Duty Free Import Authorisation (DFIA)

Scheme Overview

A Duty Free Import Authorization (DFIA) allows duty-free import of inputs used in manufacturing export products, accounting for normal wastage, energy, fuel, catalysts, etc. Some products may be excluded by the DGFT through Public Notices based on public interest, effective since May 1, 2006.

Authorization is issued based on Standard Input and Output Norms (SION), limiting import quantities accordingly. Up to 10% of CIF value may include duty-free imports of essential spares needed for exported products. It can be granted to merchant or manufacturer exporters tied to supporting manufacturers.

Details and amendments to the Duty Free Import Authorization Scheme under FTP 2015-2020 are explained in the new Foreign Trade Policy of India. It allows duty-free import of inputs like oil and catalysts used in production for export. Basic Customs Duty is exempted, while additional customs duty can be adjusted as per CENVAT credit rules. Drawback rates are determined by Central Excise authorities for duty-paid inputs used in export products, subject to specified conditions.

As per the new policy minimum value addition

According to the new IMPEX Policy 2015-20, minimum value addition of 20% shall be required to be achieved. For few items where the higher value addition has been prescribed under the Advance Authorization, the same value addition shall be applicable for Duty Free Import Authorization also.

Eligibility for obtaining the Duty Free Import Authorization

(i) Duty Free Import Authorization shall be issued on post export basis for products for which Standard Input Output Norms have been notified.

(ii) Any Merchant Exporter shall be required to mention name and address of supporting manufacturer of the export product on the export document viz. Shipping Bill / Bill of Export / Airway Bill / / ARE-3 / ARE-1.

(iii) An application is to be filed with concerned Regional Authority before effecting export under Duty Free Import Authorization.

Foreign Trade Policy

Here’s a concise summary of the Duty Free Import Authorization (DFIA) scheme:

Purpose: DFIA allows duty-free import of inputs such as oil and catalysts used in the production of export products.
Applicable Provisions: Provisions from paragraphs 4.12, 4.18, 4.20, 4.21, and 4.24 of the Foreign Trade Policy (FTP) apply to DFIA.
Exclusions: DFIA cannot be used for importing raw sugar.
Duties Exempted: Only Basic Customs Duty (BCD) is exempted. Drawback rates determined by Customs apply to duty-paid inputs used in export products.
Eligibility: Issued on a post-export basis for products with notified Standard Input Output Norms (SION). Merchant exporters must specify the supporting manufacturer on export documents.
Application Process: Must be filed with the Regional Authority before export. No DFIA for inputs with pre-import or ‘Actual User’ conditions as per SION or Appendix-4J.
Minimum Value Addition: Requires a minimum value addition of 20%.
Validity & Transferability: Valid for 12 months from the date of issue. Transferable with no revalidation beyond this period.
Sensitive Items: Declaration required for specified sensitive inputs regarding technical characteristics, quality, and specifications in the Shipping Bill.
Documentation: Specific inputs used in production must be endorsed in export documents as per FTP guidelines.
Port of Export: Exports under DFIA must originate from a single designated port.
Technical Specifications: Technical details of sensitive items must be specified in the DFIA by the Regional Authority.

This summary covers the key points of the DFIA scheme under the FTP, providing clarity on its application and requirements.

Foreign Trade Policy

Duty Free Import Authorisation is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is consumed / utilised in the process of production of export product, may also be allowed.

Provisions of paragraphs 4.12, 4.18, 4.20, 4.21 and 4.24 of FTP shall be applicable to DFIA also.

Duty Free Import Authorisation Scheme shall not be available for import of raw sugar.

Duties Exempted

Duty Free Import Authorisation shall be exempted only from payment of Basic Customs Duty (BCD).
Drawback as per rate determined and fixed by Customs authority shall be available for duty paid inputs, whether imported or indigenous, used in the export product. However, in case such drawback is claimed for inputs not specified in SION, the applicant should have indicated clearly details of such duty paid inputs also in the application for Duty Free Import Authorisation, and as per the details mentioned in the application, the Regional Authority should also have clearly endorsed details of such duty paid inputs in the condition sheet of the Duty Free Import

Eligibility

Duty Free Import Authorisation shall be issued on post export basis for products for which Standard Input Output Norms have been notified.
Merchant Exporter shall be required to mention name and address of supporting manufacturer of the export product on the export document viz. Shipping Bill/ Bill of Export / Tax Invoice for export prescribed under the GST rules.
Application is to be filed with concerned Regional Authority before effecting export under Duty Free Import
No Duty Free Import Authorisation shall be issued for an input which is subjected to pre-import condition or where SION prescribes ‘Actual User’ condition or Appendix-4J prescribes pre import condition for such an

Minimum Value Addition

Minimum value addition of 20% shall be required to be achieved.

Validity &Transferability of DFIA

Applicant shall file online application to Regional Authority concerned before starting export under
Export shall be completed within 12 months from the date of online filing of application and generation of file
While doing export/supply, applicant shall indicate file number on the export/supply documents Shipping Bill/Bill of Export/Tax invoice for supply prescribed under GST rules.
In terms of Para 12 of FTP, Wherever SION permits use of either(a) a generic input or (b) alternative input, the specific input together with quantity [which has been used in manufacturing the export product] should be indicated / endorsed in the relevant Shipping Bill / Bill of Export / Tax invoice for supply prescribed under GST rules. Only such inputs may be permitted for import in the authorisation in proportion to the quantity of these inputs actually used/consumed in production, within overall quantity against such generic input/alternative input.
In addition, if in any SION, a single quantity has been indicated against a number of inputs (more than one input), then quantities of such inputs to be permitted for import shall be in proportion to the quantity of these inputs actually used/consumed in production and declared in Shipping Bill / Bill of Export / Tax invoice for supply prescribed under GST rules within overall quantity against such group of inputs. Proportion of these inputs actually used/consumed in production of export product shall be clearly indicated in Shipping Bill / Bill of Export / Tax invoice for supply prescribed under GST rules.
Separate DFIA shall be issued for each SION and each
Exports under DFIA shall be made from a single port as mentioned in paragraph 37 of Handbook of Procedures.
Regional Authority shall issue transferable DFIA with a validity of 12 months from the date of issue. No further revalidation shall be granted by Regional

Sensitive Items under Duty Free Import Authorisation

In respect of following inputs, exporter shall be required to provide declaration with regard to technical characteristics, quality and specification in Shipping Bill:

“Alloy steel including Stainless Steel, Copper Alloy, Synthetic Rubber, Bearings, Solvent, Perfumes / Essential Oil/ Aromatic Chemicals, Surfactants, Relevant Fabrics, Marble, Articles made of Polypropylene, Articles made of Paper and Paper Board, Insecticides, Lead Ingots, Zinc Ingots, Citric Acid, Relevant Glass fibre reinforcement (Glass fibre, Chopped / Stranded Mat, Roving Woven Surfacing Mat), Relevant Synthetic Resin (unsaturated Polyester Resin, Epoxy Resin, Vinyl Ester Resin, Hydroxy Ethyl Cellulose), Lining Material”.

While issuing Duty Free Import Authorisation, Regional Authority shall mention technical characteristics, quality and specification in respect of above inputs in the Authorisation.

Hand Book of Procedures

Policy

Policy for DFIA is detailed in Chapter 4 of the Foreign Trade Policy (FTP).

Application Process

Applications, using ANF 4G along with required documents, must be filed online with the relevant Regional Authority.
Provisions from paragraphs 4.26, 4.27, 4.28, 4.48, 4.49(e), 4.49(f), and 4.52 of the Handbook of Procedures also apply to the DFIA Scheme.

Issuance and Transfer:

After completing exports and receiving proceeds, a request for transferable DFIA can be made to the Regional Authority within twelve months from the date of export or six months (or additional time allowed by RBI for realization) from the date of proceeds realization, whichever is later.
Applications can be filed beyond 24 months from the file generation date as per paragraph 9.02 of the Handbook of Procedures.

Split DFIA

Split authorizations of DFIA are possible, with each split having a minimum CIF value of Rs. 10 lakh and multiples thereof. A fee of Rs. 1000/- is applicable for each split authorization. The split-up DFIA must maintain the same port of registration as the original.

Re-export of Goods

Goods imported under transferable DFIA, found defective or unfit for use, may be re-exported as per Department of Revenue guidelines.
A certificate from the Commissioner of Customs, verifying non-use and CIF value details, allows issuance of a fresh DFIA for the remaining validity period.

Account Maintenance:

Original DFIA holders must maintain accurate records of imported and domestically procured goods usage against each authorization as per Appendix 4H.
These records are essential for processes such as bond waiver, redemption, discharge of export obligations, or transferability, and must be retained for at least three years from the redemption date.

This summary provides an overview of the procedural guidelines and requirements associated with the DFIA scheme under the FTP and Handbook of Procedures.

Duty Free Import Authorisation (DFIA)