Compliance to be followed after taking a pre-license – Afleo


In this blog we will cover a very important topic which is mostly ignored and overlooked by many of the exporters ie. what compliances should be followed after taking a pre-authorization/licensing so that your company does not get any unwanted penalties from the government Dept.

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

Prerequisite – Bank guarantee (BG) at customs

So if you are new to AA system then it is to remember that after issuance of AA from DGFT. The AA license is registered with Customs by executing a bond and/or bank guarantee.

There are some exemption notices for executing a BG, but if you do not fall under the exempt category, you must be prepared and make necessary arrangements for the bank guarantee.

Compliance by application type

Compliance with the AA scheme varies by application type. Read more about the six application types under the AA scheme and their significance, please check

For example, if the application is made under [No norms-Self declaration basis], then after the license is issued from DGFT Regional Office. The exporter must follow up for Fixation of norms at DGFT HQ, New Delhi. If the norms are not fixed in time or if they are rejected, the AA holder has to pay the entire saved duty + interest.

Mention of advance license number on shipping bills.

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

Here while exporting make sure to submit the shipping bills under advance license schedule and mention correct advance license number and date.

Also ensure that the description and HS code of the export item in the waybills are consistent with the description and HS code of advance license and standards set by the standards committee.

Mention the 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 exporting 10,000 nos. T-shirt for men & the allowed raw material is Fabrics.

And now you're making a shipment of 1,000 men's T-shirts. So the bill of lading must correctly state how much fabric was used to make 1,000 numbers 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 when the bill of lading is submitted, the AA holder must either amend the bill of lading or pay duty + interest on the intermediate quantity.

This compliance shall also be followed for ARE-3 for supply to export oriented companies and export lists for supply to SEZ unit.

Third party export

If you intend to fulfill the export obligation by making third party exports. i.e. The products will be manufactured by you and exported by a third party merchant exporter according to his waybill.

So in the waybill please mention your AA number & date and along with it Please mention your name as a supporting manufacturer.

If any of the conditions are not met, the specific waybill will not be considered for the fulfillment of the export obligation.

Supply to Special Economic Zone (SEZ Unit)

If you intend to fulfill the export obligation by supplying to an SEZ unit. Then 2 things are very important.

The first thing is to get an export bill, which is just like a waybill for direct export.

The second thing is that the payment from the SEZ entity should come from their Foreign Currency Account (FCA Account)

If any of the above is missing, such deliveries will not count as exports.

Delivery to EOU units

For supply to EOUs to count as equivalent export, a copy of CT-3/ARE-3 should be duly signed by the jurisdictional Excise/GST authorities certifying the supply, its quantity, value and date of such supply.

In case of equivalent exports, many of the exporters do not focus on proper documentation due to which such supplies are not considered by DGFT for redemption and hence the AA holder has to pay duty + interest.

Advance license for net to net

If an advance license is obtained on net-to-net basis, the technical specification of the component including part number / model number if any should be mentioned on the export documents like waybill/invoice etc.

Even when applying for redemption in such cases, a liability certificate must be obtained from an independent licensed engineer.

Correct accounting

Last but not least, if you have taken many advance licenses, proper accounting and auditing should be done periodically. Due to the lack of this, exporters generally make many mistakes and end up paying to redeem the license.

Who are we and how can we help you?

We at Afleo Group are a team of DGFT and customs experts who have 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 activities related to Prior Authorization system and get it cleaned in a hassle-free manner.

So contact us for your needs and our team will be happy to assist you.

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

We request you to share this blog with your other industry friends, industry associations as this information may help them as well.


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