The Advance License EODC (Export Obligation Discharge Certificate) is a crucial component of India’s Foreign Trade Policy (FTP). It empowers exporters by allowing duty-free import of raw materials required for manufacturing export products. The primary goal of this scheme is to enhance export competitiveness, encourage value addition, and support the government’s vision of a globally robust export ecosystem.
Through the Advance License, businesses can import inputs without paying basic customs duty, safeguard duty, anti-dumping duty, and IGST. Once the export obligation is fulfilled, the exporter can obtain the EODC from the Directorate General of Foreign Trade (DGFT), certifying the completion of all requirements under the license.
Understanding the Advance License Scheme under FTP
The Advance License Scheme is governed by the Foreign Trade Policy and implemented by DGFT. It enables exporters to import essential inputs required for manufacturing export goods, provided that equivalent exports are made within the prescribed period.
This scheme operates under two modes:
Physical Exports: Where goods are physically exported outside India.
Deemed Exports: Where supplies are made to categories considered equivalent to exports, such as EOU/SEZ units or projects funded by multilateral agencies.
Under this framework, the Advance License EODC becomes the key document to close the license once export obligations are completed. It confirms that the exporter has met all export conditions, making them eligible for future authorizations or incentives.
Key Benefits of the Advance License Scheme
The Advance License EODC offers several advantages for exporters and manufacturers under the FTP framework. These benefits contribute to cost savings, operational flexibility, and long-term business growth.
1. Duty-Free Import of Inputs
One of the most significant benefits of the Advance License is the exemption from customs duties on imported inputs. This reduces overall production costs and improves profit margins for exporters.
2. Improved Export Competitiveness
By minimizing import-related costs, exporters can offer globally competitive pricing. This strengthens India’s position in the global trade market and enhances the exporter’s business sustainability.
3. Working Capital Efficiency
The scheme helps companies manage their finances better by reducing upfront costs on raw material imports. This enables businesses to allocate funds for other operational areas like product development or logistics.
4. Flexible Input Utilization
Exporters can import raw materials, components, or consumables in required quantities as per the standard input-output norms (SION) prescribed by DGFT. This flexibility ensures efficiency in production planning.
5. Simplified EODC Procedure
Once the export obligation is fulfilled, the exporter can apply for the Advance License EODC through the DGFT online portal. The streamlined digital process allows faster verification and closure of licenses.
6. Encourages Value Addition
The Advance License Scheme motivates exporters to add value to their products by using quality imported inputs, which helps enhance the overall value chain and improve the reputation of Indian goods globally.
Eligibility Criteria for the Advance License Scheme
To avail the Advance License under FTP, exporters must meet specific eligibility requirements defined by DGFT. These criteria ensure that the scheme benefits genuine exporters contributing to India’s trade growth.
1. Export-Oriented Entities
Manufacturers and merchant exporters tied up with supporting manufacturers are eligible to apply for the Advance License EODC. The applicant must be engaged in the production or export of goods.
2. Export Obligation Fulfillment
The exporter must fulfill the export obligation within the stipulated period, generally 18 months from the date of issue of the license. The export obligation includes both quantity and value-based requirements.
3. Adherence to SION Norms
The input-output ratio of raw materials used in the production of export goods must comply with the Standard Input Output Norms (SION) published by DGFT. In the absence of a specific SION, the exporter may apply for self-declaration or ad-hoc norms.
4. Minimum Value Addition
To qualify under the Advance License Scheme, the exporter must ensure a prescribed level of value addition as defined under the FTP. This promotes efficient use of imported inputs and enhances product competitiveness.
5. Proper Documentation and Record Maintenance
Applicants must maintain all relevant documentation such as shipping bills, invoices, and Bills of Entry to establish import-export linkage. These records are mandatory during the Advance License EODC verification process.
Steps to Obtain the Advance License EODC
Securing the Advance License EODC involves a structured process managed through the DGFT portal. Here’s an overview of the essential steps:
Fulfill Export Obligations:
Complete the export of goods as specified in the license within the validity period.Compile Required Documents:
Prepare export documents like shipping bills, e-BRCs, and import documents showing input utilization.Online Application Submission:
Log in to the DGFT portal, upload necessary documents, and submit the EODC application under the “Advance Authorization” section.DGFT Verification:
The DGFT authority examines the submitted data and validates export completion.EODC Issuance:
Once verified, the Advance License EODC is issued electronically, confirming closure of the authorization.
Common Challenges in EODC Processing
While the Advance License EODC process has become simpler, exporters may face certain challenges such as document mismatches, delayed submissions, or discrepancies between import and export data. Maintaining accurate records and timely submission of applications can prevent these issues. Engaging with an experienced DGFT consultant or compliance specialist can help exporters streamline the process effectively.
Importance of Compliance under FTP
Compliance with FTP provisions ensures that exporters maintain their credibility and continue to benefit from future licenses. Failure to obtain the Advance License within the stipulated period may lead to penalties or blocking of future authorizations. Hence, adhering to procedural guidelines and maintaining proper documentation is essential for seamless trade operations.
Conclusion
The Advance License EODC plays a pivotal role in promoting India’s export-driven growth. By allowing duty-free imports and rewarding exporters who meet their obligations, the scheme enhances global competitiveness and encourages industrial expansion. For businesses aiming to scale their international trade operations, understanding the Advance License benefits and eligibility criteria is the first step toward long-term success under the Foreign Trade Policy.
