DGFT TRACE Scheme Guide: Reimbursement for MSME Export Certification & Technical Compliance

TRACE Scheme for MSME Export Certification Reimbursement

The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce & Industry, introduced the Support for Trade Regulations, Accreditation & Compliance Enablement (TRACE) scheme under the Export Promotion Mission (EPM) - NIRYAT DISHA. Implemented prospectively from 20th February 2026, the TRACE scheme assists Indian Micro, Small, and Medium Enterprises (MSMEs) in acquiring global market access by offsetting technical compliance costs.

International buyers and overseas regulatory bodies mandate stringent testing, health and safety standards, audits, and certifications. The TRACE scheme alleviates this financial burden by offering up to 95% partial reimbursement on eligible testing, inspection, and certification expenses, subject to an annual cap of ₹50 Lakh per IEC.

Navigating government incentives requires technical clarity and procedural precision. As an experienced Industrial Subsidy Consultant, Unique Group guides exporters through regulatory frameworks, documentation, claim structuring, and government liaison to ensure seamless grant disbursement.

Table of Content

1. Why This Scheme Matters
2. What is the TRACE Scheme?
3. Financial Assistance & Subsidy Pattern
4. Eligibility Criteria
5. Eligible Expenses & Coverage
6. Step-by-Step Application Process
7. Required Documentation
8. Frequently Asked Questions

Why This Scheme Matters

Non-tariff barriers (NTBs), regulatory hurdles, and stringent quality mandates frequently prevent competitive Indian manufacturers from accessing foreign markets. Obtaining international certifications such as CE marking, FDA testing, ISO compliance, organic certifications, or buyer-specific audits requires substantial capital upfront.

By subsidizing up to 95% of these compliance expenditures, the TRACE scheme enables Indian MSMEs to scale internationally, absorb compliance costs, and compete effectively in global value chains.

What is the TRACE Scheme?

The TRACE Scheme is a targeted financial reimbursement framework designed to strengthen India’s quality and technical compliance ecosystem. Managed by DGFT, it offers financial support to export-oriented MSMEs incurring costs for foreign regulatory compliance, laboratory testing, product certifications, factory audits, and traceability systems.

Primary Objectives

• Assist MSMEs in meeting international quality, safety, and technical compliance standards.
• Enhance product quality and regulatory conformity for overseas market entry.
• Minimize compliance costs associated with non-tariff measures without offering direct, prohibited export subsidies.

Financial Assistance & Subsidy Pattern

Financial support under TRACE is extended as a partial reimbursement of actual incurred costs, net of taxes, duties, and cess, or the notified ceiling price, whichever is lower.

Note: Cases exceeding ₹50 Lakh may be evaluated on a case-to-case basis by the Sub-Committee.

Two-Stage Disbursement Structure

• 1st Instalment (50%): Disbursed immediately upon completing the certification process and submitting the official certificate or test report.
• 2nd Instalment (50%): Disbursed after submitting proof of completed exports linked directly to the certified product or facility.

Eligibility Criteria

To qualify for reimbursement under the TRACE Scheme, applicants must fulfill the following parameters:

• Entity Type: Active Micro, Small, or Medium Enterprise (MSME) holding a valid Udyam Registration.
• Export Registration: Active Importer-Exporter Code (IEC) registered with DGFT and not listed on the Denied Entity List (DEL).
• Integration: Must be actively involved in or entering international value chains.
• Certifications: Eligible only for certifications mentioned in Annexure 1 of Trade Notice No. 09/2026-27 dated 01st July 2026.
• Merchant Exporters: Merchant MSMEs are eligible only for tariff lines notified under Annexure-VII where export activities rely on aggregator-based models.
• Prospective Timeline: Only testing, inspections, audits, and certification activities initiated on or after 20th February 2026 are eligible for claims.

List of Eligible Certifications: Eligible certifications should be checked against Annexure 1 of Trade Notice No. 09/2026-27 dated 01st July 2026.

Tariff lines applicable for Merchant Exporters: Merchant MSMEs should verify applicability against Annexure-VII before initiating the TRACE claim process.

Exclusions

• Deemed exports as defined under Chapter 7 of the Foreign Trade Policy are ineligible.
• Exports originating from or directed to Special Economic Zones (SEZs) are ineligible.
• Double-dipping is prohibited. Expenditure claimed under any other Central or State Government scheme cannot be submitted under TRACE.

Eligible Expenses & Coverage

The scheme covers two main categories of compliance-related costs listed under positive Annexure lists:

1. One-Time Prerequisites: Testing, factory/facility inspections, auditing fees, market-specific regulatory licensing, and registration fees essential for initial access.
2. Recurring Operational Compliance: Ongoing testing, quality re-certification fees, market-mandated health and safety standards, buyer-driven voluntary standards, and implementation of traceability and digital quality monitoring systems.

Step-by-Step Application Process

Claiming financial support requires navigating a strictly governed two-stage online application workflow:

1. Stage 1: Intent-to-Claim (IC) - Before undertaking testing, audits, or certification procedures, the applicant must file an online Intent-to-Claim via the DGFT portal. The approved IC remains valid for filing reimbursement claims for up to 2 years.
2. Stage 2A: First Reimbursement Claim (RC-1) - Filed after completing certification and acquiring the required compliance documentation. It links to the previously approved IC and triggers release of the first 50% instalment upon approval.
3. Stage 2B: Second Reimbursement Claim (RC-2) - Filed after completing and shipping the export consignment linked to the certified product. It encloses export documentation and bank realization proof and triggers release of the final 50% instalment.

Required Documentation

• Active Udyam Registration Certificate and IEC.
• Copy of online Intent-to-Claim (IC) acknowledgment.
• Formal test reports, audit reports, or compliance certificates.
• Tax invoices and proof of payment, including bank statements or payment vouchers.
• Official regulatory mandate or buyer requirement document establishing compliance necessity.
• Shipping bills, bills of lading, and e-BRC for Stage 2B.
• Non-duplication self-declaration confirming no dual benefit has been claimed across other government programs.

Compliance Safeguards & Risk Warning

• Lapse of Claim: If a Reimbursement Claim is not submitted within 2 years of filing the Intent-to-Claim, the IC automatically lapses. The firm will also be barred from filing claims for the entire subsequent financial year.
• Recovery of Funds: Exporters who receive the first 50% installment must submit evidence of linked exports within 2 years of receiving that grant. Failure to produce export proof within this window leads to automatic lapse of the remaining 50% and initiates recovery proceedings for the first instalment.

Common Mistakes Exporters Make

• Executing Certification Before IC Approval: Commencing audits or making vendor payments before filing the Intent-to-Claim renders the expense ineligible.
• Missing Priority Platforms: Failing to utilize government-integrated platforms like Bharat Aayat Niryat Lab / Quality Setu, which offer automated validation and expedited disbursal.
• Mismatched Export Evidence: Submitting e-BRCs or shipping bills that do not match the specific products or production facilities covered in the certification documents.
• Overshooting Mandatory Timelines: Missing the 2-year deadline to file RC-1 or provide export proof, resulting in financial penalties and scheme debarment.