Import Raw Material without Payment of Custom Duty under Advance Authorization

In international trade, the import of raw materials plays a crucial role in the manufacturing process. However, the payment of customs duty on imported raw materials can significantly impact the cost of production. To alleviate this burden, many countries, including India, have implemented schemes such as Advance Authorization to facilitate the import of raw materials without the payment of customs duty.

Understanding Advance Authorization

Advance Authorization is a scheme introduced by the Indian government to promote exports by allowing duty-free import of raw materials. Under this scheme, exporters can import raw materials required for the manufacture of export products without paying customs duty. This exemption is granted on the condition that the final product will be exported, thus promoting the growth of the export sector.

Eligibility Criteria

To avail the benefits of Advance Authorization, exporters need to meet certain eligibility criteria. These include:

• Being a registered exporter with the relevant authorities
• Having a valid Importer-Exporter Code (IEC)
• Having a specific export obligation to fulfill
• Providing relevant documents, such as a copy of the export order or letter of credit

Procedure for Importing Raw Materials under Advance Authorization

The process for importing raw materials under Advance Authorization involves several steps:

1. Obtaining an Advance Authorization: The exporter needs to apply for an Advance Authorization from the Directorate General of Foreign Trade (DGFT) by submitting the required documents.
2. Submitting a Bond: The exporter is required to submit a bond to the customs authorities, ensuring that the imported raw materials will be used for the intended purpose and that the export obligation will be fulfilled.
3. Importing Raw Materials: Once the Advance Authorization is obtained, the exporter can import the required raw materials without paying customs duty.
4. Manufacturing and Exporting: The imported raw materials are then used for manufacturing the export product, which is subsequently exported within the stipulated time frame.
5. Claiming Exemption: After fulfilling the export obligation, the exporter can claim exemption from payment of customs duty on the imported raw materials.

Benefits of Advance Authorization

The Advance Authorization scheme offers several benefits to exporters:

• Cost Reduction: By importing raw materials without paying customs duty, the cost of production is significantly reduced, making the export product more competitive in the global market.
• Promotion of Exports: The scheme encourages exporters to increase their export volumes, thereby contributing to the growth of the country's export sector.
• Flexibility in Sourcing: Exporters have the flexibility to source raw materials from any country, enabling them to choose the most cost-effective and high-quality options.
• Increased Profitability: With reduced production costs, exporters can enhance their profitability and reinvest in expanding their business.

In conclusion, the Advance Authorization scheme provides exporters with a valuable opportunity to import raw materials without the payment of customs duty. By fulfilling the export obligation, exporters can benefit from reduced production costs, increased competitiveness, and the growth of their export business.