Compliances to be followed after taking an Advance Authorization License

COMPLIANCE TO BE FOLLOWED AFTER TAKING AN ADVANCE LICENSE

In this blog, we will cover a very important topic which is mostly ignored & overlooked by many of the exporters i.e. what are the compliances to be followed after taking an Advance Authorisation/Licenses so that your Company does not attract any unwanted penalties from the Government Dept.

We will divide this blog into 9 quick separate sections for easier understanding.

Contents

Pre-requisite – Bank Guarantee (BG) at Customs

So if you are new to the AA scheme, then it is to be kept in mind that after Issuance of AA from DGFT. The AA License is registered at Customs by executing a Bond and/or Bank Guarantee.

There are some exemption notifications in place for executing a BG, however if you do not fall under the exempted category, then you must be prepared and make necessary arrangements for the Bank Guarantee.

Compliance as per Application Type

Compliances under AA scheme varies as per the Application type. Know more about the six application types under AA scheme and their importance please check on https://afleo.com/learn/application-types-advance-authorisation-scheme/

For Example, If the application is done under [No norms-Self declaration basis], then after the License is issued from DGFT Regional Office. The exporter has to do follow-up for Fixation of norms at DGFT HQ, New Delhi. If the norms are not fixed in time or if they are rejected, then the AA holder will have to pay entire Duty saved + Interest.

Mentioning of Advance license No. on shipping Bills.

So once the raw materials are imported and then the export will start for fulfilment of export obligation.

Here while exporting please make sure to file the shipping bills under Advance License scheme and mention correct Advance License No. & date.

Also make sure the description & HS code of export item in shipping bills matches with that of Advance license & Norms fixed by Norms committee.

Mention Quantity of duty free inputs used

This is a very important compliance that should be followed correctly.

For Example, you have taken an AA for export of 10,000 Nos. Men’s T-shirt & the raw material allowed is Fabrics.

And now you are doing a shipment of 1,000 Men’s T-shirt. So in the Shipping bill it has to be properly indicated as to what quantity of Fabric was used to make 1,000 Nos. of Men’s T- shirt.

This will be checked by the DGFT authorities at the time of redemption/EODC application.

If any mistakes are found in declaring the quantity while filing the shipping bill, then the AA holder has to either amend the shipping bill or pay Customs Duty + Interest on the difference quantity.

This compliance is to be also followed for ARE-3 for supply to EOUs and Bill of Exports for supply to SEZ Unit.

Third Party Export

If you are intending to fulfil the export obligation by doing third party exports. i.e. Products will be manufactured by you and export by a third party merchant exporter under his shipping bill.

So in the shipping bill, please mention your AA No. & Date and along with that Please mention your name as a supporting manufacturer.

If any of the conditions are not met, then that particular shipping bill will not be considered for fulfillment of export obligation.

Supply to Special Economic Zone (SEZ Unit)

If you are intending to fulfil the export obligation by supplying to a SEZ Unit. Then 2 things are very important.

First thing is to obtain a Bill of export which is just like shipping bill in case of Direct Exports.

Second thing is, the payment from SEZ unit should come from their foreign Currency Account (FCA Account)

If any one of the above is missing, such supplies will not be counted as exports.

Supply to EOU Units

For supply to EOU units to be counted as deemed exports, a copy of CT-3/ARE-3 duly signed by the jurisdictional excise/GST authorities certifying the item of supply, its quantity, value and date of such supply should be obtained.

In case of Deemed exports, many of the exporters do not focus on proper documentation, due to which such supplies are not considered by DGFT for redemption and accordingly the AA holder needs to pay Customs duty + Interest.

Net to Net basis Advance License

If an Advance License is obtained on Net to net basis, then the technical specification of the component including Part No. / Model No. if any should be mentioned on the export documents like shipping bill/Invoice etc.

Also while applying for Redemption in such cases an Accountability Certificate has to be obtained from an Independent Chartered Engineer.

Proper Accounting

Last and finally, if you have taken a lot of Advance Licenses, then proper Accounting & Audit should take place on regular intervals. Due to lack of this, exporters generally make a lot of mistakes and end up paying for it to redeem the license.

Who are We and How can we help you?

We at Afleo Group, are a team of DGFT & Customs Experts having a rich experience of 10+ Years in Exim Consultancy & International Logistics [Freight Forwarding]. With our vast knowledge and experience in this field we can represent your case for all the activities pertaining to the Advance Authorisation scheme and get it cleared in a hassle free manner.

So do get in touch with us for any of your requirements and our team will be happy to help you.

Let us know if you have any doubts in the below section.

We request you to share this blog with your other Industry friends, Trade associations, as this information might help them as well.

Thank You.