What is an Advance License for Exports in India?

Maintaining a favourable balance of trade, where the value of exports exceeds that of imports, is always a preferred goal. Various government initiatives have been introduced to enhance the country's exports, all governed by the Foreign Trade Policy (FTP). The FTP's primary objective is to bolster the nation's exports and utilise trade expansion as a powerful tool for economic growth and job creation.

The current Foreign Trade Policy (2015-2020) aligns with the 'Make in India' vision and lends support to exports from Special Economic Zones (SEZs), and Export Oriented Units (EOUs), among others. This policy encompasses several export promotion schemes, some of which involve customs duty exemption or remission. One such scheme is the Advance Authorization Scheme.

What is the Advance Authorization Scheme?

The Advance Authorization Scheme permits duty-free import of inputs (accounting for normal wastage) if these inputs are physically integrated into a product intended for export. Typically, an export obligation is imposed as a condition for granting an Advance Authorization.

Duties Exempted under the Advance Authorization Scheme

The inputs imported under this scheme are exempt from various duties, including Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty, Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, as applicable, subject to specific conditions.

Duty-Free Importable Items under the Scheme

The following items can be imported without duty payment under this scheme:

• Inputs incorporated into the export product (considering normal wastage).

• Fuel, oil, and catalysts are consumed to obtain the export product.

• Mandatory spares are required to be exported along with the resultant export product, up to 10% of the CIF value (Cost, Insurance and Freight) of the Authorization.

• Specified spices for activities such as crushing, grinding, sterilisation, oil or oleoresin production (not for simpler tasks like cleaning, grading, re-packing, etc.).

Eligibility for Advance Authorization License

The Advance Authorization Scheme is available to either a manufacturer exporter directly or a merchant exporter in association with a supporting manufacturer. It applies to:

• Physical exports.

• Intermediate supply.

• Supplies made to specified categories of deemed exports.

• Supply of 'stores' on board of a foreign-going vessel/aircraft, provided there are specific Standard Input Output Norms (SION) for the items supplied.

Validity of Advance Authorization

Advance Authorization is valid for 12 months from the date of issuance, and in the case of deemed exports, it is linked to the contracted project execution duration or 12 months from the issuance date, whichever is longer. The export proceeds should be realised in freely convertible currency unless otherwise specified.

Actual User Condition for Advance Authorization

Advance Authorization and the materials imported under it are subject to an actual user condition, meaning that only the authorised user may import these goods. The authorization is non-transferable, even after fulfilling the export obligation.

Grounds for Issuing Advance Authorization

Advance Authorization can be issued based on:

• Standard Input Output Norms (SION): Notified by the Director General of Foreign Trade (DGFT), which specify the input required for manufacturing a unit of the export product.

• Self-declaration: In cases where SION is not available for a particular product, subject to review by the Regional Authority.

• Application before the establishment of standards by the Norms Committee: An alternative for an exporter when the Standard Input Output Norm (SION) is not specified involves applying to the Norms Committee to request their determination. Upon submitting all the necessary data to the Norms Committee, the committee will strive to establish these norms or offer ad-hoc norms based on the application submitted. It's important to note that ad-hoc norms are applicable for a single authorization and cannot be reused for subsequent authorizations.

• Self Ratification Scheme: Available to exporters with an Authorised Economic Operator (AEO) Certificate under the Common Accreditation Programme of CBEC. This option can be chosen when SION is not available or when the exporter wishes to use additional inputs in the manufacturing process, without requiring norm committee ratification.

The Regional Authority may grant an Advance Authorization under this scheme once the relevant conditions are met.

Conclusion

The Advanced License for Exports is a pivotal tool in India's export promotion strategy. By reducing production costs and encouraging value addition, it helps Indian exporters compete effectively in global markets.

Understanding the nuances of this scheme and complying with its requirements can provide a significant advantage to businesses engaged in international trade.

As India continues to strive for increased exports and economic growth, the Advanced License remains an essential instrument for achieving these goals.

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