Indian Premium Footwear Industry Rocked by Import Disruptions: An Examination of Regulatory Hurdles and Domestic Manufacturing Incentives

Introduction:

India’s booming premium footwear market, a playground for coveted designer labels and high-performance sports brands, is facing unprecedented challenges. The Bureau of Indian Standards (BIS) certification requirements for foreign footwear factories, particularly those in China and Vietnam, have cast a dark cloud over upcoming spring-summer collections. This article delves deeper into the legal intricacies of the QCO (Quality Control Order) framework, analyzes its impact on industry stakeholders, and examines potential solutions to navigate this turbulent landscape.

Regulatory Impasse:

The crux of the current turmoil lies in the implementation of QCOs for specific footwear categories. Notably, leather shoes have been subject to mandatory BIS certification since July 2023, while sports shoes, sandals, and slippers will fall under the purview of the regulation from January 2024. As per QCO norms, factories abroad supplying these products and their key components (soles, heels) must receive BIS certification for their goods to be imported and sold in India.

Chinese Conundrum:

However, the BIS has not yet certified any sourcing factories in China and Vietnam, the primary sources for imported premium footwear in India. This delay disrupts established supply chains and threatens to disrupt new season launches. Industry leaders, speaking anonymously, have expressed concerns about BIS’s reluctance to certify factories in these markets, hinting at potential political and economic considerations at play.

Government’s Perspective:

The Indian government maintains that the QCOs aim to bolster domestic footwear manufacturing and curb the influx of low-quality imports, primarily from China. They point to the October 2020 notification of the QCOs and argue that industry players, especially larger ones, have already been granted multiple extensions to comply.

Alternative Solutions:

With spring-summer collections hanging in the balance, brands are left scrambling for solutions. Importing from Europe, while a viable option, carries the burden of higher costs and potentially revised pricing strategies for Indian consumers. Domestic manufacturing, though promoted by the government, faces limitations in terms of expertise for high-end and technical footwear production.

Impact on Stakeholders:

The QCO implementation significantly impacts various stakeholders within the industry:

  • Brands: Facing potential delays in new collections, disrupted supply chains, and possible price hikes due to alternative sourcing or domestic production.
  • Consumers: May experience limited choices, higher prices, and potentially lower quality if domestic production ramp-up struggles to meet demand for premium footwear.
  • Retailers: Grappling with potential stock shortages and the challenge of adjusting pricing strategies to maintain consumer demand.
  • Domestic Manufacturers: Presented with an opportunity to increase market share but face challenges in scaling up production to meet the demand for premium and technical footwear.

Legal Implications:

The QCO implementation throws up several legal questions. The potential for discriminatory application of the certification process across countries raises concerns about fairness and adherence to World Trade Organization (WTO) principles. Additionally, the impact on existing contracts and intellectual property rights of brands needs careful consideration.

Path Forward:

As the Indian premium footwear industry navigates this challenging phase, open communication and collaborative efforts between the government, BIS, and industry stakeholders are crucial. Streamlining the certification process, ensuring transparency in its application, and exploring alternative compliance measures such as targeted testing protocols hold the key to finding sustainable solutions.

Potential Solutions:

  • Streamlining the BIS certification process: Reducing bureaucratic hurdles and expediting factory inspections, particularly in key sourcing countries like China and Vietnam.
  • Promoting transparency and predictability: Clearly outlining certification requirements and timelines to provide certainty for businesses.
  • Exploring alternative compliance measures: Implementing targeted testing protocols for specific product categories or components instead of mandatory factory certification for all.
  • Enhancing domestic manufacturing capabilities: Providing targeted incentives and technical assistance to domestic manufacturers to help them upgrade their production capabilities for premium and technical footwear.
  • Investing in skills development: Building a skilled workforce in India through training programs and collaborations with international footwear experts.

Conclusion:

The BIS certification impasse has put the Indian premium footwear industry at a crossroads. While promoting domestic manufacturing holds merit, it should not come at the cost of stifling fair competition and disrupting established supply chains. Finding a balanced approach that prioritizes consumer welfare, adheres to legal frameworks, and fosters a thriving footwear ecosystem is the need of the hour. By working collaboratively and implementing effective solutions, the Indian premium footwear industry can overcome this challenge and emerge even stronger.

Aditya Pratap is a lawyer and founder of Aditya Pratap Law Offices. He practices in the realm of real estate, corporate, and criminal law. His website is adityapratap.in and his media interviews can be accessed at http://www.youtube.com/@AdityaPratap/featured. Views expressed are personal.

This article has been assisted by Aruj Gupta, a 3rd year law student pursuing B.A., LL.B. from NMIMS Bangalore.