The export of products and services plays a crucial role in the economic liberalization of any country, including India, by putting forward a significant sum earned in exchange for goods and services to enhance trade relations with foreign nations. However, there is a strict regulating policy by which any company exporting goods from India has to abide by the government. One of the most important prerequisites for firms to trade internationally is the acquisition of the right export license. These licenses help ensure the export of goods and services in a way that honours Indian laws, protects the national interest, and furthers India’s international trade policy.
An export license, as in the case of India, is a license granted by the Directorate General of Foreign Trade, which falls under the Ministry of Commerce and Industries. There is a range of export licenses that a business would need depending on the type of product being exported, the amount that is being exported or the country to which it is going. These areas are covered in this blog, whereby we will focus on The various categories of export licenses in India, the Importance of export licenses, and the procedure for applying for export licenses.
What is an Export License?
An export license is sometimes known as an export permit, and as its name suggests, it is an official document that the government of India provides exporters to allow them to export certain goods out of the country. Export license means a legal permission given to the Indian exporters to export their products to the overseas countries. Export licenses are administered by the Directorate General of Foreign Trade (DGFT), which holds and issues licenses based on the law of the Foreign Trade (Development & Regulation) Act, 1992.
Export licenses are important not only for regulating the flow of goods but also for regulating compliance with various regulations on safety and quality and concerns of national security. The kind of export license that will be needed will vary with the nature of the product and its intended destination, as well as whether the goods are restricted to export.
Types of Export Licenses in India
India has divided its export licenses into the kinds of goods that are being exported, their use for exportation, and any other conditions required by the government. Broadly, there are four main types of export licenses that businesses may need to apply for:
Free Export License
Free Export License is the most prevalent type of export license in India and is easily available to anybody. This type of form is issued for goods that have no restrictions for export and therefore there is no regulation hindered on it. There are no restrictions and prohibition in the export of these goods under the laws of India. This can include textiles and garments, electronics, agricultural products and many other products that are not considered security sensitive.
To get Free Export License, exporter should be registered with the DGFT and possess IEC number which is mandatory for those who are involved in export and import of goods in India. The Free Export License usually does not take too long as the export is free from any policy restrictions of the government relative to Export/Import License.
E this type of license is not very hard to get as compared to some of the other licenses out there. The license is called Foreign Trade Policy license and can only be obtained after applying to the DGFT and after the application has been processed and granted. The license is valid for the fixed period of time and has to be renewed at the end of this period.
Restricted Export License
The Restricted Export License is needed when the exported goods are partly or fully prohibited to be exported from the country. These products may contain security features as well as have environmental impacts on the surrounding community or may be subject to certain trade restrictions of exportation. This category includes products such as Defence equipment’s, nuclear technology and Banned Chemicals and Metals products etc.
For example, export of arms and ammunitions, chemicals, high technology electronics goods may demand Restricted Export License only. These goods are well regulated by the government so that they should not fall in the wrong possession or use in a manner that is dangerous to the state or in a manner that violates any treaty.
For those involved in export restricted commodities, this license is required from the DGFT while involving extra check-ups or documents to be produced. They often require clearances from other bodies such as the Ministry of Defence or the Ministry of External affairs, to ensure that the goods in the exportation process are legal and safe.
Export Licence for Control or Banned Items
It is important to consider that some of the items may be banned from export from India under trade commitments, security and regulatory requirements. Such goods are commonly restricted from exportation, or if allowed, may be so under very special permission. Any export of such goods requires special license or permission from the relevant authority and exporter needs to prove the bonfide export.
Examples of products under this category could be products that have been declared inadequate for use in India by the government because they are hazardous to the environment or human health. For instance, the substances may be poisonous in nature or are radioactive or other specific waste materials. Likewise, goods that contravene international legal instruments, like endangered species of wildlife or plants, also attract special licenses.
This export license is slightly more complex than the Free Export License which requires exporters to justify the legitimacy of the good or prove that the goods are safe or have been environmentally or internationally approved. The approval of projects entails several government ministries such as Ministry of Environment, Forests and Climate Change Ministry, Ministry of Commerce and Ministry of External Affairs.
Special Export License
The STE is used in cases where the exported product is not a standard export classification, but will be exported for a permissible purpose such as humanitarian aid, diplomatic reasons or other government approved activities. This kind of license is issued to companies or people who are exporting commodities approved by the government, or in projects of regional or global importance.
For example, if a company deals in medical supplies or food relief items that needs to be exported to another country under the direction of Indian government for use in the disaster areas, it is possibly required to have Special Export License. Likewise, exports that are prepared under certain bilateral and multilateral arrangements like the foreign assistance or cooperation might also be required to acquire Special Export License.
This is provided through the use of undertaking an application that outlines the kind of export intended and the reason for the export. It has to clear some government organizations like the DGFT, Ministry of External Affairs, etc, which will depend on the export goods to be transferred.
Advance Authorization Scheme (AAS).
Advance Authorization Scheme is one of the export license given by Indian government to import duty free certain materials or parts required for manufacture of products to be exported. This license is more suitable for production sectors including textiles and other fabrics, handicrafts, engineering and among others, which import inputs to be used in the production of final products for export.
The Advance Authorization scheme is one of the measures implemented in India to support exports by giving permission to importer practically without duties on essential inputs needed for export production. Thus, under this scheme, export obligation related conditions like minimum export obligation, through which exporters are required to export a fixed percentage of the value of the imported inputs are to be complied with.
Duty Drawback Scheme
According to the Duty Drawback Scheme, the exporter is allowed to reimburse the duties paid on the inputs used for producing the export goods. Though freely assignable and different from a conventional ‘license’, the Duty Drawback Scheme is, therefore, a relevant part of India’s export license system since it enables the refund of excise and customs duties.
This scheme wants to increase competitiveness in Indian products by minimizing the general necessary expense in export. It applies to goods that have already been exported and enables exporters recover the duty that was on the raw material used in the exported product. The refund measures vary depending on the tariff classification and export performance of the eligible goods.
However, to be able to realize this scheme, the exporters must be in possession of a registration number from the Customs Department and fulfill all the standard procedures. Duty drawbacks are a method allowed to exporters, some of which requires documentation and proof that the product was exported, but it relieves exporters of financial burden.
Although not a type of license, anyone who intends to export the products must first take or be issued an Importer Exporter code. The IEC code has to be obtained for business through the DGFT website only, and in that process, one has to submit the legal details of the business and the PAN number. The facility to obtain the IEC code is valid for a lifetime, and firms merely need to modify their information in the DGFT system. It is mandatory for all forms of businesses dealing in the import and export of goods in India to register under the same.
Conclusion
A casualty of export control is the export licenses that are central to the managing of export trade and the promotion of legal and responsible export business in India. The export licenses can be categorized into several forms depending on categories of exportable products and the special conditions that may be applied to certain export operations. Regardless of being an exporter of general merchandise or restricted items or some specific products, it is very crucial to have proper knowledge of the types of licenses available and the process of getting that license for the export business.
Sorting out export licenses can at times be a real chore but with the right knowledge on the possibilities available and with the right mastery of the legal requirements in the given area Indian exporters can fully exploit the international market hence enhancing the India’s diplomatic relations and more importantly its mercantile stability.
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