Advance Authorization (AA)

All the three categories namely Physical Exports, Deemed Exports & Intermediate Supplies are classified under common platform known as "ADVANCE AUTHORISATION SCHEME" under the popular Duty Exemption Scheme (DES).

Under DES Scheme, the advance authorizations are issued for duty free imports required for export production.

a) Advance Authorisation are issued to manufacturers exporters or merchant exporters tied to manufacturer(s) for duty-free imports of inputs.
b) Supply of Goods to ultimate exporter holding another Advance Authorisation / Duty Free Import Authorisation.
c) Supply of Goods to the various categories as mentioned in Chapter 7.02 of the Policy (8 notified categories).
d) Supply of stores on board of the foreign going vessels / aircrafts.
e) Supply to SEZ such as EOU / Project Authority / Deemed Export
f) Supply against E.P.C.G License.

Important Conditions:

• Advance Authorisation shall have minimum 15% Value Addition.

• Advance Authorisation Imports shall be with actual User Condition i.e. it shall never be transferable / sold even after EODC is obtained.

• All exempted materials along with wastage should be mentioned in Customs/Proforma Invoice & Shipping Bills. This is a mandatory requirement for obtaining EODC. If it is Deemed Exports, Invoice duly attested by their Excise authorities showing exempted material/ components on net to net basis including wastage and file number is mandatory.

• To avoid any problem with the Excise authorities we strongly recommend you to clear the consignments under Excise Bond only without payment of duty.

• If supply to EOU / SEZ, kindly get Bill of Exports, Invoice and ARE-3/ARE-1 form duly attested by Excise Authorities showing list of raw materials (including wastage) and file number.

The description & ITC (HS) Code in Shipping Bill, Bill of Exports, Bills of Entry and Authorization should tally exactly as per the Advance Authorization / EPCG Licence & MEIS Scheme.

Import Stage:

1. The following duties are exempted :

• Basic Customs Duty.

• Additional Customs Duty including Education Cess. (Not for DFIA)

• Anti Dumping Duty / Safeguard Duty / Transition Product Specific Safeguard Duty (these are however payable on deemed exports under para 7.02 (c), (d) & (g)

2. LUT/BG: In case the authorisation holder wishes to import, the inputs against the Advance Authorisation, prior to exports, he can do so by furnishing the Bank Guarantee / LUT to the Customs Authorities as per the guidelines of Custom Circular No. 58/04 dated 21.10.2004. However, the following categories of Exporter can clear the goods against Advance Authorisation on furnishing LUT.

• Exporters having minimum export turnover of Rs. 5 crores in the current or preceding year and having three years export performance in the past.

• Public Sector Undertaking

• Status Holder

• Manufacturer Exporter registered with Excise Authority and having minimum export turnover of Rs. 1 crore and above in the preceding year and having export during previous 2 financial years (This provision is not applicable to Proprietorship & Partnership firms).

• Manufacturer Exporter registered with Central Excise who has paid Rs. 1 crore or more Excise Duty during preceding financial year.

• Manufacturer Exporter not covered above has to give Bank Guarantee to the extent of 15% of duty saved.

• Others including Merchant Exporter and Service Provider have to give Bank Guarantee to the extent of 100% of the duty saved. (except Status Holder).

For procurement of raw material from the Indigenous Manufacturer, the exporter has to give a Bank Guarantee / LUT to Regional Licensing Authority.

Very Important: Earlier Advance Authorization were valid till end of the month irrespective of date of expiry but w.e.f. 01/04/2015, the licence shall expire on the date of expiry itself. (i.e. not valid till end of the month).

Points to be noted:

• Advance Authorisation or materials imported are not transferable even after completion of export obligation. In case Bank Guarantee / LUT has been redeemed, the Licensee can get the duty free inputs processed from any manufacturer under Actual User Condition i.e. for domestic sale.

• Goods already imported / shipped / arrived in advance but not cleared from Customs are also allowed for clearance against Advance Authorisation issued subsequently.

• The authorisation holder can procure the inputs from Indigenous sources / EOU etc. against Invalidation Certificate / ARO to be issued by the Regional Authorities in terms of para 4.14 of Handbook Redemption / No Bond Certificate:

• Bond Waiver - In case Authorisation holder exports first (before effecting imports) by using imported inputs / indigenously procured raw material, in that case the Authorisation holder can seek waiver of Bond condition by submitting evidence of export made and payment realised to that extent. If exports made are less than the export obligation stipulated in the Authorisation, request for waiver of bond condition, on pro-rata basis, can also be made.

• Export Obligation Discharge Certificate (EODC) –

(i) In case Authorisation holder imports / procures inputs first and exports later, the Authorisation holder shall submit online application in ANF-4F as in (a) (i) above. In such cases, if EO has been fulfilled, the Regional Authority may issue EODC / Redemption Certificate to Authorisation holder and forward a copy to the Customs authority at the port of registration of 117 Authorisation indicating the same details of proof of fulfilment of EO as stated in paragraph (a) above evidencing fulfilment of Export Obligation.
(ii) (ii) Copy of EODC will also be endorsed by Regional Authority to Customs at the Port of Registration by post till system of transmitting these through EDI under message exchange between DGFT and CBEC is introduced.

• Ordinarily, redemption of BG / LUT shall not preclude customs authority from conducting random checks and from taking action against Authorisation holder for any misrepresentation, misdeclaration and default detected subsequently as per the Customs Act.

• Authenticity of such Certificate shall be verified by referring to DGFT website ( DGFT will publish details of such certificate on its official web every month.

• Regional Authority shall take action against Authorisation holder in case of non-submission of Appendix 4H & 4-I duly filled in, as stipulated in paragraph 4.51 below or for any misrepresentation, misdeclaration and default detected subsequently in details declared and furnished in Appendix 4H & 4-I. An endorsement to this effect shall be made by Regional Authority in the redemption certificate.


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