Advance Authorisation: Fixation of Input Output Norms
- Commercial Consultancy Counsel
- Dec 29, 2023
- 7 min read
Updated: Nov 28, 2024
Navigating the complex landscape of international trade demands a nuanced understanding of regulatory frameworks and schemes designed to facilitate seamless commerce.
One such pivotal instrument in this domain is the Advance Authorisation, a dynamic initiative allowing for duty-free import of inputs crucial for the production of export goods.
In this blog, we delve into the intricacies of Advance Authorisation, shedding light on its issuance processes, the role of standard input output norms (SION), and the innovative self-ratification scheme.
By demystifying these facets, we empower exporters to harness the benefits of this scheme effectively and propel their businesses into the global market with confidence.
Our team of experts at Commercial Consultancy Counsel are comitted to make your Advance Authorisation issuance process a smooth experience.
Here's how you can get in touch with us to know how.
What is Advance Authorisation?
How is the Advance Authorisation Issued?
What are The Standard Input Output Norms?
What is Applicant Specific Prior Fixation of Norms?
Can the Norms Committee extend the validity of the adhoc norms fixed?
What are self-declared norms?
What is the maximum entitlement value allowed under self-declared norms?
What is the validity of the norms ratified under the self-declared norms?
Can applicants of advance authorisation use the ratified norms under the self declaration basis to get their authorisation?
What is the self-ratification scheme?
Are all the exporters allowed to apply under the self ratification scheme?
What are the additional conditions required for the status holder to be fulfilled to apply under the self ratification scheme?
We start out exploration by understanding what an Advance Authorisation is in the next section.
1. What is Advance Authorisation?
Advance Authorisation is a duty exemption scheme under which authorisation is issued to allow duty free import of input, which is required to be physically incorporated in the export product as a pre-condition to the import.
But how is an Advance Authorisation issued? What are the criterias for issuance?
We cover these in detail in the next section.
2. How is the Advance Authorisation issued?
Advance Authorisation is issued for inputs in relation to resultant product, on the following basis:
As per the standard input output norms (SION) notified by the DGFT; or
On the basis of self-declaration; or
Applicant specific prior fixation of norms by the Norms Committee; or
On the basis of self-ratification scheme.
Let our expert consultants at Commercial Consultancy Counsel help you with meeting SION requirements effectively.
Now let's understand one of the most important components of the Advance Authorisation, the Standard Input Output Norms or SION in the next section.
3. What are standard input output norms?
Standard input output norms (SION) are published by the DGFT where in the type and specific number of inputs is given to produce a specific unit of outputs for exporting.
SION is applicable for various products, however there might be cases where the exporter would want to import more quantity of inputs or a different type of input other than the what is provided in the SION against a specific export product.
For such cases the exporter may apply under points given in question 2 above.
Under the SION framework also comes a requirement for Applicant Specific Prior Fixation of Norms which plays a significant role in the Advance Authorisation issuance process.
Let's understand it's significance in the upcoming section
4. What is applicant specific prior fixation of norms?
Just as explained above in question 3, in case an applicant wants to import a specific type of input or a quantity of input not notified under the SION, then the applicant may before filing an application for the advance authorisation get adhoc norms fixed by the concerned Norms Committee (NC) in the DGFT Headquarters, based on the ITC HS codes of the export product.
The adhoc norms fixed for the exporter under this route shall be valid only for one authorisation for which such application is made.
Let Commercial Consultancy Counsel help you in your norm fixation process and the various regulations surrounding it.
When it comes to adhoc norms, the Norms Committe has full authority to extend it's validity but under certain criteria.
What are those criteria? We cover it in detail over in the next section.
5. Can the Norms Committee extend the validity of the adhoc norms fixed?
The Norms Committee can extend the validity of the adhoc norms for a period of upto 2 years from the date of fixation of the norms.
During this time the exporter can use the adhoc norms for as many authorisations.
Among the various types of norms, a self-declared norm also holds quite a bit of significance in the Advance Authorisation issuance process.
Let's understand the importance of self-declared norms further.
6. What are self-declared norms?
In case there is no SION/Ad hoc norms for export products or where SION/Ad hoc have been notified but the exporter wants to use additional inputs or different type of input, the applicant may get the norms fixed based on self declaration.
The applicant shall do so along with the submission of application of Advance Authorisation. The applicant shall also submit an undertaking to abide by the decision of the Norms Committee.
Facing troubles with self-declared norms? Commercial Consultancy Counsel is here to help.
But self-declared forms come with a limit called entitlement value on the quantity of inputs.
We explore this entitlement value on self-declared norms further in upcoming section.
7. What is the maximum entitlement value allowed under self-declared norms?
Exporters who are Status Holders are allowed to fix norms for exports products where in the quantity of inputs is allowed upto 300% of FOB value of preceding years exports.
For other than status holders they are allowed upto 300% of FOB value of preceding years exports or INR 10 Crore, whichever is higher.
Once the adhoc norms are fixed as per the values mentioned above, then value of authorisation subsequent to fixation of such norms by the Norms Committee may be enhanced more than the above values.
Additionally, Authorisation Holder shall be entitled for further authorisations as per norms ratified Norms Committee without the need for subsequent ratification by the NC.
Did you know that norms ratified under the self-declared norms have a validity to them?
What is the validity of such norms?
That's exactly what we answer in the next section.
8. What is the validity of the norms ratified under the self-declared norms?
Norms ratified by the NC on and after 1.04.2023 in respect of Advance Authorisation obtain by self-declaration shall be valid for a period of 3 years from the date of ratification.
However, norms notified by the NC on or after 1.04.2015 shall be valid upto 31.03.2026.
Making sense of validity and several other regulations under the self-declared norms can feel like a maze.
Commercial Consultancy Counsel is here to help you navigate that maze effortlessly.
But can ratified norms under self declaration basis be used to get authorisation?
Let's look at the criteria for this in the next section.
9. Can applicants of advance authorisation use the ratified norms under the self declaration basis to get their authorisation?
Since all the decisions of the NC are available in the form of minutes on the DGFT website, all other applicants of Advance authorisation are also eligible to apply and get their authorisations based on such ratified norms on repeat basis during the validly of the norms as provided under question 8.
To simplify the process of availing the benefits of ratified norms, there is a self-ratification scheme enforced by Regulating Authority.
Read along to learn more about the self-ratification scheme.
10. What is the self-ratification scheme?
Where there is no SION/valid Adhoc Norms for an export product or where SION has been notified by the exporter intends to import additional quantity of inputs than what is notified or a different type of input for the specific export product, the exporter can apply for an advance authorisation under this scheme on self ratification basis.
Unlike in the self declaration scheme the RA under this scheme may issue Authorisations without it being referred to the Norms committee for ratification.
Let's help you avail the benefits of the self-ratification scheme with the help of our highly team of consultants.
But if the self-ratification scheme is so beneficial, can all exporters take benefit of it?
Let's find out in the next section.
11. Are all the exporters allowed to apply under the self ratification scheme?
No, only the following eligible exporter is allowed to apply for authorisation under the self-ratification scheme:
An exporter (manufacture or merchant) who holds AEO certification, under the Common Accreditation Programme of CBEC; or
A status holder who is a manufacturer cum actual user and holds valid 2-star or above status under para 1.25 of FTP and who has already submitted its application for the grant of AEO certificate.
Status Holders have to meet certain additional conditions under the self-ratification scheme.
Let's explore these conditions in detail in the next section.
12. What are the additional conditions required for the status holder to be fulfilled to apply under the self ratification scheme?
The following pre conditions are required to be fulfilled by status holder to apply under the scheme:
Status holder submits copy of numbered and dated acknowledgement of its application for grant of AEO.
Status holder undertakes to the DGFT that:
If status holder is unable to obtain the AEO certification within 120 days from date of application under this scheme, the exporter agrees that the facility under the scheme shall stand withdrawn and the status holder will be bound to approach the concerned Norms Committee of DGFT for fixation of norms and to abide by the decision of the said Committee.
In case of situation as mentioned in the point above, no further authorisation under this scheme will be issued.
Conclusion
In conclusion, the Advance Authorisation emerges as a strategic gateway for businesses engaged in international trade, offering a pathway to optimize costs and enhance competitiveness.
Whether navigating the established SION framework, seeking bespoke norms through applicant-specific prior fixation, or embracing the streamlined self-declaration and self-ratification schemes, exporters have a spectrum of options to align with their unique needs.
The dynamism of this regulatory tool, as evidenced by the flexibility in norm validity and extensions, underscores its adaptability to evolving global trade scenarios.
As businesses harness the advantages of Advance Authorisation, they not only contribute to their own growth but also foster the vibrancy of the international trade landscape.
Along with the expert consultancy on Advance Authorisation, Commercial Consultancy Counsel also provides DGFT Consultancy and Customs Consultancy to help you navigate the complicated world of import export.
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