TRACE Scheme DGFT: How MSME Exporters Can Get Certification Costs Reimbursed

TRACE Scheme DGFT: How MSME Exporters Can Get Certification Costs Reimbursed

You have a confirmed order from a buyer in Europe or the US. Then comes the line that every small exporter dreads: “Please share your CE / FDA / REACH / BRCGS certificate before shipment.”

Testing, audits and certification can run into lakhs of rupees, and the money is spent before a single container moves. For many MSME exporters, that cost is the difference between winning a market and walking away from it.

DGFT has now put a scheme in place to share that burden. It is called TRACE: Trade Regulations, Accreditation & Compliance Enablement, and it sits under the Export Promotion Mission (EPM) – Niryat Disha. It was launched through Trade Notice No. 26/2025-26 dated 20 February 2026 and has since been amended. This guide explains what it covers, who qualifies, what the current rates are, and the mistakes that can cost you your reimbursement.

Quick Take: What Exporters Need to Know

• What it is: a partial reimbursement of testing, inspection, certification, audit and traceability costs needed for overseas market access.
• Who it is for: MSMEs involved in international value chains with an active IEC (not on the Denied Entity List) and a valid Udyam Registration.
• Effective date: 20 February 2026. Only activities undertaken on or after this date qualify.
• Current rates: up to 95% for Micro and Small Enterprises and up to 80% for Medium Enterprises, of actual cost net of taxes or the notified ceiling, whichever is lower.
• Annual cap: ₹50 lakh per IEC per financial year (earlier ₹25 lakh), with higher support considered case by case. 
• Payout: in two instalments, 50% after certification and 50% after linked exports. 
• Process: file an Intent-to-Claim (IC) before you obtain the certificate, then a Reimbursement Claim after.
• Biggest trap: starting the certification process before filing the Intent-to-Claim.
• Advance Authorisation / EPCG: the notice does not link TRACE to either scheme.
• Status: the scheme runs on a pilot basis, so expect further refinements.

What Does the DGFT Notification Actually Say?

The notice limits support to partial reimbursement of eligible expenditure incurred by MSMEs towards testing, inspection, certification, audits, traceability systems and other conformity-assessment requirements. These must be either mandated by regulations for market access, or necessary to show compliance with internationally recognised standards.

The notice came with seven parts: the Policy Framework (Annexure-I), Operational and Procedural Guidelines (II), Governance Structure (III), the Online Application Procedure (IV), the Positive List (V), the Priority Positive List (VI) and the tariff lines for merchant exporters (VII).

DGFT also invited stakeholder comments within 30 days under Paragraph 1.07A of the Foreign Trade Policy 2023.

One important point from the policy framework: assistance is meant to build your capacity to comply, “without conferring any entitlement linked to export performance.” This is not an export incentive like RoDTEP. It reimburses compliance spending. (The July 2026 amendment, covered below, brings a link to exports into the payout stage.)

What Has Changed? The February Launch and the July Amendment

DGFT issued Trade Notice No. 09/2026-27 on 1 July 2026, amending the TRACE guidelines. It states that all other provisions of the February notice remain unchanged. Here is the position before and after: 

Why this matters: the scheme is now more generous on rate and ceiling, but the second half of your money depends on actually exporting against that certification.

Exporter Tip: The July amendment still carries Para 2(f) of the original guidelines, which says revised reimbursement rates apply only to certifications obtained on or after the date of the revision. If you obtained a certificate between 20 February and 30 June 2026, confirm with DGFT which rate applies to you before assuming the higher percentage.

Why Is This Important for Exporters?

Compliance cost is a fixed cost. A small exporter and a large one pay similar audit and testing fees, but the small exporter spreads them over far fewer shipments.

TRACE targets exactly that gap. A well-chosen certification can open a market, and TRACE can return a substantial part of the cost. For a Micro or Small unit at the top rate, you would bear only a small slice of the eligible expense, subject to the notified ceiling for that certification.

There is a catch. TRACE rewards planning, not hindsight. The scheme is built around filing the Intent-to-Claim first, then getting certified, then claiming. Exporters who certify first and think about reimbursement later may find themselves outside the process.

Who Will Be Affected?

Exporters who may benefit

• MSME manufacturers and exporters selling into regulated markets (EU, US, UAE, Saudi Arabia, China, Japan, South Korea and others) that require product certification.
• MSMEs facing buyer-mandated audits and certifications in food, agri, aquaculture, textiles, chemicals, electronics and consumer goods.
• Exporters that must renew certificates regularly, since recurring compliance costs are covered.
• Micro and Small units, which get the highest rate.

Exporters who may be affected or restricted

• Merchant exporters. They qualify only for tariff lines notified in Annexure-VII, where exports are predominantly through aggregator-based models. That annexure lists around 1,483 six-digit HS lines, running through agri-food, textiles, leather and footwear categories.
• Exporters whose exports are deemed exports (FTP Chapter 7) or exports to SEZs. Support is not admissible for these.
• Anyone relying on a certificate or test that is not on the eligible list.

Exporters who may not be covered

• Non-MSME exporters (a valid Udyam Registration is a condition).
• Firms on the Denied Entity List.
• Expenses incurred before 20 February 2026.

Eligibility and Conditions

• Active IEC, not on the Denied Entity List.
• Valid MSME Udyam Registration Number.
• The MSME must be involved in international value chains.
• The certification, test or inspection must appear in the notified list. The list is dynamic and reviewed periodically for additions and removals.
• Cost categories covered:
  
  • One-time costs: certification prerequisites such as inspections, audits, factory or facility assessments and market-specific licensing.
  • Recurring costs: ongoing compliance such as specific health or safety certificates and buyer-mandated voluntary certifications.
• Reimbursement is on the actual cost net of taxes, or the notified cost, whichever is lower.
• Reimbursement is admissible only after you have cleared and obtained the outcome, not merely on completing the process.
• Self-declaration that no benefit has been or will be claimed for the same expenditure under any other Central or State scheme or any third-party assistance.
• Firms that graduate out of their MSME category during the year stay eligible for three years from re-classification (per Ministry of MSME Notification S.O. 4926(E) dated 18.10.2022), subject to other conditions.
• For FY 2025-26, the annual ceiling applied in full, without pro-rata reduction.
• Applicants are subject to post-disbursement verification.

Exporter Tip: The declarations in the forms are wide. You confirm you are not under investigation, prosecuted or blacklisted under the FTDR Act, Customs Act, Central Excise Act, FEMA or COFEPOSA, and that you have no outstanding penalties or dues under them. Check your compliance position before you file, not after.

Important Dates and Deadlines

How to Claim: The Two-Stage Process

Stage I: Intent-to-Claim (IC), filed before certification. The online form asks for firm details (auto-populated from your IEC), the ITC-HS code (for merchant exporters), sector, certification name, certifying agency and its address, purpose, country of export, amount with and without taxes, type and nature of certification, renewal frequency, whether accredited labs in India are adequate for your product, and the testing period.

Stage II: Reimbursement Claim, filed after certification. Tag the relevant IC and attach:

1. Copy of the certificate, inspection report or test report.
2. Invoice and proof of payment.
3. Evidence of the mandatory or market-driven requirement.

Under the amended guidelines, this stage is split into RC-1 (the above) and RC-2 (evidence of exports and proof of realisation linked to the certification). 

DGFT examines the claim and pays into the bank account linked to your IEC. Certificates generated or validated through the Bharat Aayat Niryat Lab / Quality Setu platform may be prioritised for automated processing and faster disbursal, subject to system validations and post-disbursement audit safeguards.

How Does This Affect Advance Authorisation and EPCG?

The notice does not mention either scheme, and TRACE does not change eligibility, export obligation or duty benefits under Advance Authorisation or EPCG. If you use those schemes, nothing about them changes because of TRACE.

The one overlap to watch is the declaration that you are not claiming support for the same expenditure under any other scheme. If you intend to claim a certification cost under TRACE, keep that expense out of any other claim.

How Does This Affect Other DGFT Schemes?

TRACE is one of several interventions launched under the Export Promotion Mission, which also includes Market Access Support (Trade Notice 19/2025-26) and the trade-finance, logistics and trade-intelligence interventions notified in early 2026. Each has its own conditions, so check each notice separately.

TRACE is a cost reimbursement for compliance spending. It is not an incentive on export value, so it does not replace RoDTEP, RoSCTL or similar benefits. Whether a specific cost can also be supported elsewhere depends on the double-benefit declaration and should be verified case by case.

Practical Example: How TRACE Could Work for a Small Exporter

Illustrative only. The numbers are hypothetical, and the actual reimbursement depends on the notified ceiling for the certification.

Suppose a Small Enterprise exports processed food and needs a buyer-mandated food-safety certification. The net-of-tax cost is ₹4,00,000, assumed to be below the notified ceiling.

• Before filing the Intent-to-Claim: the firm files its IC with certification and agency details.
• After certification: it pays the agency and files RC-1.
• Eligible support (at the maximum Small-enterprise rate of 95%): up to ₹3,80,000.
• First instalment (50%): up to ₹1,90,000 after certification and RC-1.
• Second instalment (50%): up to ₹1,90,000 after export evidence and realisation proof (RC-2), within 2 years of the first instalment.

Earlier (Feb 2026 rules): at 60%, the same cost would have returned up to ₹2,40,000, paid in one go.
Practical impact: a higher reimbursement, but the firm must now track exports linked to this certificate.

What Should Exporters Do Now?

☐ Confirm your Udyam registration and IEC are active and details match
☐ Check your MSME category (Micro, Small or Medium), which sets your rate
☐ List certifications your buyers or destination markets require
☐ Check each against the current eligible list (462 entries)
☐ If you are a merchant exporter, check your HS code against Annexure-VII
☐ File the Intent-to-Claim before starting any test, audit or certification
☐ Keep invoices, payment proofs and buyer or regulatory requirement letters organised
☐ Plan exports linked to the certificate so RC-2 can be filed within the 2-year window
☐ Review your declarations for pending penalties or proceedings
☐ Seek professional help if any condition is unclear

Common Mistakes Exporters Should Avoid

• Certifying first and filing later. The process requires the Intent-to-Claim before certification.
• Assuming past costs qualify. Anything done before 20 February 2026 is out.
• Assuming the 95% rate applies to everyone. It is for Micro and Small units; Medium units get up to 80%.
• Forgetting the notified ceiling. The rate applies to actual cost or the notified ceiling, whichever is lower.
• Ignoring the export link. Missing the 2-year window for export evidence can lapse the second instalment and trigger recovery of the first.
• Letting the IC lapse. No claim within 2 years means the claim lapses and you lose eligibility for the next financial year.
• Double-claiming. The same expense cannot be claimed under another scheme.
• Merchant exporters ignoring Annexure-VII. Not every tariff line qualifies.
• Treating the scheme as permanent. It is on a pilot basis and guidelines can change.

FAQs

1. What is the TRACE scheme of DGFT?
TRACE (Trade Regulations, Accreditation & Compliance Enablement) is a DGFT scheme under the Export Promotion Mission that partially reimburses MSMEs for testing, inspection, certification and similar compliance costs needed for overseas market access.

2. When did the TRACE scheme start?
It took effect on 20 February 2026 through Trade Notice 26/2025-26. Only activities undertaken on or after that date are eligible.

3. Who is eligible for TRACE?
MSMEs involved in international value chains with an active IEC (not on the Denied Entity List) and a valid Udyam Registration Number. Merchant exporters are covered only for notified tariff lines.

4. What percentage is reimbursed under TRACE?
After the 1 July 2026 amendment, up to 95% for Micro and Small Enterprises and up to 80% for Medium Enterprises, of actual cost net of taxes or the notified ceiling, whichever is lower. The original rates were up to 60% and 75%. 

5. What is the maximum reimbursement under TRACE?
₹50 lakh per IEC per financial year after the amendment, up from ₹25 lakh. Larger claims may be examined case by case by the Sub-Committee. 

6. Do I apply before or after getting my certificate?
Both. File the Intent-to-Claim before obtaining the certification, then file the Reimbursement Claim after.

7. How long is the Intent-to-Claim valid?
Two years. If you do not file a Reimbursement Claim in that time, the claim lapses and you cannot claim in the next financial year.

8. Are FDA, CE, REACH and similar certifications covered?
The original Positive List included certifications such as FDA, FCC, CE, REACH, CCC, ECAS, SABER, KC, ISO standards, HACCP and BRCGS. The list has since been expanded to 462 entries, so check the current list for your certification.

9. How is the reimbursement paid?
In two instalments: 50% after certification and 50% after export evidence linked to that certification. Payment goes to the bank account registered with your IEC. 

10. Can I claim for certifications I already obtained?
Only if undertaken on or after 20 February 2026 and eligible under the rules. Also check the rate-applicability point under the “What Has Changed” section.

11. Does TRACE affect my Advance Authorisation or EPCG?
The notice does not link TRACE to either. The only overlap is the declaration against claiming the same expenditure under another scheme.

Final Takeaway

TRACE is a real opportunity for MSME exporters who spend heavily on certification. The rates are now stronger and the ceiling is higher. But the scheme rewards the exporter who plans: file the Intent-to-Claim first, choose an eligible certification, keep clean records, and line up exports within the 2-year window.

Because the scheme is on a pilot basis, rules may change again. Read the current notice before you commit money.

Need Help Understanding How TRACE Applies to Your Business?

TRACE looks simple on paper, but your reimbursement depends on your MSME category, the certification, your HS code, your compliance history and your export plan.

If you are unsure whether you qualify or how to file the Intent-to-Claim and Reimbursement Claims correctly, A V International, with 35+ years of experience in DGFT and Customs matters, can help you assess eligibility, prepare documentation and stay compliant. Our DGFT services include IEC-related support, scheme-eligibility review, application and claim documentation, and wider DGFT and Customs compliance.

This article is for general information and is based on DGFT Trade Notice 26/2025-26 and the amendment dated 1 July 2026. It is not an official DGFT position. Please verify the latest position on the DGFT website before acting.