The Trade Regulations, Accreditation & Compliance Enablement (TRACE) scheme is deliberately narrow in scope. While it provides structured support for compliance-related costs, the guidelines clearly specify what is excluded from eligibility to preserve the scheme’s regulatory focus and fiscal discipline.
This article explains the explicit exclusions under TRACE, the policy rationale behind them, and their implications for exporters.
Why Exclusions Are Integral to TRACE
TRACE is not designed as a general export support or subsidy scheme. Its objective is limited to enabling compliance with overseas regulatory requirements. Exclusions serve to:
Prevent overlap with other export promotion mechanisms
Avoid duplication of benefits
Maintain WTO-consistent, non-incentive character
Ensure targeted use of public funds
Accordingly, several categories of exports and expenditure are kept outside TRACE.
Deemed Exports: Explicitly Excluded
TRACE does not extend support to deemed exports.
Meaning of Deemed Exports
Deemed exports refer to transactions notified under the Foreign Trade Policy where goods do not leave India but are treated as exports for policy purposes.
TRACE Position
Reimbursement under TRACE is not admissible for deemed exports
Compliance costs linked to such supplies are excluded
The exclusion applies irrespective of MSME status
The rationale is that TRACE addresses importing-country regulations, which do not arise in deemed export transactions.
Supplies to Special Economic Zones (SEZ)
Supplies made to Special Economic Zones are also excluded.
Key Points
SEZ supplies, though treated as exports under FTP, are not eligible under TRACE
Certifications or testing undertaken for SEZ supplies cannot be claimed
The exclusion applies uniformly across sectors and products
TRACE focuses on foreign market access, whereas SEZ supplies remain within the domestic regulatory ecosystem.
No Overlap with Other Government Schemes
TRACE follows a zero-duplication principle. Accordingly, reimbursement is not admissible for:
Expenditure already claimed under any Central Government scheme
Expenditure supported by State Government schemes
Costs reimbursed or subsidised by any other public authority
Applicants must furnish a self-declaration confirming non-availment of duplicate benefits.
Retrospective Costs Not Covered
TRACE is strictly prospective. This means:
Certifications, tests, or inspections completed before the notified cut-off date are excluded
Legacy or historical compliance costs are not admissible
Intent-to-Claim cannot be filed retrospectively
The scheme does not permit regularisation of past expenditure.
Certifications Outside Notified Lists
Even if a certification is commercially important or buyer-preferred, it is excluded if:
It does not appear in the notified Positive List, or
It is not included in the Priority Positive List
List inclusion is mandatory. There is no case-by-case discretion.
Excluded Nature of Expenditure
TRACE does not cover costs that are:
Capital in nature
Infrastructure or machinery-related
Consultancy or advisory expenses
Marketing, branding, or promotional costs
Freight, logistics, or insurance-related
Taxes, duties, cess, or statutory levies
Only direct compliance-related expenditure is admissible.
Exclusion of Non-Compliant Applicants
Applicants are excluded where:
IEC is suspended or cancelled
The entity is listed in the Denied Entity List
The applicant is under debarment or blacklisting under trade laws
Mandatory declarations are false or misleading
Eligibility exclusions operate independently of the nature of expenditure.
Policy Rationale Behind Exclusions
The exclusions ensure that TRACE:
Remains focused on international regulatory compliance
Does not function as an export incentive
Avoids fiscal leakage and duplication
Aligns with Foreign Trade Policy 2023 objectives
Maintains audit and verification integrity
They are structural, not discretionary.
Practical Implications for Exporters
Exporters must carefully assess:
Whether the transaction qualifies as a physical export
Whether the target market is overseas
Whether the certification is notified
Whether any other scheme support exists
Incorrect assumptions can result in outright rejection of claims.
Conclusion
The exclusion framework under TRACE is as important as its eligibility conditions. By excluding deemed exports, SEZ supplies, duplicate benefits, retrospective costs, and non-notified certifications, TRACE preserves its identity as a targeted compliance enablement scheme.
Exporters should factor these exclusions into compliance planning at the outset, as TRACE does not allow relaxation, regularisation, or discretionary inclusion once a claim is found ineligible.
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