Duty-Free Authorization Scheme (DFIA) is the Scheme that allows duty-free imports of raw materials used for exported products. It includes inputs, fuel, oil, energy sources, acatalyst However, this scheme is applicable post exports; this means that duty-free imports will only be allowed oncethe export iscompleted.

Introduction

Policy relating to the Duty-Free Import Authorisation (DFIA) Scheme is prescribed in Chapter 4 of Foreign Trade Policy 2015-2020 which is extended till 31st March 2022.This scheme replaced the Duty-Free Replacement Certificate (DFRC) scheme and became operational on May 1, 2006. It has the features of Advance Authorisation scheme as well DFRC. Like the Advance Authorisation scheme, DFIA permits, Duty-free imports of inputs for use in the manufacture of the exported product.

Under the Duty-Free Import Authorisation (DFIA) scheme, authorization is issued to allow duty-free import of inputs. No change has been made regarding transferability in DFIA scheme under Foreign Trade Policy 2015-20.

The DFIA scheme is valid only for those export products where valid Standard Input Output Norms (SION) are in place. The scheme is not available in cases where Standard Input Output Norms have been suspended.

Contents of this article

  • Introduction
  • Duties Excluded From Payment
  • Facility To Split DFIA
  • Records Required To Be Maintained
  • Eligibility
  • Minimum Value Addition
  • Legitimacy &Transferability of DFIA
  • Cognizant elements covered under Duty-Free Import Authorisation
  • Re-export of goods imported covered by DFIA Scheme
  • Wrapping Up

Duties Excluded From Payment

1. Duty-Free Import Authorisation holder shall be not liable to payonly Basic Customs Duty (BCD)Payment.

2. Customs authority has determined and fixed rate of drawback and 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 Authorisation.

Facility To Split DFIA

Split Authorisations of DFIA aresubject to a minimum of CIFvalue of Rs. 10 lakhs each and multiples thereof may also be issued, on request at the time of seeking transferability. A fee
of Rs. 1000/- each shall be paid for each split authorization. Split-up DFIAs shall be permitted with the same Port of Registration as appearing on the original DFIA.

Records Required To Be Maintained

Original DFIA holder shall maintain a true and proper account of consumption and utilization of duty-free imported / domestically procured goods against each authorization as prescribed in Appendix-23. These records are required to be sent to the concerned Regional Authority (RA) along with a request for bond waiver/redemption/discharge of export obligation/ transferability. Such records should be preserved for a period of at least three years from the date of redemptionas prescribed in Appendix-23.

Eligibility

  • The products for which Standard Input Output Norms (SIONs) have been notified, Duty-Free Import Authorisation shall be issued on a post export basis for such products.
  • It is required to mention the name and address of the supporting manufacturer of the export product on the export document viz. Shipping Bill/ Bill of Export / Tax Invoice for export by merchant exporter, prescribed under the GST rules.
  • It is required to file anapplication with the concerned Regional Authority before executingexport under Duty-Free Import Authorisation
  • 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 input. However, this restriction is not applicable for “Raw Sugar” on exports made till 30.9.2018

Minimum Value Addition

Under this scheme, a minimum of 20% value addition for exports is prescribed.

Legitimacy & Transferability of  DFIA

  • An applicant is required to file an online applicationbefore starting export under DFIA. to concerned Regional Authority (RA).
  • It is required to complete export within 12 months from the date of online filing of application and generation of file number.
  • The applicant shall denote the file number on the export /supply documents viz. Shipping Bill /  Bill of Export / Tax invoice for supply prescribed under GST rules while doing export/supply.
  • Wherever SION permits the 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 authorization in proportion to the quantity of these inputs actually used/consumed in production, within overall quantity against such generic input/alternative input.
  • Independent DFIA shall be issued for respective SION.
  • Regional Authority shall issue transferable DFIA with a validity of 12 months from the date of issue. Regional Authority shall not grant any further revalidation.

Cognizant elements covered under Duty-Free Import Authorisation

  • The exporter shall be required to provide a declaration in relation to technical characteristics, quality, and specification in Shipping Bill, in respect of the below inputs:

“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”.

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

Re-export of goods imported covered by DFIA Scheme

Following DOR Guidelines, Goods imported against transferable DFIA, which are found defective or unfit for use, maybe re-exported. In such cases, 95% of CIF value debited against DFIA for export of such goods, shall be generated bythe concerned Commissioner of Customs as an Authorisation, containing the amount generated and the details of original DFIA. A fresh DFIA shall be issuedby the concerned Regional Authority (RA) based on the certificate.Fresh DFIA, so issued, shall have the sameport of registration and shall be valid for a period equivalent tothe balance period available on the date of import of such defective/unfit goods.

Wrapping Up

Duty-Free Import Authorization (DFIA) Scheme is a post-export and it enables exporters to import raw-material or inputs that are exempted from Basic Customs Duty (BCD). Like Advance Authorisation Scheme (AA), it also facilitates the exporter to transfer DFIA to a needy friend for offsetting his/her Duty.