Advance Authorization – Complete Practical Guide

Advance Authorization is a facility under DGFT that allows exporters to import inputs duty-free, provided these are used to manufacture goods for export. The scheme reduces production cost and improves competitiveness of Indian exports.

1. Eligibility and Purpose

The scheme is available to:

• Manufacturer exporters
• Merchant exporters tied to supporting manufacturers
• Units under EOU, SEZ, EHTP, STP, BTP (as per provisions)

Purpose: To import raw materials, components, fuel and consumables without payment of customs duty, for the purpose of export production.

2. What Can Be Imported Duty-Free

• Raw materials physically incorporated in the export product
• Catalysts, consumables, fuel, and oil
• Mandatory spares up to 10% of CIF value

Duties typically exempted: BCD, ACD, CVD, Anti-dumping/Safeguard duties (as permitted), IGST/Compensation Cess (subject to notification).

3. Input–Output Norms and Conditions

Imports are allowed based on:

• SION (Standard Input Output Norms)
• Ad-hoc norms (Norms Committee)
• Self-Declared Norms
• Self-Ratification Scheme for AEO-T2/T3 status holders

Minimum value addition is usually 15%, unless specified otherwise.

Export Obligation is generally 18 months, with import validity of 12 months.

4. Actual User Condition

Goods imported under AA cannot be sold in India.
They must be consumed in the manufacturing process of the export product.

5. ANF Forms Linked to Advance Authorization

6. DGFT Fee Structure (Standard)

• Application for AA (ANF-4A/4B/4F):
  Rs.1 per thousand of CIF value, minimum Rs.500, maximum Rs.1,00,000.
• Amendments:
  Simple corrections: Rs.200.
  Enhancement of CIF value: Fee on increased amount (Rs.1 per thousand).
• EODC / Redemption filing:
  Rs.500 per application.
• Duplicate copy / corrections: Rs.200.

7. Registration at Port (Customs Registration of Advance Authorization)

Once DGFT issues the Advance Authorization:

1. Log into ICEGATE or approach the Customs Service Centre at the port of import.
2. Submit:
   • Copy of Advance Authorization
   • License file number & date
   • Details of inputs permitted under the authorization
   • Bond/BG executed with Customs
   • IEC, GST certificate
3. Customs verifies the authorization electronically through the DGFT-Customs linkage.
4. After verification, Customs registers the Advance Authorization against the IEC.
5. Only after this registration can the importer file the Bill of Entry for duty-free import under the license.

Registration ensures that imports are monitored and linked to export obligations.

8. Mentioning AA Details on Shipping Bill at Time of Export

During export, the exporter must mention the authorization details on the Shipping Bill:

• Advance Authorization Number
• Date of issue
• Item Serial Number as per the Authorization
• Quantity and value debited toward EO

This is mandatory because:

• Customs needs to debit export obligation quantities.
• DGFT receives automatic electronic confirmation of export.
• Non-mentioning can lead to exports not being counted towards EO fulfillment.

Tip: Under the “Scheme” section of the Shipping Bill, select “Advance Authorization – Duty Exemption” and fill all required fields.

9. Process of Redemption / Closure After Exports

Once the exporter completes exports and fulfills EO value and quantity:

Step 1 – Prepare Documents

Typical documents required for redemption/EODC:

• Copy of Advance Authorization
• Export statements (Shipping Bills + EDI printouts)
• E-BRCs (proof of realized export proceeds)
• Consumption details of imported materials
• Chartered Accountant/Engineer Certificate
• Proof of IGST/cess exemption utilization (if applicable)

Step 2 – File ANF-4D

Submit the redemption application online on the DGFT portal through ANF-4D, attaching the entire set of documents.

Step 3 – DGFT Examination

DGFT reviews:

• Whether exports match the norms
• Whether value addition requirements are met
• Whether import quantities match consumption

If any mismatch exists, DGFT may seek clarification.

Step 4 – Issuance of EODC

Authorized officer issues an EODC (Export Obligation Discharge Certificate).

Step 5 – Closure at Customs

Submit EODC to the port where the authorization was registered.
Customs closes the bond/BG and endorses the file as redeemed.

Step 6 – Record Keeping

Retain all import/export records for minimum 3–5 years for audit.

10. Key Compliance Points

• Maintain proper input consumption records.
• Ensure all Shipping Bills mention AA details.
• Complete exports within EO period; apply for extension if needed.
• File EODC immediately after fulfilling obligation.
• Any unaccounted imports attract duty + interest + penalty.