the market will be suffered any product prior to launch needs to have an India BIS certified identity to be given before selling any product from July 3, 2013."

He also pointed out that, "Even the BIS lab infrastructure for these products are not fully geared up for testing these products. Already the lab has close to 15,00- 18,00 products for testing and not a single certificate has come out. Once the lab testified these products, then it has to pass on to the BIS and they will put in their due diligence, then it will award the series nos to these products. Post that, as I vendor have to look at back to my supply chain, to get it fixed before the product shipping off. The whole process will take lead time to 14-15 weeks, even if I get the result today, products which are available on sale, will not get BIS certifications."

In the view of Vinay Shetty, country head - Component Business, ASUS (India), said, "As such is not a burden on IT product companies. There was initially much confusion regarding the process and timelines but things are slowly falling into place and we have sent our products for evaluation. However, the certification process should be transparent. Eventually the move should benefit customers and usher uniformity in the IT products space in the country. Currently, manufacturing is not very policy driven and neither are imports and government has to take steps to safeguard consumer interest.

However, there needs to be more transparency on the testing, methodology, results, timeframe and process related to the certification. The process should be well managed and should be kept free of bureaucracy and red-tape."

Commenting on this move, Ashiq Raidium from Kerala posted on The DQ Week website that, "its already too late, and India witnessed huge dumping of these low quality products since the 1994's and later many vendors soon begun the same game , many vendors started to sell these products under their brand names. Many vendor's products where of low quality and selling at a low price than branded MNCs is not an excuse, in later the customer has to get a new item or pay higher prices for quality products. In India there is no option to recycle these poisonous products lying in the junk yards around the nation, and there is no action from the importer or the Government too. By Imposing quality control on new products is a great move and I consider this as the greatest decision made by the Govt: to save our people and to get good quality (at least) products on the end user side. And now on only branded products will survive or local brand owners need to source from major OEMs/ODMs to survive on the coming weeks to fight with major MNC brands."

Talking about the challenges it will pose to the IT companies, Sushmita Das, VP, business at Kobian added, "The law is been imposed with very short period as notice for vendors to get the product certified. This shall also delay the launch of models aggressively in India as the law does not allow the product to be imported even the first consignment without the certification. Further any minor hardware changes shall need a new certification, which is practically very difficult to be attained knowing the time frame and the cost involved in each certification."

Sunil Pillai, co-founder and MD at iValue InfoSolutions pointed out, "As we speak we do not still have clarity on the certification criteria for various IT products,necessary infrastructure to conduct the tests and certify products within reasonable lead times across the country for the variety and volume of IT currently being imported. Hence the lead time available for getting the certification done by most of the manufacturer looks challenging given the readiness on most fronts."

One way of overcoming this challenge would be to start allowing imports based on some of the international certifications since most of the large manufacturers exporting to developed markets any way have these in place. Once these labs are ready with its standard and enough number of labs to certify quickly, we can then move in phases from international standard based imports to BSI standards relevant for our markets. This way we will ensure genuine and quality brands are not put through unnecessary harassment and more importantly ensure availability of quality products for our Indian customers.

Overall, there is an urgent need to streamline and standardize the BIS certification process or else the already troubled IT Hardware Industry may lose further ground in the market. According to market estimates, the delay in issue of registration number would lead to lack of supply in the market, thereby directly impacting the consumers. There are 8,000 models among recognized IT players which need certification. The 14 existing BIS labs can test only 500 devices per month. Till now only two IT companies Samsung and Sony have got the certification along with few electronic companies.

Big Threat to parallel import and smaller importers

If imported goods are not BIS-compliant the customs authorities can confiscate the shipments. The regulation also allows the DeitY and the BIS to raid and seize any premise that is manufacturing, stocking or selling the notified products. If the notified products are found BIS non-compliant the manufacturer, distributor or reseller can be booked under the Contravention of BIS Act 1986. The order allows the government to randomly select samples of registered electronic goods to ascertain whether these goods conform to the specified standards. Under the RCRO, even consumers are empowered to file cases in consumer courts for a missing or fake BIS mark on the notified products.

Once its get rolled out, the parallel importers and smaller importers will get a major jolt. Already the custom department has started restricting the entry of imported products at the ports, which are without the BIS certification. As in India there are many companies which either import cheap products from China or manufacture them locally without any quality control. No doubt, the survival of these companies will be diminishing and will clear the pave to multi national brands to have their monopoly and seizes the ways to get cheaper products get imported in India. Such strict actions will benefit consumers and MNSc only.

As a result even the smallest system integrator / assembler needs to have BIS Certification for laptop / PC / tablet which costs nothing less than `1 lacs per model and a time period of 90days to get the registration and few impossible documents(See Table 1 for list of documents for applying for BIS Certification for each model), which none of system integrators can provide as no one will share this. Even the small assemblers will die, Parallel import of course will be impossible under these laws.

The other setback would be the cost of attaining these certification. Commenting on the BIS certification move, Delhi based Kapil Wadhwa, of Champion Computers lamented, "RCRO will deal a serious blow to smaller importers and brands. They will not be able to bear the cost burden of `1.5 lakh for certifying every model."

The PC assemblers have welcomed the government's decision of not including desktops and components in its list of notified products. "If they had been included it would have created a big disadvantage for the assembled PC makers and many would have been forced to shut shop," opined Wadhwa.

As with certification come into force, it is expected many low volume importers will be out of the fray or these companies will left with options of either started focusing on system components or become authorized distributors of branded companies.