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Why Industrial Exporters Must File EODC Online Without Delay

Earlier, there used to be a lot of delay in the EODC online procedure. Keeping this in mind, later the Directorate General of Foreign Trade (DGFT) created an online procedure so that there is no delay and all the post-export requirements can be fulfilled on time.

In this fast-paced international environment, following the regulatory procedures is not just a formality but also a necessity. It becomes very important for Indian industries working under the advanced authorisation scheme to comply with the post-export regulations or export obligations within a specific period. If one delays or skips this step, it can have huge and serious legal, financial, and operational consequences. So, from this article, we will know why industrial exporters should always fulfil the EODC online procedure within the period without any delays. But before that, let us know what EODC is.

What is EODC?

The Export Obligation Discharge Certificate (EODC) is a document issued by the DGFT once an exporter has fulfilled the conditions of an Advance Authorisation license. This license allows the import of inputs duty-free, provided the exporter meets specific export obligations. 

Once the export obligation is fulfilled, the exporter must apply for an EODC to close the license and confirm compliance. This process must be done online through the DGFT portal, ensuring transparency and speed in documentation.

Why Filing EODC Online Without Delay is Crucial

To Avoid Legal Penalties and Interest

The first and the biggest reason is that if EODC is not completed on time, then a lot of penalties are imposed on it, because when the EODC online process is not completed on time, it is considered that the exporter has failed to fulfil their export obligation. Now, if penalties are imposed, then the exporter's expenses will increase unnecessarily, and their production will be affected. This can lead to: Recovery of duty exemption, imposition of interest, adjudication proceedings, and show cause notices. 

To Retain Duty Exemptions

The advanced authorisation scheme provides several important benefits to the exporter by allowing the import of raw materials or inputs without payment of Basic Customs Duty (BCD), IGST, and other applicable taxes. Now, if the exporter fails to file the EODC in any way, then DGFT considers that the exporter has tried to commit fraud, and this can happen with the exporter:

Demand payment of duty along with interest.

Cancel the license or block further incentives.

Suspend the IEC (Importer Exporter Code) temporarily or permanently.

Exporters must not treat duty-free imports as unconditional. The benefits only become final after EODC is issued.

Avoid Delay in Future Licenses and Incentives

An advanced license doesn't need to be required only once; exporters need it. Now, if they do not file EODC on time, then all the incentives, benefits, duty imports of DGFT, everything will be taken back, not only that time but also future incentives, licenses, everything will be taken back. First of all, DGFT will automatically reject it, and then when you go back, DGFT will not hear it. That is why it is the responsibility of every exporter to fulfil all the obligations, and if there is any due, then fulfil that too, so that there is no problem in the future.

Conclusion

An advanced authorisation scheme is a very powerful option and beneficial for exporters, but they just have to fulfil their export obligations post-export, so that DGFT does not take any legal action; otherwise, all the benefits will be withdrawn from the exporter, both future and present. In such a situation, filing of EODC becomes very important for exporters without any delay.

DGFT has provided all the possible benefits and smooth functioning ways to the exporters, now it is up to the exporters to take the responsibility and fulfil it to file the EODC online so that there is no obstacle in the future.

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Why Hiring a DGFT Consultant is Essential for Exporters and Importers

Navigating the complex regulations of international trade requires expertise and experience. A DGFT Consultant plays a crucial role in helping exporters and importers comply with the Directorate General of Foreign Trade (DGFT) guidelines, ensuring smooth operations and maximizing benefits. Whether dealing with licensing, incentives, or compliance, hiring a DGFT Consultant can provide strategic advantages.

Understanding the Role of a DGFT Consultant

A DGFT Consultant specializes in assisting businesses with foreign trade regulations, helping them obtain various export-import licenses, avail government benefits, and ensure legal compliance. Their key responsibilities include:

Obtaining Import Export Code (IEC): Essential for businesses involved in international trade.

Applying for Duty Credit Scrips: Helping exporters receive incentives under schemes like RoDTEP, MEIS, and SEIS.

Managing Export Obligation: Ensuring compliance with Advance Authorization and EPCG schemes.

Handling Compliance and Documentation: Assisting with regulatory filings and record maintenance.

Key Benefits of Hiring a DGFT Consultant

1. Expertise in Foreign Trade Policies

A DGFT Consultant stays updated with the latest changes in foreign trade policies, ensuring businesses take advantage of all available incentives and avoid penalties due to non-compliance.

2. Simplified Licensing and Approvals

The application process for various DGFT-related licenses can be complex. A DGFT Consultant ensures accurate and timely submission of applications, reducing the risk of rejection or delays.

3. Maximizing Incentives and Benefits

Exporters can leverage government schemes such as RoDTEP and MEIS to reduce their financial burden. A DGFT Consultant helps businesses claim maximum benefits under these schemes.

4. Ensuring Compliance and Avoiding Penalties

Failure to comply with DGFT regulations can lead to heavy penalties and legal complications. A DGFT Consultant ensures that all documentation and regulatory requirements are met, minimizing compliance risks.

5. Assistance in Foreign Trade Disputes

In cases of disputes or legal issues, a DGFT Consultant provides guidance and representation, helping businesses resolve conflicts efficiently.

How a DGFT Consultant Helps Exporters and Importers

1. Exporters

Helps in availing Duty Credit Scrips and other incentives.

Ensures proper documentation for smooth customs clearance.

Assists in the application and renewal of trade licenses.

2. Importers

Provides guidance on import licensing and regulatory compliance.

Helps in reducing import duties through proper utilization of schemes.

Assists in securing permissions and clearances for restricted items.

Choosing the Right DGFT Consultant

Selecting a reliable DGFT Consultant is essential for maximizing the benefits of foreign trade regulations. Key factors to consider include:

Experience and Expertise: Look for consultants with a proven track record in handling DGFT-related services.

Industry Knowledge: Choose a consultant familiar with your business sector.

Reputation and Reviews: Check client testimonials and reviews before hiring.

Service Portfolio: Ensure they offer a comprehensive range of services covering all aspects of DGFT compliance.

Conclusion

Hiring a DGFT Consultant is essential for exporters and importers aiming to navigate the complexities of international trade regulations efficiently. From securing trade licenses to maximizing incentives and ensuring compliance, a DGFT Consultant provides invaluable support, allowing businesses to focus on growth and expansion. Investing in expert consultancy ensures smooth trade operations, risk mitigation, and optimal utilization of government benefits.

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Common Challenges in Achieving One Star Export House Certification

India’s One Star Export House Certification is a prestigious recognition for exporters that helps enhance their global standing, offers various trade benefits, and unlocks government incentives. The certification is granted to businesses based on their export performance and is a part of the Export House Status Certificate Scheme under the Foreign Trade Policy of India. While the benefits of being recognized as a One Star Export House are numerous, the process of achieving the certification is not without its challenges.

In this article, we will explore the common challenges exporters face in achieving One Star Export House certification and how to overcome them.

What is One Star Export House Certification?

Before delving into the challenges, let’s quickly review what One Star Export House certification is. The Directorate General of Foreign Trade (DGFT) grants this status to firms that have achieved a prescribed export performance over the past two financial years.

To qualify as a One Star Export House, an exporter must meet a FOB (Free on Board) value of USD 3 million in exports, among other requirements. Once granted, this status provides benefits such as priority clearance of shipments, self-certification of certain export documents, and access to trade fairs and exhibitions.

Common Challenges in Achieving One Star Export House Certification

Meeting the Minimum Export Criteria

One of the most fundamental challenges in obtaining One Star Export House certification is meeting the required export threshold of USD 3 million. For many small and medium-sized enterprises (SMEs), reaching this figure can be difficult, especially in highly competitive international markets.

Factors such as fluctuating global demand, currency volatility, and supply chain disruptions can make it hard to achieve consistent export performance. Additionally, for companies just entering the export market, building a client base and scaling operations to meet the criteria can take time.

Solution: To overcome this challenge, exporters should focus on expanding their international presence, diversifying their product range, and leveraging government incentives like the Merchandise Exports from India Scheme (MEIS) to boost their exports. Strategic planning and market research to target regions with high demand for their products can also help achieve the required export value.

Navigating Complex Regulatory Requirements

The export process in India involves a complex set of regulations, documentation, and compliance requirements. Exporters must adhere to the norms laid down by the DGFT, customs authorities, and other government bodies. Ensuring proper documentation, obtaining licenses, and complying with international trade standards can be challenging, particularly for first-time exporters.

Failure to meet these regulatory requirements can result in delays, penalties, or even disqualification from being considered for the One Star Export House status.

Solution: Exporters should invest in building a robust compliance management system. Consulting with trade experts or hiring experienced professionals to handle documentation and regulatory affairs can significantly reduce the likelihood of errors. Additionally, exporters should stay updated on any changes to trade policies or regulations, both domestic and international, that could affect their operations.

Inconsistent Export Volumes

Maintaining consistent export volumes over the qualifying period is crucial to achieving One Star Export House certification. For many exporters, seasonal fluctuations, changes in market demand, or disruptions in the supply chain can lead to inconsistent export volumes.

Economic recessions or geopolitical factors like trade tariffs and restrictions can also negatively impact an exporter’s ability to maintain steady sales abroad.

Solution: To maintain consistency in export volumes, companies should adopt risk management strategies. This could include diversifying their export destinations, expanding into new markets, or launching new product lines that cater to different seasons or regions. Additionally, developing strong relationships with international clients and building a reliable supply chain will help mitigate disruptions.

Difficulty in Accessing Finance

Exporters, especially SMEs, often face financial challenges in scaling their businesses to meet the export targets required for certification. Access to working capital, credit lines, and trade financing can be difficult, limiting a company’s ability to produce goods for international markets at a competitive price.

Moreover, the costs associated with entering new markets, such as shipping, marketing, and legal expenses, can add up quickly, making it harder to achieve export milestones.

Solution: Exporters should explore financial schemes and incentives offered by the government, such as Export Credit Guarantee Corporation (ECGC) coverage and export financing solutions from various banks. Additionally, exporters can leverage grants and low-interest loans designed to help SMEs enter international markets. Building a strong financial plan that accounts for potential export costs will make the path to certification smoother.

Limited Knowledge of International Markets

For many companies, limited knowledge of international markets can be a significant hurdle in achieving One Star Export House certification. Understanding the cultural, economic, and regulatory dynamics of different markets is critical to growing a successful export business.

Many exporters struggle with identifying the right market opportunities, understanding local competition, and adapting their products to meet the preferences of international consumers.

Solution: Investing in market research is key. Exporters can access resources like the India Trade Portal or partner with trade consultants to gain insights into potential markets. Participating in international trade fairs and exhibitions can also help businesses gain first-hand knowledge of their target regions and foster connections with potential buyers.

Conclusion

While achieving One Star Export House certification offers numerous benefits, exporters must navigate several challenges along the way. From meeting the minimum export criteria to managing complex regulations and maintaining consistent export volumes, the certification path requires careful planning, market insight, and financial management.

By proactively addressing these common challenges, exporters can enhance their chances of achieving certification, gaining global recognition, and leveraging government benefits to grow their business internationally.

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Updates and Changes in the Advance Authorization Scheme 2024

The Advance Authorization Scheme, administered by the Directorate General of Foreign Trade (DGFT) in India, is a critical facilitator for businesses involved in the import and export sector. This scheme allows duty-free import of inputs, which are physically incorporated into export products. In 2024, several updates and changes have been introduced to the Advance Authorization Scheme, aiming to enhance its efficiency, broaden its scope, and streamline processes for exporters. Here's an in-depth look at these significant updates.

Overview of the Advance Authorization Scheme

Before diving into the changes, it's essential to understand the core objectives and benefits of the Advance Authorization Scheme. This scheme allows exporters to import raw materials, components, and other inputs without paying customs duty, provided these inputs are used in the production of goods meant for export. The primary benefits include:

Cost Reduction: Duty-free import reduces the cost of raw materials.

Improved Competitiveness: Lower production costs enhance the competitiveness of Indian exports in the global market.

Flexibility: The scheme covers a wide range of industries and products, offering flexibility to exporters.

Key Updates and Changes in 2024

Expansion of Eligible Products

One of the most significant changes in 2024 is the expansion of the list of eligible products under the Advance Authorization Scheme. This move is aimed at including more sectors, particularly those that have shown potential for growth and export. New categories have been added, making it possible for more exporters to benefit from duty-free imports.

Digitalisation and Process Simplification

The DGFT has made considerable strides in digitalizing the application and approval process for the Advance Authorization Scheme. Key changes include:

Online Applications: Exporters can now submit applications online, reducing paperwork and processing time.

E-Verification: The introduction of e-verification for documents ensures quicker approvals and minimizes delays.

Track Application Status: Exporters can now track the status of their applications in real time, enhancing transparency and efficiency.

Revised Norms for Input-Output Ratios

The input-output norms, which specify the quantity of inputs required to produce a unit of export product, have been revised. This update ensures that the norms are aligned with current industry standards and technological advancements. Exporters must adhere to these revised norms to qualify for duty exemptions.

Introduction of a Self-Ratification Scheme

In 2024, the DGFT introduced a self-ratification scheme for exporters with a proven track record. Under this scheme, eligible exporters can self-certify the input-output norms, significantly speeding up the approval process. This move is expected to benefit experienced exporters by reducing bureaucratic hurdles.

Enhanced Monitoring and Compliance

To ensure the integrity of the Advance Authorization Scheme, the DGFT has enhanced its monitoring and compliance mechanisms. Key measures include:

Regular Audits: Periodic audits of exporters availing of the scheme to ensure compliance with the terms and conditions.

Stricter Penalties: Introduction of stricter penalties for non-compliance and misuse of the scheme.

Data Analytics: Use of data analytics to identify patterns and anomalies, ensuring the scheme is not exploited.

Focus on Sustainability

Recognizing the global shift towards sustainability, the Advance Authorization Scheme includes provisions to encourage environmentally sustainable practices. Exporters adopting green manufacturing processes and sustainable sourcing of inputs may receive additional benefits or faster approvals. This change aligns with India's commitment to sustainable development goals (SDGs).

Impact on Exporters

The updates and changes in the Advance Authorization Scheme 2024 are poised to have a substantial impact on exporters:

Increased Accessibility: With more products and sectors included, a larger number of exporters can now benefit from duty-free imports.

Efficiency Gains: Digitalisation and process simplification reduce administrative burdens and accelerate the approval process.

Cost Savings: Revised input-output norms and the self-ratification scheme can lead to significant cost savings for exporters.

Sustainable Practices: Encouragement of sustainable practices aligns exporters with global trends and may open up new market opportunities.

Steps for Exporters to Leverage the Updates

To maximize the benefits of the Advance Authorization Scheme, exporters should:

Stay Informed: Regularly check updates from the DGFT to stay informed about changes in eligibility, norms, and processes.

Leverage Digital Platforms: Utilize the DGFT's online application portal for efficient submission and tracking of applications.

Adopt Best Practices: Ensure compliance with revised norms and consider adopting sustainable manufacturing practices.

Prepare for Audits: Maintain thorough records and be prepared for periodic audits to demonstrate compliance.

Conclusion

The updates and changes in the Advance Authorization Scheme are designed to enhance its effectiveness, broaden its reach, and align with global trends in sustainability and digitalisation. By understanding and leveraging these changes, Indian exporters can reduce costs, improve efficiency, and increase their competitiveness in the global market. Staying informed and compliant with the updated norms will be crucial for maximizing the benefits of this vital scheme.

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What is The Role of Chartered Engineers in the Import and Export of Machinery to India

In the progressive world of global trade, for industrial development and driving economic growth, the import and export of machinery to India plays a significant or major role. However, it does not seem an easy task to import and export machinery to India without the involvement of Chartered Engineers in these international transactions. In this comprehensive guide, we will dive into the importance of chartered engineers in traversing the process of import and export of machinery to India and will pinpoint their roles, responsibilities and the impact they have on these seamless trade operations.

Understand the Role Of Chartered Engineers In the Import and Export of Machinery

As is recognized by their expertise and professional capability, chartered engineers play a significant role in the import and export landscape. Ensuring compliance with regulatory standards, technical features and safety measurements are their primary roles. This whole process includes adherence to the benchmark of quality, assessments of machinery in compliance with Indian standards and the verification of import and export documents. 

Certification and Inspection of Import and Export of Machinery

In the global landscape of international trade, adherence to regulatory standards is crucial to avoid any legal consequences and to ensure the smooth shipment of goods across borders. Here Chartered engineers play a very significant role in verifying compliance with regulatory standards that govern import and export of machinery activities. These include adherence to the safety standards, rules and regulations of the environment and the last is technical specifications as mandated by the Indian authorities of import and export.

Custom Clearance Role of Chartered Engineers In Import and Export

It can prove to be a very difficult task while tracking the customs clearance process alone, especially while dealing with complex machinery imports. But with the help of Chartered Engineers, you can streamline the process of import and export by providing accurate documentation, technical specifications and certifications of compliance. Their expertise in this field can help you ease the customs clearance procedures, minimize the delay in import and export and ensure timely delivery of your machinery to end-users.

Risk Assessment and Reduction Role of Chartered Engineers In Import and Export of Machinery

One of the crucial roles that Chartered Engineers are proficient at conducting risk assessment available with the import and export of machinery to India. They can identify potential threats, structural flaws, or any non-compliance issues and can enable stakeholders to take proactive steps at risk reduction in import and export. But in return for their help or advice, they charge a little fee which is known as the Chartered Engineers fees. This proactive approach can help you safeguard against any costly disruption and ensure the safety and integrity of imported or exported machinery.

Value Addition Role of Chartered Engineers In Import and Export of Machinery

Beyond regulatory compliance and certifications, one of the major roles of Chartered Engineers in import and export is to add value through their technical expertise and field knowledge. Their valuable insights and knowledge can contribute to optimizing the selection, installation and utilization of imported or exported machinery. Through their specialized skills and knowledge, Chartered Engineers can provide informed decision-making and strategic planning for importing and exporting good machinery.

Conclusion

At last, you can conclude that the role of Chartered Engineers in the import and export of machinery to India is very crucial. From ensuring regulatory compliance to providing customs clearance and risk reduction they serve as trusted advisors and enablers of seamless import and export operations. Their insights not only ensure the quality and safety standard of machinery but also contribute to driving industrial growth and innovation. As businesses navigate the complexities of global trade, the involvement of chartered engineers remains essential for achieving sustainable success in the import and export of machinery to India.

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Unlocking Trade Potential: The Comprehensive Guide to Status Holder Certificates

In the dynamic landscape of international trade, businesses constantly seek ways to enhance their competitiveness and streamline their operations. One powerful tool available to traders is the Status Holder Certificate, a recognition granted by many countries to businesses that demonstrate excellence in exports and imports.

This comprehensive guide aims to explore the intricacies of Status Holder Certificates, shedding light on their significance, eligibility criteria, benefits, and the application process.

Eligibility for Status Holder Certificate

Any entity engaged in the export of goods, services, and technology, possessing a valid Import-Export Code (IEC) number, is eligible for consideration as a status holder. The recognition as a status holder is contingent upon the export performance of the applicant. 

To qualify for status holder categorization, an applicant must demonstrate notable export performance over the current and preceding three financial years. It is noteworthy that, in the Gems & Jewelry Sector, the assessment period for recognition as a status holder spans the current and the preceding two financial years.

The key criteria for the granting of status involve achieving export performance benchmarks in at least two out of the four specified years. This rigorous evaluation ensures that entities seeking status-holder recognition consistently demonstrate a commitment to excellence in their international trade activities.

What are the Prerequisites for Applying for a Status Holder Certificate?

To access the advantages associated with a Status Holder Certificate, the following prerequisites must be fulfilled:

Linked User Profile with IEC

Ensure that your user profile is seamlessly linked with an Importer-Exporter Code (IEC). This linkage is fundamental for the successful application and utilization of the Status Holder Certificate.

Valid Digital Signature Certificate (DSC)

A valid Digital Signature Certificate (DSC) must be duly registered in the system. To verify the status of your DSC, you can navigate to 'My Dashboard' and access the 'View and Register Digital Signature Token' section at https://www.dgft.gov.in/CP/. 

Updated Export/Import/Turnover Details

It is imperative to input and regularly update the export, import, and turnover details of your firm in the IEC profile. Accurate and up-to-date information is crucial for the evaluation and validation processes associated with the Status Holder Certificate.

What are the Benefits of Status Holder Certificates?

Priority in Custom Clearance

Holders of Status Holder Certificates often enjoy priority in customs clearance processes. This can significantly reduce the time and resources required for the import and export of goods, facilitating faster and more efficient trade transactions.

Access to Government Incentives

Many governments offer a range of incentives to businesses with Status Holder Certificates. These incentives may include duty credit, exemption from certain taxes, and access to special export promotion schemes designed to boost international trade.

Facilitated Cross-Border Transactions

Status Holder Certificates can open doors to simplified and expedited cross-border transactions. This can be particularly advantageous for businesses involved in time-sensitive industries where delays can have a significant impact on operations.

International Recognition and Trust

The certification serves as a mark of excellence in international trade. It can enhance the reputation of a business, instilling confidence in international partners and customers, ultimately leading to expanded market opportunities.

How to Apply for a Status Holder Certificate?

Follow the steps given below to apply for a Status Holder Certificate directly on the DGFT portal: 

Login on the DGFT Website

Selection of "Certificate Management" 

Start a fresh application 

Fill all the required Applicant Details

Fill in the Status Holder Details 

Fill out the Export Performance

Attach all the required documents

Accept the terms and conditions by clicking on the check

Submit the Application

Check the Status of Submitted Applications

Print the Status Holder Certificate

For a detailed step-by-step guide about the portal, refer to the guide provided by DGFT: User Help File

Challenges in Getting a Status Holder Certificate

Obtaining a Status Holder Certificate is undoubtedly a rewarding endeavour, but like any significant achievement, it comes with its set of challenges. Here are some common challenges businesses may face when seeking a Status Holder Certificate:

Documentation Requirements

The application process for a Status Holder Certificate often involves a substantial amount of documentation. Businesses may struggle with compiling and presenting the required information accurately and in the specified format.

Adherence to Regulatory Changes

The landscape of international trade is subject to frequent regulatory changes. Adapting to and ensuring compliance with these changes can be a challenge, as it requires businesses to stay abreast of evolving trade policies and procedures.

Digital Security Challenges

The requirement for a valid Digital Signature Certificate (DSC) introduces cybersecurity considerations. Ensuring the security of digital signatures and protecting against potential threats is a critical aspect that businesses must address during the application process.

Complex Application Procedures

The application process itself can be intricate, involving various stages and online submissions. Navigating through the complexities of the application, including online verification and registration, may pose challenges for businesses unfamiliar with the digital processes.

Auditing and Verification Processes

Post-certification, businesses are often subject to audits and verification processes to ensure ongoing compliance. Preparing for and undergoing these audits can be time-consuming and may require meticulous record-keeping and documentation.

Limited Awareness and Resources

Many businesses may not be fully aware of the existence and benefits of Status Holder Certificates. Limited awareness can be a barrier to applying for and leveraging the advantages of this certification. Additionally, small and medium-sized enterprises (SMEs) may face resource constraints in meeting the eligibility criteria.

Geopolitical Challenges

Changes in geopolitical dynamics can impact international trade relations. Businesses seeking Status Holder Certificates may face uncertainties related to trade agreements, tariffs, and diplomatic relations that could affect their eligibility or the benefits associated with the certificate.

Conclusion

Unlocking the trade potential through Status Holder Certificates involves a strategic blend of consistent performance, regulatory adherence, and leveraging the multitude of benefits provided.

Businesses that grasp the significance of these certificates and navigate the application process with precision find themselves at the forefront of international trade, poised for sustained growth and success. The Status Holder Certificate is not just a recognition; it is a key that unlocks a world of opportunities in the global marketplace.

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What is the Average Export Obligation in the EPCG Scheme

To encourage and facilitate exports, governments often introduce various schemes and incentives. One such scheme is the Export Promotion Capital Goods (EPCG) Scheme, which offers benefits to exporters in India. Within this scheme, the concept of the Average Export Obligation holds great significance.

The EPCG Scheme encompasses two distinct types of export obligations, which can be delineated as follows:

Specific Export Obligation, which is equivalent to six times the value of the duty saved.

Average Export Obligation.

Now, let's delve into the concept of Average Export Obligation within the framework of the EPCG Scheme.

What is the Export Promotion Capital Goods (EPCG) Scheme?

The Export Promotion Capital Goods (EPCG) Scheme is designed to promote the import of capital goods, enhancing India's manufacturing competitiveness and facilitating the production of high-quality goods and services.

This scheme permits the importation of capital goods with zero customs duty for pre-production, production, and post-production purposes. Furthermore, capital goods imported under the EPCG Scheme for physical exports were also granted exemptions from IGST and Compensation Cess until March 31, 2020.

Alternatively, exporters have the option to procure capital goods from the domestic market in accordance with the provisions outlined in paragraph 5.07 of the Foreign Trade Policy (FTP). Capital goods, within the context of the EPCG Scheme, encompass:

Capital goods as defined in Chapter 9 of the FTP.

Computer systems and associated software are integral to capital goods.

Spare parts, moulds, dies, jigs, fixtures, tools, and refractories.

Catalysts for initial charge along with one subsequent charge.

The EPCG Scheme extends its coverage to various categories, including manufacturer exporters, with or without supporting manufacturer(s), merchant exporters affiliated with supporting manufacturer(s), and service providers.

What is the Average Export Obligation?

Average Export Obligation refers to the average export performance achieved in the preceding three licensing years for identical or similar products. This average export obligation is determined and established at the time of issuance of the EPCG licence, taking into account the export turnover of the previous three years.

To adhere to the Average Export Obligation, an exporter must meticulously maintain accurate records of the average turnover for similar goods and services over the three preceding financial years, continuing this record-keeping until the specific export obligation is fulfilled.

The primary objective behind the Average Export Obligation is to ensure that the average export performance reaches a specified threshold.

Under this obligation, the Directorate General of Foreign Trade (DGFT) expects exporters to monitor and maintain a record of their export performance for all preceding years diligently.

Computation of Annual Average Export Obligation under EPCG

In accordance with the policy, the Authorization holder must uphold the average export levels attained in the three preceding licensing years for identical or similar products during the entire Export Obligation (EO) period, including any extensions. This average is determined as the arithmetic mean of export performance in the preceding three licensing years for the same and similar products.

Calculation of the annual average export obligation under the EPCG Scheme involves specific guidelines to ensure accuracy and fairness.

When considering EPCG authorizations issued within a given licensing year, it's important to note that any specific Export Obligations undertaken for the same or similar products under EPCG Authorizations in the preceding three years should not be factored into the calculation.

For entities with a track record spanning more than three years, the exports for each of the past three years (even if some years recorded zero exports) are totalled, and the resulting aggregate export value is divided by three. This method ensures that the annual average export obligation is based on a balanced assessment of recent export performance.

On the other hand, if an entity has been in operation for less than three years, the denominator in the calculation mentioned above will be the actual number of years in existence, rather than the standard three-year period. This adjustment accommodates newly established businesses and ensures that the calculation is equitable.

Penalties for Non-Compliance with Export Obligations

When dealing with the Average Export Obligation, there is no leniency granted. Exporters must fulfil the 100% requirement of the average export obligation. In cases where an EPCG licence holder fails to meet the criteria for average export obligation, they are obligated to remit the customs duties along with a 15% annual interest to the customs department.

Alternatively, if an authorization holder successfully meets the average export obligation but falls short of fulfilling the 100% specific export obligation, they will be required to pay the proportional amount of the duty saved, along with an annual interest rate of 15%.

Exemptions from Average Export Obligation under the EPCG Scheme

In the context of the EPCG Scheme, certain categories of goods are exempted from the requirement to maintain an average export obligation. These categories include:

(i) Handicrafts,

(ii) Handlooms,

(iii) Cottage & Tiny sector,

(iv) Agriculture,

(v) Aqua-culture (including Fisheries), Pisciculture,

(vi) Animal husbandry,

vii) Floriculture & Horticulture,

(viii) Poultry,

(ix) Viticulture,

(x) Sericulture,

(xi) Carpets,

(xii) Coir, and

(xiii) Jute.

Summary

The Average Export Obligation is a critical element of the EPCG Scheme in India, aimed at promoting consistent and sustained export performance among eligible exporters. While it imposes certain responsibilities on exporters, compliance is essential to unlock the benefits offered by the scheme.

By maintaining a strong export record and understanding the intricacies of the Average Export Obligation, exporters can leverage this scheme to expand their global reach and contribute to the growth of the Indian economy.

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The most essential guide for garment and clothing export | Updated in 2023

Planning to start a garment export business in India? You must already be aware of the fact that the garment industry is one of the oldest industries in the Indian economy. The textile sector of India deals in various ranges of items both for domestic markets and foreign markets. 

India's textile industry contributes around 15% to the country's economy. In these recent years, India has seen rapid development in textiles, garments, and clothing exports. Around 4.5 crores of the Indian population is engaged in the textile industry. By 2029, India's textile industry is expected to grow by more than $209 billion. 

Our country has evolved to be the world's 6th largest exporter of clothes and textiles. If you are willing to start a garment export business here, then here we are presenting you with the most essential guide that will help you to convert your business into a successful one. 

All that you need to know about garment exports in India 

Garment exports are the highly exported textiles from India

Over these few years, garments have evolved to be the most exported textiles from India. However, there are many types of garments and textiles exported from our country. So, are there any specific products that are most in demand? Yes, here are some of the highly-demanded Indian garments in the international market.

Traditional Clothes 

Kids Clothing 

Woolen garments 

Carpets 

Home-use textiles 

Ready-to-wear garments 

Kitchen linen

Which are the top exporting countries of India? 

India provides garment and clothing exports to various countries. But, the topmost importer of India in terms of garment and textile exports is the USA. The other following countries are the UAE, United Kingdom, Bangladesh, China, Saudi Arabia, and the European Union (Germany, Spain, Italy, France, and the Netherlands).  

Now, the next question that arises is which are the top garment exporting states in India? The leading exporters are Andhra Pradesh, Haryana, Telangana, Gujarat, and Jharkhand. The textile industry is the second-largest industry that contributes a huge amount to the country's economy and also provides employment to a lot of people.

What are the documents required to start a clothing export business?

In order to establish an excellent career in the garment export business, there is some necessary documentation that you need to have. The most essential documents to start a garment and textile export business are:

PAN Card 

An ID proof be it Aadhar Card, Driving License, or Voter ID 

A document having your permanent address

Import-Export Code 

GST Certificate 

Fire NOC 

Business Registration License 

RCMC 

Trade License granted by the Municipal Corporation of the state 

MSME Registration

Getting garment export orders

Customers are the main element of any business. Therefore, getting garment export orders should be your ultimate focus. But, how will you receive orders?

There are some approaches that you can try out.

Use social media marketing to boost your sales 

Send emails to various international garment traders 

Join a lot of export communities of your niche 

Register your business on online marketplaces 

Participate in international trade fairs 

Answering to online quarries of the audience 

Government schemes for garment export 

The Indian government has launched various promotional schemes for promoting garment exports. The textile industry plays an important role in India's economic growth. Therefore, the government has put full focus on increasing Indian garment exports. Two main schemes solely focus on increasing garment exports in India and they are the Advance Authorization Scheme (AA) and Amended Technology Upgradation Fund Scheme (ATUFS). 

There are also a few initiatives that have been introduced by the government to promote the same such as:

Production Linked Incentive Scheme (PLI)

PM MITRA Scheme 

Textile Cluster Development Scheme (TCDS)

Rebate of State and Central Taxes and Levies Scheme (RoSCTL)

Conclusion

The garment export industry of India is expanding day by day. But, people often assume that starting a garment and clothing export business needs a lot of funds. One can start a garment export business even with a small amount. A garment export business can be started with a small budget and fewer products. All you need is the right knowledge. 

In order to start a garment export business, you must first conduct a thorough study about target markets, demand for the products, and various export promotion schemes initiated by the government such as EPCG Scheme, MEIS License Sale, etc. These promotional schemes would provide you with a lot of advantages in your business. 

The export target for readymade garments for every textile in the year 2022-23 is decided to cross around 17.6 Billion USD. The AEPC has taken up this challenge, and it plans to give its best efforts to exceed it. The Indian government is also focusing on promoting more Indian exports in the global market. Therefore, starting a garment export business is going to be very profitable.

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How to apply for duty-free imports under the Advance Authorisation Scheme?

Manufacturers can use a duty exemption program known as the Advance Authorisation Program or Advance Licence Scheme to bring in tariff-free raw materials for producing goods intended for export.

DGFT issues sector-wise lists of standard input-output rules or SION, which detail the maximum allowable number of inputs for each product. It describes the amount of each input needed to produce a specific product, with allowances made for any waste incurred during production.

An exporter can seek an advance license under ad hoc criteria if it appears that the SION does not cover them or their production method. This scheme allows exporters to apply for it on their initiative, by self-declaring and self-ratifying, in cases where no SION or arbitrary regulations exist.

Manufacturer-exporters can participate in this program, although they are not required to. You can also register if you are a merchant exporter with ties to a manufacturer who will assist with your application. 

Companies that provide goods and services to the UN and other aid programs as project subcontractors are eligible to qualify for this program. Here, the currency must be readily converted into the amount being paid. However, only manufacturer-exporters will be granted permission to import pharmaceuticals.

Several tariffs, including the essential customs duty, the education cess, the social welfare cess, the anti-dumping duty, the countervailing duty, and the safeguard duty, are waived for manufacturers under this program. Taxes like the Value-Added Tax and the Compensation Expense Levy are also waived.

What kinds of resources are available for use in this plan?

A broader range of materials can be used as building blocks for this project because they are exempt from import taxes. It includes fuel, oil, and other catalysts that are either consumed or employed in the manufacturing process of the exported product. 

Authorization provides approximately 10% of the CIF cost for mandatory exports of spare parts shipped with the final product. If the Directorate of Biotechnology issues a "no-objection certificate," biotech products are permitted.

Companies that crush, grind, sterilize, or produce oil or oleoresin are the only ones eligible to import certain spices duty-free. Bringing in spices for cleaning, sorting, and packaging does not count as manufacturing and will not be free from import duties.

Duty-free importation of textiles entitled to SION and physically included in the export goods is possible through a specialized advance authorization procedure.

There Must Be Value Added

It is possible to export the raw ingredients purchased under the scheme after adding at least 15% in value. At the same time, this is different for tea when a value addition of 50% is mandatory.

Products for which value-addition of less than 15% is permitted are detailed in Appendix 4D of the Manual of Procedures, 2015-2020. The value-added stipulation for products sold for which payment is not received in a freely convertible foreign currency is laid out in Appendix 4C.

All the paperwork and the fine print

To participate in the scheme, exporters and manufacturers must have a certified IEC code and visit the DGFT's website (www.dgft.gov.in). Fulfill the export obligation in regards to the value & number of exports within the required time frame to receive an advance authorization.

Applicants must guarantee that all export revenues are received in a freely convertible currency. The relevant regional authority should be notified within a month if exported products are subsequently re-imported.

The authorization will be good for an entire year from its date. However, for a minimum of 18 months after the issuance of the advance authorization, it is recommended that you keep records verifying the fulfillment of your duties.

Advance authorization is also possible as a yearly requirement for goods notified in the SION. However, exporters are required to disclose how their exports have fared over the previous two years. The CIF worth of the input included in the scheme must exceed 15% of the total export value.

Conclusion

The Advance Authorisation Scheme is a duty-free import scheme. It allows importers to import goods without paying duty and excise tax for goods that will be exported within one year of their importation. The importer must apply for EPCG License from DGFT before importing the goods.

If the application is approved, the importer will receive an authorization number that they can use to clear the goods through customs. Beneficiaries of Advance Authorization are required to meet an export obligation (EO) in the form of a total value for exports by a specific date. There are consequences for failing to meet the EO by the deadline specified in the authorization. 

Once the EO has been fulfilled, supporting documentation must be kept and presented if requested. The time period is defined as eighteen months from the date when the advance authorization was issued; however, for inputs such as supply to construction contracts, military, defense, aerospace, etc., this time period could be extended.

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How can one claim SEIS incentive?

Service Exports from India Scheme - (SEIS Scheme) is designed to encourage service exports from India. It provides duty credit for service trades and offers scrip credits. SEIS Scheme allows service providers to be rewarded for any eligible export of Indian services. As part of the Service Exports from India Scheme Scheme (SEIS Scheme), eligible exporters receive Duty Credit Scrips with a value equal to the earned net foreign currency.

Important points and procedures to claim SEIS export incentive

Online applications should be made via the DGFT website. The SEIS ECOM Module Module will need all relevant information.

Online Application Form ANF 3B & Annexure To ANF 3B available. The notice must be taken that, pursuant to public notice no. 15/2015/2020 dated 28th in June 2018, a new ANF 3B has been implemented.

In the event that the applicant is providing multiple services, he/she must both classify eligible services per Appendix 3D as well as provide the required information (ANF 3B) regarding the Service Category Information.

It is important to note here that SEPC (Service Export Promotion Council ) RCMC (Registration-cum-Membership Certificate) is mandatorily required in the case of the service provider who wants to apply for SEIS.

Further, RCMC from an export promotion council is mandatory if the applicant works as both a manufacturer/service provider.

Documentary evidence in relation to the payments that the RBI approves as being received in foreign money and deemed to earn in foreign exchange to pay for the services listed in Appendix 3E.

If there is a discrepancy in the service description as per the invoice and description in Appendix 3D/3E. In such cases, you must upload copies of the invoices for each different service to your application.

List of documents required for the Procedure To Claim SEIS Export Incentives

Copy of FIRC

Copy of IEC

C.A. Certificate

List of directors, if the company's size is less than Pvt. Ltd.

Board resolution

Copy of RCMC

Statement of Forex earning F.Y wise

Photocopies of invoices

Declarations.

Relevant due date

Relevant due date

SEIS applications cannot be filed except on an annual basis. Also, one application can only be filed per Financial Year.

SEIS has a 12-month deadline for applications. This date is calculated from the end of the relevant financial calendar.

Processing of applications

According to para 9.10 of Handbook of Procedures 2015-20, upon receipt of the SEIS Scheme applications, the department must dispose of them within three working days. Only in case of any deficiencies/discrepancies in the file, a longer processing time is allowed.

Risk Management System under SEIS

SEIS uses a random approach to assess the correctness and validity of applications. It also evaluates the fairness of awarding the reward.

The Directorate General of Foreign Trade's headquarters will randomly choose 10% of the applications to each Regional Authority (hereinafter referred 'RA').

The original holder has the option of reclaiming the excess claim by returning the same scrip to him or her, regardless of how it was used. In such a scenario, the original holder will not be required to pay interest.

Regional Authority may request original proof for the following.

Landing certificate

Annexures attached ANF and any other document that has already been uploaded digitally

Any other export-related documents relevant to the application

The original proof can still be obtained within three years after the date on which the scrips were issued.

If the applicant fails or is unable to supply the original documents, the applicant could be held responsible to repay the reward as well as the appropriate interest beginning with the issue date of the scrips.

Here are all the requirements which are needed to claim for the Service Exports From India Scheme for Your business or you can consult the DGFT Consultant Services providers who are readily available to help you answer any questions regarding SEIS Scheme

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DGFT Guru

Our DGFT Consultant team is well-equipped with experts willing to offer top-notch import-export consulting services. The highly trained professionals work systematically towards building a firm pillar to support and level up the aspirations of entrepreneurs, industrialists, exporters, and importers. We create an incentive scheme policy that indeed will land in your benefit in an unprecedented way.