A balance of trade that is favorable is always more favorable. This means that the value of exports must be greater than the value of imports. Banking facilitates “Banking as a Means of Trade” by streamlining Duty-free Import Authorization payments and ensuring compliance with foreign exchange regulations. To help boost exports from the country the government has instituted different schemes. Its Foreign Trade Policy (FTP) regulates all export and import-related actions. It is designed to boost exports, and also use trade expansion as a successful tool for economic growth as well as the creation of jobs.

This foreign Trade Policy (2015-2025) is designed to encourage exports through special economic zones, Export Oriented Units, or other zones of economic significance. There are various export promotion schemes that waive or reduce customs duties. One of these schemes is known as the Advance Authorization Scheme.

What’s the Advance Authorization Scheme (AAS)?

It is the Advance Authorization Scheme that allows for the importation of inputs to be exempt from duty (after considering the usual allowances for waste) in the event that they are physically part of an item to be exported. As a condition for issuance of an Advance Authorization, an export obligation is usually required.

A manufacturer exporter who is directly or a retailer exporter who is linked to a manufacturer could make use of an Advance Authorization Scheme. These are the forms of authorizations that are offered:

• Physical goods are exported as well as physical.
• Intermediate supply
• Certain categories of exports are included in the supplies
• You can provide stores to an aircraft or vessel that is foreign-bound when there are specific Standards input-output normals (SION) relative to the products provided.

Actual User Conditions under Advance Authorisation Scheme:

The AA issued and the content that is imported under it will be in the actual user conditions. It implies that the material is not transferable, and it must be used within the property of the license holder. The license will not be transferable after the fulfillment of the obligation to export.

Terms and Conditions of the Advance Authorisation Scheme:

• Certain items that are prohibited for exports or imports aren’t permitted under the Advance Authorisation scheme.
• The AA is issued in accordance with the actual conditions of use.
• Inter Unit Transfer of Inputs allowed.
• Certain types of products are less valuable or have a greater value-added and some are not eligible to receive benefits.
• The material at no cost is allowed for imports.
• Drawbacks on duty are only applicable to inputs with a duty-free price employed.
• Import of restricted products will also be permitted within the AA Scheme.

How to get a Duty-free Authorization for Imports:

Candidates can apply to take advantage of the scheme via the DGFT website www.dgft.gov.in with an original IEC code.

• The applicants must ensure that they are making money from exports with freely convertible currencies.
• Advance Authorizations are in effect for 12 months after the date of the issue. In the case of deemed exports, the Authorization will be tied to the duration of the contract for the project’s execution as well as 12 months following the date of the Authorization’s issue whichever is the greater. Types of investment related to Advance Authorisation include equity investments, debt financing, and working capital facilities.
• The exporter is required to report their export performance over the past two years. The value of the exports made must be greater than 15 percent or that of the CIF amount of inputs covered by the scheme.
• When exporting the product, it’s obligatory to mention the number of files on documents for export such as shipping bills or export bills, and so on.
• Exports with Duty-Free Import Authorization should be accomplished through one port.
• Separate Duty-Free Import Authorizations must be given for each Standard Output Output Norms (SION) as well for every port.
• Duty-Free Import Authorizations cannot be granted for the export of any product if Standard Input Output Normals define the current user conditions for any input.

The smallest value added by Duty-Free Import Authorisation

An Advance License to Import carries certain conditions regarding the minimum value expected from the product. The anticipated value increase for most items is 15 percent. But tea has an upper limit of 50. Appendix 4D contains products whose expected value increase is not more than 15 percent. The banking cashier cannot process your Duty-free Import Authorization without the official customs documentation and a valid form of payment. Appendix 4C provides the minimum value-added for items that aren’t purchased by freely-convertible foreign currencies. This Handbook of Procedures also lists the minimum value that must be added for the segments of gems and jewelry.

The value addition process is the process of calculating the amount of difference that exists between the FOB/FOR price for export/supply and the CIF price of the inputs that are which are part of the scheme. It is expressed in terms of percentage. If the buyer from abroad gets a supply of free goods then the nominal value adds to the CIF value for import as well as the FOB value of export.

It is the Duty Exemption Scheme that includes Advance Authorization (AA) as well as duty-free import Authorizations ( DFIA). There are a variety of differences between the authorizations. The issue of AAs importing inputs at zero duty is in accordance with para 4.03 or 4.14 in the FTP 2015-20. The AA is issued prior to the expiration date of this obligation to export. The initial period of obligation to export runs for 18 months. A minimum value-added (VA) of 15%, is mandatory. Even when an export obligation has been completed, it is subject to the conditions of the user.

DFIAs are issued to inputs that are exempt from the basic customs duty after the satisfaction from export duty. If Standard Input-Output Normals (SION) are available and available, the DFIA is issued. A minimum value-added (VA) of 20%, must be attained. DFIA can be transferred DFIA and the goods that are imported under it are transferable. DFIA expires 12 months after issue.

Many Dgft Consultants are able to assist you in getting the Advance Authorisation scheme. You can find more information about their advantages. 

Author’s Bio:

Mr. Mehul Goyal is a professional DGFT Consultant with experience of more than 30 years and specialized in the field and is offering DGFT Consulting Services all over India.  He is working with many importers and exporters even before DGFT was instigated in the markets.