Advance Authorization

Introduction

Advance Authorization (AA) is issued to allow duty free import of inputs, which are physically incorporated in an export product.

The quantity of inputs allowed for a given product is based on specific norms defined for that export product, which considers the wastage generated in the manufacturing process. DGFT provides a sector-wise list of Standard Input-Output Norms (SION) under which the exporters may choose to apply. Alternatively, exporters may apply for their own ad-hoc norms in cases where the SION does not suit the exporter.

There were be some conditions for Advance Authorization such as.

Minimum value addition required to be achieved under AA is 15%.

Export Obligation has to be completed post Import of Inputs.

AA is issued on actual user condition and cannot be transferred.

One can also apply for Advance Authorization for Annual Requirement.

Eligibility for applying under Advance Authorization

Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacture(s).

Such authorization can also be issued for.

Physical Exports (including exports to SEZ) by Authorization holder.

Intermediate Supply (for Further Processing eg. : Job Work).

Supply of Goods to the categories mentioned: EOU/STP/EHTP/BTP etc.

Supply of Stores on board of foreign going vessel/aircraft provided there is specific SION in respect of items supplied.

Duties Exempted under Advance Authorization

Input Goods imported under AA are exempted from basic customs duty, additional customs duty, education cess, anti-dumping duty, countervailing duty, safeguard duty, transition product specifit safeguard duty, wherever applicable.

Items which can be imported duty free against authorization

Input which are physically incorporated in export product (making normal allowance for wastage).

Fuel, oil, catalysts which are consumed/utilised to obtain export product.

Mandatory spares which are required to be exported/supplied with resultant product permitted up to 10% of CIF value of Authorization.

Specified spices only when used for activities like crushing/grinding/sterilization /manufacture of oils , re-packing, etc.

Basis of Issuance of Advance Authorization

As per Standard Input Output Norms (SION) notified or

Applicant specific prior fixation of norm by the Norms Committee or

On the basis of self declaration where no SION / adhoc norms have been notified / published or

On the basis of self-ratification scheme on SION/valid adhoc Norms for an export product.

Advance Authorization Scheme works

Import of Input Goods must be completed within 12 months from the date of issue of authorization.

Step 1 : To initiate the procedure, make a list of all the raw materials required along with their quantities for the manufacture of 1 Unit of Export Product.
Step 2: Further, make an application for Advance License at DGFT on the basis of above mentioned four methods.
Step 3: After License issuance from DGFT, registration of license at customs should be done. This registration is mandatory in able to clear the materials at the Port. Further, Customs Department will execute a bond or bank guarantee at the time of license registration at the port.
Step 4: After executing the Bond, now the exporter will be able to clear the material imported at the port.
Step 5: Along with the benefits of duty-free imports, exporters are required to achieve certain targets of export known as export obligation. This obligation is mentioned on the license received under the scheme.
Step 6: Exporter has to submit relevant proofs of the completion of export obligations to DGFT for the closure of the Advance license. Further, for redemption of the license, exporter has to submit the application to the regional authority of DGFT.

Calculation of Value Addition

Minimum Value Addition required to be achieved under Advance Authorization is 15%.

Calculation of value addition will be as follows
VA = [(A-B) * 100]/B
Where,
A = FOB Value of export realeazed /FOR value of supply received.
B = CIF value of inputs covered by authorization plus any other imported materials used on which benefit of duty drawback (DBK) is claimed or intended to be claimed.

*Notional Value of items supplied free of cost will be added in the CIF value of import and FOB value of export for purpose of calculating value addition.