DGFT Licensing & Foreign Trade Policy Advisory

The Directorate General of Foreign Trade (DGFT) is the apex regulatory authority under India's Ministry of Commerce and Industry responsible for formulating and implementing the Foreign Trade Policy (FTP). DGFT's mandate covers: issuing the IEC (Importer Exporter Code) to all importers and exporters; administering export incentive schemes (Advance Authorisation, EPCG, RoDTEP, DFIA, and others); maintaining the prohibited/restricted/canalized goods list; regulating trade with specific countries (SCOMET items — Dual-Use items); and conducting proceedings under the FTDR Act 1992 for policy violations. DGFT operates through its headquarters in New Delhi and approximately 23 Regional Authorities across India's major cities including Chennai, Mumbai, Delhi, Kolkata, Bangalore, and Hyderabad.

The Foreign Trade Policy (FTP) is a comprehensive policy document notified by the Ministry of Commerce and Industry that governs India's import and export trade. The current FTP 2023 was notified on 1 April 2023 and replaced FTP 2015-20 (which had been extended multiple times). The FTP 2023 is described as a 'living document' — it does not have a fixed 5-year term but will be updated continuously through amendments, trade notices, public notices, and circulars as trade conditions evolve. The FTP is supplemented by the Handbook of Procedures (HBP) which specifies procedural requirements, ANF formats, SION norms, and the operational details of each scheme. The HBP is updated more frequently than the FTP itself — DGFT issues public notices amending specific HBP chapters and SION annexures throughout the year.

Yes — the Importer Exporter Code (IEC) is mandatory for any person importing or exporting goods (and certain services) from India. It is a 10-digit number issued by DGFT on the basis of the PAN of the applicant entity. Without a valid IEC, Customs will not clear imports or exports, and DGFT licensing is not accessible. From April 2021, IEC holders are required to electronically update or confirm their IEC details (or opt for deactivation) through the DGFT portal in the annual update window (typically April to June each year). Failure to complete the annual update results in the IEC being automatically deactivated — and an inactive IEC blocks all trade operations until it is reactivated by completing the update.

The Registration-cum-Membership Certificate (RCMC) is issued by the Export Promotion Council (EPC) covering the exporter's product category. It is a mandatory prerequisite for most FTP benefit applications (AA, EPCG, DFIA) and for certain other regulatory purposes. The EPC is determined by the HS code of the export product: EEPC India for engineering goods; CHEMEXCIL for chemicals, dyes, and pharmaceuticals; APEDA for agricultural products; TEXPROCIL for cotton textiles; AEPC for apparel; MPEDA for marine products; FIEO for general merchandise and multi-product exporters; SEPC for service exporters; BPEC for beauty, wellness, and personal care; and approximately 20 others. An RCMC from the wrong EPC or an expired RCMC on an AA application is an automatic deficiency. RCMC is typically valid for a calendar year or financial year and must be renewed with the EPC before expiry.

FTP 2023 provides several incentive mechanisms for Indian exporters. The Advance Authorisation (Chapter 4) allows duty-free import of inputs for export production based on SION norms. The EPCG Scheme (Chapter 5) allows duty-free import of capital goods for export production with a 6x export obligation over 6 years. The RoDTEP (Remission of Duties and Taxes on Exported Products) scheme refunds embedded central, state, and local taxes and levies on export goods at rates notified in the RoDTEP Schedule — this replaced the earlier MEIS scheme. The DFIA (Duty Free Import Authorisation) allows post-export duty-free imports and is freely transferable after redemption — making it commercially valuable for exporters who want to monetise the benefit. The deemed exports chapter (Chapter 7) extends FTP benefits to domestic suppliers to EOUs, ICB project suppliers, and others. The Town of Export Excellence and Common Service Provider schemes provide support for export clusters.

All three instruments provide relief from customs duty on inputs used in export production, but through different mechanisms. Advance Authorisation (AA) provides upfront duty exemption at import, before production and export — it requires a forward export commitment and SION-based norm compliance. It is most valuable for manufacturers with predictable export volumes who import high-duty inputs regularly. DFIA (Duty Free Import Authorisation) is issued post-export — based on actual past exports — and the DFIA licence is freely transferable after redemption, meaning it can be sold to other importers if the holder does not need the duty-free imports itself. DFIA is more flexible than AA but requires established export performance. Duty Drawback is the simplest: it refunds the All India Rate (AIR) of basic customs duty paid on inputs used in exports, based on the export FOB value, without any forward obligation or norm compliance — it is available to merchant exporters and manufacturer-exporters equally. The trade-off: Drawback rates are typically lower than the actual duty saved under AA and require duty to be paid first (cash flow cost), whereas AA saves the duty upfront.

Every Advance Authorisation carries a mandatory Export Obligation (EO): the AA holder must export goods of a minimum FOB value within the prescribed period (18 months from AA issuance, subject to extension). The minimum EO is the CIF value of duty-free imports under the licence plus 15% — this is the 15% minimum value addition. For example: if the AA permits duty-free imports of CIF value ₹2 crore, the EO is at minimum ₹2.30 crore in export FOB value, to be fulfilled within 18 months. The export obligation must be fulfilled by actual physical export on shipping bills; deemed exports under specific categories may also count subject to conditions. Exports made in the 12 months before the AA was issued (in the same product category) can also be set off against the EO under the FTP past export provision.

The EPCG (Export Promotion Capital Goods) scheme export obligation is 6 times the duty saved on the imported capital goods over a 6-year period from the date of EPCG licence issuance. For example: if the EPCG licence covers ₹10 crore in capital goods at a 5% average duty rate, the duty saved is ₹50 lakh, and the EO is 6x ₹50 lakh = ₹3 crore in export FOB value over 6 years. For certain capital goods imported by SSI units or under specific schemes, a lower EO multiple applies. The EO under EPCG is to be fulfilled in the ratio of 50% in the first 4 years and the remaining 50% in the next 2 years (or any other distribution that results in 100% by year 6). Failure to fulfill within 6 years: duty foregone plus interest at 15% per annum from import date. The EPCG can be extended on application before expiry with a composition fee.

RoDTEP (Remission of Duties and Taxes on Exported Products) is the scheme that replaced MEIS (Merchandise Exports from India Scheme) in January 2021. MEIS provided a percentage-of-FOB value incentive on exports, and was held to be an export subsidy inconsistent with WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). RoDTEP, by contrast, refunds only the actual embedded taxes and levies that are not refunded through any other mechanism — central and state taxes, local levies, electricity duties, mandi taxes, and similar embedded costs in the export supply chain. RoDTEP rates are lower than MEIS rates for some sectors (particularly textiles) because they are capped at actual embedded tax levels. The RoDTEP credit is issued electronically on ICEGATE as a transferable duty credit scrip (in the exporter's ICEGATE account) and can be used to pay Basic Customs Duty on future imports or transferred to other importers.

Standard Input Output Norms (SIONs) are pre-approved norms published by DGFT (in Appendix 4B of the Handbook of Procedures) that specify the maximum quantity of each input that may be imported duty-free per unit of export output for a given product category. SIONs cover a wide range of exported goods across sectors including textiles, chemicals, engineering goods, marine products, and others. If your product has a published SION: the AA application refers to the SION number, and the import quantities are determined by the SION without additional norm justification. If your product does not have a published SION: you must apply for ad-hoc norm fixation through the Norms Committee (which requires a technical consumption statement from the exporter with production records and a Chartered Engineer certificate) or use self-declared norms for certain categories (subject to post-export verification). Ad-hoc norm fixation adds 3–6 months to the timeline. DGFT updates SIONs periodically — if an existing SION understates your actual input consumption, you can apply for a SION revision.

An Advance Authorisation grants exemption from Basic Customs Duty (BCD), Additional Customs Duty (largely replaced by IGST post-GST), Countervailing Duty, Anti-Dumping Duty (where specifically granted in the licence), and Education Cess on customs duties. The IGST position on AA imports has been specifically addressed: imports under a valid AA are also exempt from IGST under the Customs Exemption Notifications that give effect to the AA scheme in GST law. This means an AA holder importing inputs does not pay BCD, IGST, or other specified duties on those inputs at the time of import. However, AA holders cannot simultaneously claim IGST input tax credit refund on the same IGST-exempt imports — since no IGST was paid, there is no credit to claim. The exemption from Safeguard Duty and Social Welfare Surcharge under a standard AA varies by notification — PNPC verifies the exact duty exemption coverage for each import before the Bill of Entry is filed.

Generally, no — or only in very limited circumstances. The AA scheme is premised on physical incorporation of imported inputs into export products through a manufacturing process. A pure merchant exporter or trading house that does not manufacture cannot demonstrate physical incorporation. There is a provision in the FTP for a merchant exporter to obtain an AA backed by a supporting domestic manufacturer — in a Back-to-Back arrangement — where the supporting manufacturer provides a Manufacturer's Declaration and the physical incorporation obligation effectively rests with the manufacturer. In practice, this arrangement requires careful structuring and the manufacturer must maintain the input-output records and co-sign the obligation. For merchant exporters who source manufactured goods for export, Duty Drawback is a simpler and more directly available instrument — it does not require proof of physical incorporation and is available on actual export regardless of who manufactured the goods.

A DGFT Show Cause Notice (SCN) is a formal notice issued by the DGFT Regional Authority or, in more serious cases, by DGFT's Enforcement (previously the Directorate General of Foreign Trade Enforcement) under the FTDR Act 1992 (Foreign Trade (Development and Regulation) Act). Common grounds for SCN: unfulfilled or partially fulfilled export obligations under an AA or EPCG licence; alleged misuse of a licence (importing goods other than those licensed or for a purpose not permitted); incorrect value addition claims in an AA application; failure to comply with licence conditions; and export of SCOMET (dual-use) items without required authorisation. Penalties under FTDR Act 1992 can include: financial penalties up to several times the duty foregone; cancellation of the licence; debarment from future FTP benefits; and in serious cases, prosecution under Section 11 of the FTDR Act.

The Foreign Trade (Development and Regulation) Act 1992 is the legislation that empowers the Central Government and DGFT to regulate India's foreign trade. Key provisions: Section 3 gives the Central Government power to prohibit, restrict, or otherwise regulate import/export; Section 5 empowers DGFT to issue and revoke licences; Section 9 provides for penalty for contravention of any provision of the Act, rules, or orders — up to ₹1 lakh per contravention or three times the value of the goods or services involved (whichever is higher); Section 11 allows for adjudication of penalties by the DGFT adjudicating authority; and Section 15 provides for appeals to the DGFT Appellate Authority. DGFT proceedings under the FTDR Act are quasi-judicial — they follow principles of natural justice with notice and opportunity to be heard before any adverse order.

SCOMET stands for Special Chemicals, Organisms, Materials, Equipment and Technologies — India's dual-use goods and technologies export control list maintained by DGFT. Items on the SCOMET list require a DGFT authorisation (SCOMET export licence) before they can be exported, regardless of the destination country. The list covers: nuclear materials and related equipment; aerospace and defence technologies; chemicals that could be used in chemical weapons; biological agents and related equipment; and certain advanced manufacturing technologies. Export of SCOMET items without the required authorisation is a serious violation under the FTDR Act and the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act 2005 — potentially criminal in nature. The SCOMET list is updated by DGFT and aligned with international export control regimes.

Chapter 7 of FTP 2023 (Deemed Exports) provides that certain categories of domestic supply are treated as 'deemed exports' and are entitled to FTP benefits equivalent to physical exports. The deemed export categories include: supply of goods to Export Oriented Units (EOUs); supply against International Competitive Bidding (ICB) tenders; supply to projects funded by multilateral agencies (UN, ADB, World Bank) where payment is in foreign exchange; supply to Nuclear Power Projects under international competitive bidding; and supply to mega power projects. A domestic manufacturer supplying to an EOU can apply for an Advance Authorisation for the inputs used in manufacturing those goods, and the supply to the EOU counts as EO fulfillment — along with Advance Payment of Duty refund and other FTP benefits as specified. This allows the domestic supply chain feeding EOUs and large infrastructure projects to also benefit from duty-free input procurement.

DGFT and Customs are two different regulatory authorities within India's trade regulatory framework — but they interact closely in the administration of FTP schemes. DGFT issues licences (AA, EPCG, DFIA); Customs registers those licences at the port of import and enforces the licence conditions (permitting duty-free import only of goods and quantities covered by the licence). The Customs House Agent (CHA) or Customs Broker is the specialist licensed by Customs to file Bills of Entry and Shipping Bills on the ICEGATE portal and represent importers and exporters at the Customs port. The CHA's expertise is in Customs port procedures — HS code classification for Customs, duty payment, Customs clearance, and post-import compliance at the port level. The CHA typically does not handle DGFT applications, SION verification, EO tracking, or DGFT redemption proceedings. PNPC manages the DGFT lifecycle end-to-end and coordinates with the client's CHA for the Customs registration and port-level filings.

The DFIA (Duty Free Import Authorisation) is a post-export duty-free import entitlement — it is issued after exports have been made, based on the exporter's actual export performance measured against published SION norms. Unlike the Advance Authorisation (which is a pre-export instrument with a forward EO), the DFIA is granted on the basis of exports already completed. The DFIA's key commercial feature is that it is freely transferable after redemption (completion of requisite exports) — meaning the DFIA licence can be sold in the open market to any importer who needs duty-free imports of the same inputs. This makes DFIA valuable for exporters who do not need the duty-free imports themselves but can monetise the licence. The DFIA is limited to products with published SIONs. The duty exemption under DFIA covers Basic Customs Duty; IGST exemption under DFIA has conditions that need to be verified at the time of each import.

Active DGFT licences (AA, EPCG, DFIA) with outstanding export obligations are registered in the name of the IEC holder who applied for them. If the business closes (company wound up, firm dissolved), the outstanding EO on active licences becomes immediately due — the duty foregone on all imports under those licences is recoverable from the erstwhile entity (or its directors/partners under the FTDR Act in certain circumstances). Simply closing the company does not extinguish the DGFT obligation. If the business is being transferred or merged with another entity, the active licences must be transferred to the successor entity through a DGFT amendment — the successor assumes the EO obligation. A change in IEC (replacement rather than transfer) creates complexity around the continuity of existing licences. PNPC advises on DGFT compliance as part of any business closure or restructuring engagement.

The India-UAE Comprehensive Economic Partnership Agreement (CEPA), effective from 1 May 2022, reduced or eliminated tariffs on a wide range of Indian goods exported to the UAE and vice versa. For Indian exporters exporting to the UAE under CEPA preferential tariff rates, the key compliance requirement is Rules of Origin — specifically, the goods must satisfy the CEPA's Rules of Origin (RoO) criteria to qualify for the preferential duty rate. The exporter must obtain a Certificate of Origin (CoO) from the authorised issuing body in India (typically the Export Inspection Council or the relevant EPC) confirming that the goods qualify under CEPA RoO. The RoO criteria vary by product (generally requiring substantial transformation or a specific value addition threshold). For DGFT purposes: CEPA CoO requirements interact with DGFT HS code classifications and FTP benefit claims — particularly because the inputs imported under AA may have a different origin from the exported product, affecting RoO calculations.

The AA holder is required to maintain a Link Register (also called an Utilisation Register or Input-Output Register) throughout the period of the AA and for 5 years after redemption. The Link Register tracks, for each import under the AA and each export in fulfillment of the EO: the quantity and value of each input imported; the date of import and Bill of Entry number; the quantity of that input used in production; the quantity of the export product manufactured; the date of export and shipping bill number; and the link between specific input batches and specific export batches. This register is the primary evidence in the DGFT redemption proceeding — it demonstrates that the inputs imported duty-free were physically incorporated into the exported goods. A Link Register that is not maintained contemporaneously (i.e., prepared retrospectively at the time of redemption based on incomplete records) is typically challenged in a DGFT redemption audit.

The Bank Realisation Certificate (BRC) — now increasingly referred to as the eBRC (electronic BRC) since FEMA-based integration with bank systems — is the document issued by the exporter's Authorised Dealer bank confirming that the foreign exchange receivable against a specific export shipment has been realised (received by the exporter's bank account in India). The eBRC is generated on the DGFT portal by the AD bank after the foreign remittance against the export invoice is credited to the exporter's account. BRCs/eBRCs are mandatory for redemption of Advance Authorisation and EPCG export obligations — they constitute the FEMA-compliance proof that export proceeds have been realised within the prescribed period (currently 9 months for goods exports). Missing BRCs on exports claimed toward EO fulfillment is a common redemption problem — particularly where payment terms include delayed payment, retention money, or payment through buyers' credit structures.

Yes. The FTP specifically provides that exports made up to 12 months before the date of the Advance Authorisation can be counted toward the export obligation on that AA, provided they are in the same product category and the documentation (shipping bills, BRCs) is on record. This provision is valuable for exporters who have been exporting on duty-paid inputs and want to begin using the AA scheme: they can apply for an AA, make the duty-free imports, and set off prior exports against the new EO — effectively recovering the benefit of the scheme on past export production cycles through the duty-free imports going forward.

If the export obligation under an AA cannot be fulfilled within the original 18-month period, the AA holder can apply to the DGFT Regional Authority for an extension before the period expires. An extension carries a composition fee — a percentage of the duty foregone on imports under the AA, calculated at a rate that increases the longer the extension is sought. The HBP specifies the applicable composition fee table. Extensions are typically granted in tranches of up to 6 months each, with each successive extension carrying a higher fee rate. The composition fee is in addition to the interest that accrues (at 15% per annum) on the duty foregone if the EO is eventually not fulfilled even after the extension — so the composition fee is the cost of buying time, not of extinguishing the obligation. Exact composition fee rates are specified in the HBP and may be revised by DGFT through trade notices.

The nexus condition under the EPCG scheme requires that the capital goods imported duty-free under an EPCG licence are used for export production — there must be a direct nexus between the capital goods and the export goods that will be manufactured using them. The EPCG licence specifies the export product(s) for which the capital goods are to be used. For manufacturers of multiple products (domestic and export), the nexus condition requires that the imported capital goods are not exclusively used for domestic production. DGFT and Customs verify the nexus at the time of application (through a CA Certificate and a factory layout plan) and at redemption (through export obligation fulfillment from the same manufacturing facility). Capital goods moved out of the manufacturing premises or used for a different purpose without DGFT amendment invalidate the EPCG licence and trigger duty recovery.

Orders passed by the DGFT Regional Authority (including penalty orders under the FTDR Act) can be appealed to the DGFT Appellate Authority at the DGFT headquarters in New Delhi. The appeal must be filed within 45 days of receipt of the RA's order (extendable for sufficient cause shown). The appeal is filed in the prescribed format with the grounds of appeal, the impugned order, and all relevant documents. The Appellate Authority hears both parties and passes an order — which can uphold, modify, or set aside the RA's order. Orders of the Appellate Authority can be challenged before the High Court under Article 226 of the Constitution of India. DGFT appeal proceedings are quasi-judicial; legal representation before the Appellate Authority is common in complex cases.

Special Economic Zone (SEZ) units and Export Oriented Units (EOUs) have their own duty-free import mechanism under the SEZ Act 2005 and the EOU Scheme respectively — they are generally not permitted to simultaneously use Advance Authorisation or EPCG licences for the same goods that they import duty-free under their SEZ or EOU entitlement. Using two duty-free import mechanisms for the same goods is not permitted. However, SEZ/EOU units can access DGFT licences for goods or purposes not covered by their SEZ/EOU entitlement, subject to the specific conditions of the relevant DGFT scheme. Additionally, domestic suppliers to SEZ units and EOUs can access deemed export FTP benefits. The interaction between SEZ/EOU status and DGFT licences requires careful analysis before any application is filed.

FTP 2023 introduced a dedicated chapter and framework for e-commerce exports — recognising the growth of cross-border B2C and B2B e-commerce from India. Key elements: exports through e-commerce platforms are eligible for FTP benefits including RoDTEP; a simplified clearance mechanism (Courier Exports under Section 65 of Customs Act or speed post) is available for small value B2C exports; IEC is required for e-commerce exports; GST refund (IGST refund) on e-commerce exports follows the standard GST mechanism. For e-commerce exporters, the key DGFT compliance requirement is ensuring the IEC is active, the correct HS codes are declared on shipment documents, and RoDTEP is claimed on eligible shipments. For high-volume e-commerce sellers, the aggregate RoDTEP benefit across many small shipments can be material.

AA and EPCG licence holders must maintain all records related to the licence — applications, licences, Bills of Entry (imports), Shipping Bills (exports), BRCs/FIRCs, input-output utilisation registers, production records, DGFT correspondence, and the Redemption Certificate — for a minimum of 5 years from the date of redemption. Customs similarly requires records to be maintained for 5 years after the date of import. These records are subject to post-redemption audit by both DGFT and Customs. The Redemption Certificate issued by DGFT does not permanently close the audit risk — DGFT has conducted audits and raised demands years after redemption where records were found to be inadequate or the input-output links were not adequately documented. Records maintenance is not optional — it is the only defense against a retrospective demand.

A freight forwarder manages logistics — shipping, documentation for transport, incoterms, freight rates. A general export consultant may assist with documentation preparation but does not have the statutory qualification to certify DGFT applications (the CA Certificate required in several ANF forms is a statutory certification that must be signed by a practicing Chartered Accountant), advise on FEMA implications of export proceeds, advise on GST-Customs interface for AA importers, or represent clients in DGFT proceedings or before the FTDR Act adjudicating authority. A Customs House Agent (CHA) is expert in Customs port procedures but not in DGFT applications, EO tracking, or DGFT redemption. PNPC is a practising CA firm with specific FTP competence across the complete DGFT lifecycle. We provide the statutory certifications required in DGFT applications, manage the FEMA-GST-Customs interface, track EO obligations proactively, and defend clients in DGFT proceedings — capabilities that neither a freight forwarder, export consultant, nor CHA can provide.

For a SION-based Advance Authorisation application filed on the DGFT portal by a qualified practitioner with complete documents, the DGFT Regional Authority typically issues the licence within 3–6 working weeks from the date of application. This timeline assumes: the IEC is active; the RCMC is current; the SION number is correct and the application documents are complete; and no queries are raised by the RA (or queries are resolved promptly). If queries are raised, each query-response cycle adds 1–3 weeks. For non-SION products requiring norm fixation, the Norms Committee proceeding adds 2–4 months to the timeline. For applications where the DGFT RA has a backlog (this varies by office and time of year), processing times can extend. PNPC's pre-filing review process is designed to minimize query rates — we review every application against the RA's common query checklist before submission.

PNPC Global has been advising Indian exporters on DGFT licensing and FTP compliance since the Foreign Trade Policy existed in its current regulatory form. Our DGFT practice covers: Advance Authorisation applications and lifecycle management across multiple sectors (engineering goods, chemicals, textiles, automotive components, food products); EPCG applications for manufacturer-exporters and service exporters; DFIA applications and transferable licence management; RoDTEP claims setup and monitoring; norm fixation proceedings before the Norms Committee for non-SION products; DGFT SCN responses and FTDR Act proceedings; and FTP policy interpretation advisory for complex cross-border trade transactions. Our Chennai, Bangalore, and Hyderabad offices handle DGFT matters at the respective Regional Authorities. Our Dubai office advises on the India-UAE corridor including CEPA compliance and UAE import-side regulatory matters.

DGFT and FEMA intersect significantly in the export-import transaction chain. FEMA (Foreign Exchange Management Act 1999) requires that export proceeds (foreign exchange receivable against goods or services exported from India) are realised within the prescribed period — currently 9 months for goods exports. Failure to realise export proceeds within this period requires reporting to the Authorised Dealer bank and, in some cases, to the RBI. The BRC/eBRC generated by the AD bank is the evidence of export proceeds realisation — it is simultaneously the FEMA compliance document and the DGFT redemption document. Where export proceeds are delayed (common in buyer credit structures, L/C discounting, factoring arrangements), the BRC generation is delayed, creating both a FEMA filing obligation and a potential DGFT redemption gap. PNPC coordinates FEMA compliance and DGFT filing requirements as integrated services — not as separate engagements where each adviser is unaware of what the other is doing.

The process for a new DGFT advisory engagement with PNPC begins with a diagnostic meeting — typically 60–90 minutes — where we understand your export products (HS codes), import inputs (HS codes and duty rates), export markets, annual volumes, current FTP registrations (IEC, RCMC status), and any active DGFT licences or outstanding obligations from previous schemes. From this diagnostic, we prepare a DGFT Benefit Map — a summary of which schemes you are eligible for, the estimated benefit under each scheme, and the compliance commitment required. This is shared before any engagement fee is committed to, so you can assess the value proposition clearly. Once the engagement scope is agreed, PNPC takes over the IEC/RCMC verification, application preparation, and ongoing management within 5–7 working days of engagement confirmation.