Meaning of Advance Authorization Scheme, Eligibility of Advance Authorization Scheme, and “When Advance Authorization Scheme is issued?”

Introduction

The value of exports should always exceed the value of imports in order to preserve the balance between the two. The Indian government has launched a number of programmes to increase exports from the nation. The FTP, or Foreign Trade Policy, regulates all import and export-related activities with the goal of increasing exports while utilizing trade expansion as a powerful tool for economic growth and job creation. In this article we will look into Meaning Advance Authorization Scheme, Eligibility of Advance Authorization Scheme, Documents required and “When Advance Authorization Scheme is issued?”

The present foreign trade policy supports exports carried out by Special Economic Zones (SEZs), Export Oriented Units (EOUs), among other entities, in order to maintain alignment with the Make in India goal.

Meaning of Advance Authorization Scheme 

Under the Advance Authorization Scheme, inputs that are physically incorporated into a product that is intended for export are eligible for duty-free importation (after normal provision for wastage). Typically, granting an advance authorization comes with a requirement to fulfil an export obligation. Below is the information on Export Obligation.

Export Obligation

Allowing duty-free inputs is done entirely to increase exports. These gathered inputs will be used by the entity to create a product that can be exported. Export Obligation (EO) is the amount of export that must be achieved compulsorily within a specified time period in the case of an advance authorization. The issued Authorization typically makes reference to the EO. After reaching the EO, the entity must show proof of it. Penalties may apply if the EO is not reached within the allotted time frame. Different criteria apply to the export obligation under other export promotion programmes, such as the Export Promotion Capital Goods (EPCG) Program.

Eligibility of Advance Authorization Scheme

The merchant exporter or manufacturer exporter relationship with the sponsoring manufacturer may benefit from an advance license. In the case of supplying the UN (United Nations) or other humanitarian programmes, it is also available to subcontractors or projects where the name of the subcontractor is stated in the contract. Such contracts should be compensated in freely convertible foreign currency.

It is granted for some physical exports, including exports to Special Economic Zones (SEZs), intermediate supplies, and the provision of stores for use on aircraft or ships. The duty-free benefit covers the import of necessary spares, if they must be provided along with the exported item, up to a maximum of 10% of the CIF (Cost, Insurance and Freight) value of the Authorization.

Documents required for registering under Advance Authorization Scheme

• Copy of Registration Cum Membership Card
• Export House Certificate
• Information on IEC License
• DSC (Digital Signature Certificate)
• Application Form ANF-4A
• MSME, IEM or SSI Certificate
• GST Registration certificate

When Advance Authorization Scheme is issued?

• Application before the Norms Committee fixes the standard: An exporter may also submit an application to the norms committee with a similar request if the SION is not defined. The norms committee will work to either fix these norms or give adhoc rules based on the application filed after receiving all the necessary evidence. Such adhoc regulations can only be used once, and more authorizations cannot be granted.
• SION (Standard Input Output Norms): On the advice of the Norms Committee, the Director General of Foreign Trade (DGFT) establishes standard norms that specify the quantity of input needed to produce one unit of the output product that will be exported. It is accessible for a variety of goods.
• Self Ratification Scheme: Only exporters that possess the Authorized Economic Operator (AEO) Certificate issued under the Common Accreditation Programme of CBEC are eligible for Advance Authorization under this Scheme. This Scheme can be chosen if an export product does not already have SION or valid adhoc norms, or if SION has been announced but the exporter still wants to employ additional inputs in the production process. Under this arrangement, the standards committee’s approval is not required, and the regional authority may give an advance authorization when the necessary requirements have been met.
• Self Declaration: On occasion, the Standard Input Output Norms (SION) is not offered for a specific product. In this situation, a request can be submitted to the Regional Authority, which will thereafter, after assessment, grant the advance authorization.

Conclusion

An advance authorization is good for 12 months from the date it was issued. For presumed exports, the authorization is tied to the longer of the negotiated project execution term or 12 months from the date of issuance of such authorization. However, the export obligation may be completed up to 18 months after the authorization was issued, or as otherwise instructed by the DGFT (Directorate General of Foreign Trade). The export proceeds should, unless otherwise stated, be realized in freely convertible currency.