Compliances Under Advance Authorization (AA) Scheme.

Compliance requirements begin from the time an authorization is issued and continue until the EODC (Export Obligation Discharge Certificate) is granted and the case is fully closed at Customs.

1. Compliance at the Time of Receiving the Authorization

1. Verify that all details (items, quantities, SION norms, input ratios, EO period) are correct.
2. Ensure the bond / bank guarantee is executed with Customs or as per DGFT conditions.
3. Register the authorization at the port of import before filing any Bill of Entry.

2. Import-Related Compliances

1. Only the authorization holder (actual user) can import—no transfer or sale allowed.
2. Imported items must exactly match the description, quality, and technical specs allowed in the authorization.
3. Maintain separate stock records for duty-free imported inputs.
4. Adhere to wastage norms as per SION / self-declared norms.
5. Use the inputs strictly for manufacturing export products.
6. Do not divert any portion of duty-free imports to domestic sale or job work without authorization.
7. Ensure that imports are completed within the import validity period (generally 12 months).

3. Manufacturing & Consumption-Related Compliances

1. Maintain a Consumption Register showing:
   • Quantity imported
   • Quantity consumed
   • Wastage percentage
   • Balance stock
2. Production should match the input–output norms approved in the authorization.
3. No excess wastage beyond allowed limits.
4. Maintain separate registers for each Advance Authorization.

4. Export-Related Compliances

1. Exports must be completed within the Export Obligation period (generally 18 months).
2. Each Shipping Bill must mention:
   • AA Number
   • Date
   • Serial number of the export product in the authorization
3. Exports should only include permitted products and technical descriptions.
4. The minimum Value Addition (VA) must be achieved (normally 15%).
5. Exports must be realised in foreign currency; obtain E-BRCs for each shipment.
6. Maintain linkage between imports and exports for audit.

5. Documentation & Record-Keeping Compliances

1. Maintain all import Bills of Entry, invoices, shipping bills, E-BRCs, packing lists, and production records.
2. Preservation of records for minimum 3–5 years (or as required).
3. Prepare Chartered Engineer/CA certificates when applying for redemption.
4. Maintain complete trail and reconciliation between:
   • Duty-free imports
   • Finished goods produced
   • Quantity exported

6. GST / IGST Compliances (If applicable)

1. Ensure IGST exemption is properly availed as per Customs notifications.
2. Maintain documentary proof for audit if IGST was not paid under AA.
3. Make sure exports under AA do not claim IGST refund simultaneously (double benefit not allowed).

7. EODC / Redemption Compliances

1. File an application in ANF-4D after export obligation completion.
2. Attach all shipping bills, E-BRCs, consumption details, and import documents.
3. Respond to DGFT queries, if any.
4. After receiving EODC, submit it to Customs for closure of Bond/BG.
5. Ensure proper closure of the license in the DGFT system.

Consequences of Non-Compliance Under the AA Scheme

Non-compliance can trigger actions from both Customs and DGFT, including recovery of duties, penalties, and prosecution.

1. Payment of Duty + Interest

If exports are not completed within the EO period or imported goods are misused, the exporter must pay:

• Full customs duties forgone on imports
• Interest (usually @ 15% p.a.) from the date of duty exemption until payment

This is the most common consequence.

2. Penalties under Foreign Trade (Development & Regulation) Act

DGFT may impose:

• Monetary penalty
• Suspension of IEC
• Cancellation of AA licenses
• Debarment from incentives and export schemes

3. Customs Penalties

Under the Customs Act, non-compliance can lead to:

1. Demand of duty + interest + penalty under Section 28.
2. Confiscation of duty-free imported goods.
3. Penalty equal to duty evaded (in serious cases).
4. Blocking of future imports under AA/DFIA/EPCG.

4. Blacklisting / Blocking at DGFT

The IEC may be flagged under:

• Denied Entity List (DEL)
• Blocked IEC on DGFT portal

This stops issuance of new authorizations until the case is regularized.

5. Loss of AEO Benefits

If norms are mis-declared or inputs do not match, AEO status (if held) may be suspended or withdrawn.

6. Recovery of IGST / Cess (if wrongly exempted)

If IGST exemption was availed without fulfilling conditions, IGST + interest + penalty can be recovered.

7. Compulsory Payment Even After Exports

Even if exports are completed, duties can still be demanded if:

• Value Addition falls short
• Exported product specifications do not match the authorization
• Inputs consumed exceed the permitted norms
• Shipping Bills did not mention AA details and EDI linkage did not occur

8. Prosecution in Serious Cases

If diversion or fraudulent misuse is established, prosecution under the Customs Act and FTDR Act may be initiated.

Summary (Easy to Understand)

Compliances involve:

• Import as per norms
• Consumption as per norms
• Manufacturing records
• Correct Shipping Bill declarations
• Export within time
• Maintenance of value addition
• Filing for EODC
• Proper documentation

Non-compliance leads to:

1. Duty + interest recovery
2. Penalties under DGFT & Customs
3. Blocking of IEC / DEL
4. Bond forfeiture
5. License cancellation
6. Prosecution in severe cases