How to Import Raw Materials Duty-Free Without QCO Compliance under an Advance License

You can import raw materials duty-free without mandatory Quality Control Order (QCO) compliance in India by using the Advance Authorisation Scheme (aka Advance License). However, you must meet specific conditions for the Advance License duty-free import, set by the Directorate General of Foreign Trade (DGFT). 

This one’s really beneficial for exporters. The Scheme helps you save on customs duty, IGST, and Compensation Cess when importing inputs for export production. This guide explains the updated provisions and how you can use the Advance License to import essential raw materials without the QCO mandate.

• Main Benefit: You get exemption from Customs Duty, IGST, Compensation Cess, and other duties for raw materials used to make export goods under an Advance License.
• QCO Exemption: DGFT now allows import of QCO-subjected inputs under AA without QCO compliance.
• Pre-Condition: This QCO exemption is subject to a pre-import condition. The imported material must be used in the exported product under the same license.
• Key Step: You must get the QCO exemption specifically endorsed on your Advance Authorisation document from the DGFT.

The Advance Authorisation (AA) Scheme is one of India’s most important tools for export promotion. It allows duty-free import of inputs required to manufacture goods for export.

The scheme provides exemption from various duties on the imported inputs, which can significantly reduce your production cost:

• Basic Customs Duty (BCD)
• Additional Customs Duty (CVD)
• Integrated Goods and Services Tax (IGST)
• Compensation Cess
• Anti-Dumping Duty, Safeguard Duty, and Social Welfare Surcharge, wherever applicable.

Both Manufacturer Exporters and Merchant Exporters (who tie up with supporting manufacturers) can apply for an Advance License.

• Actual User Condition: The imported material must be used by the license holder (or supporting manufacturer) and cannot be transferred to another party, even after the export goal is met.
• Export Obligation (EO): You must fulfil the promise of exporting the finished goods within a specified time, usually 18 months from the date your license was issued.
• Value Addition: You must achieve a minimum value addition of 15% on the cost of the imported raw materials.

A Quality Control Order (QCO) is a legal mandate issued by the Indian government under the Bureau of Indian Standards (BIS) Act, 2016. It protects consumers and domestic industries by stopping the import and sale of sub-standard or low-quality goods.

• Mandate: It makes compliance with specific Indian Standards (IS) mandatory for certain products.
• Issuer: QCOs are notified by various Ministries, such as the Ministry of Steel or the Department for Promotion of Industry and Internal Trade (DPIIT).
• Compliance: Once a QCO is enforced, both domestically manufactured and imported goods in that product category (like steel products, certain chemicals, or plastics) must obtain a BIS certification and display the ISI Mark (for consumer goods).
• The Problem for Importers: This process can be time-consuming and costly for importers of raw materials. Foreign manufacturers must have their factory inspected and certified by BIS before imports are allowed into India for domestic consumption.

To make it easy for exporters and importers in India, the DGFT has introduced a specific provision (under Foreign Trade Policy, like Para 4.18A) that allows exporters to bypass the mandatory QCO/BIS compliance for certain imported raw materials.

Many chemicals, steel products, and other raw materials are subject to mandatory Quality Control Orders (QCOs) issued by different ministries in India. 

While these QCOs ensure quality for domestic consumers, complying with them can delay the import process for export-oriented units, especially if the raw material’s quality is verified by the overseas buyer. The exemption aims to speed up the supply chain for exporters.

To get the QCO exemption under your Advance License, you must strictly follow these two rules:

1. Specific Endorsement: You must explicitly request DGFT to endorse the “Exemption from mandatory QCOs” on your Advance Authorisation document at the time of application. Without this endorsement, Customs will not allow the QCO exemption.
2. Strict Pre-Import Condition: The imported inputs (which did not comply with QCOs) must be physically incorporated into the final product and then exported under the same Advance Authorisation. This is a very strict rule with no room for error.

If you want to import raw materials without QCO compliance, follow these steps during the Advance Authorisation application process:

• Identify the exact raw materials you need and confirm they are subject to a mandatory QCO.
• Confirm the quantity of the raw material required using the Standard Input Output Norms (SION) specified by DGFT, or apply for your own Ad-hoc Norms.

• Log in to the DGFT Website with your valid Importer-Exporter Code (IEC) and Digital Signature Certificate (DSC).
• Fill out the application form (ANF 4A) under the Advance Authorisation module.

• In the application form, clearly select the option or make a specific declaration requesting the exemption from mandatory Quality Control Orders (QCOs) for the inputs you intend to import.
• Ensure the DGFT Regional Authority specifically endorses this exemption on the final Advance Authorisation document they issue. This is the most important part.

• Present the endorsed Advance Authorisation to the Customs Authority at the time of import. Customs will allow duty-free clearance without demanding QCO/BIS certification.
• Use the imported raw materials strictly for the manufacture of the export product mentioned in the license.

• Physically export the finished goods within the stipulated Export Obligation Period (usually 18 months).
• Only physical exports are allowed under the QCO exemption route, not Deemed Exports (supplies within India).

This exemption comes with serious responsibilities. Exporters must be very careful with compliance:

The DGFT continues to simplify the process.

The government has recently extended the Export Obligation (EO) period for certain chemical products imported under AA with QCO exemption. The previous short period of 180 days for specific chemical products has been extended to the standard 18 months, giving exporters more time to fulfil their export commitments.

This extension shows the government’s commitment to supporting the export-oriented chemical and petrochemical industry. Exporters should always check the latest DGFT Notifications and Trade Notices for any specific product-wise restrictions or extensions.

For exporters using this QCO exemption, the biggest risk is proving you met your Export Obligation (EO). The safest way to protect your Advance License and ensure full compliance is to get pre-approved consumption rules (called Ad-hoc Input-Output Norms, or ION).

Instead of just using the general rules (SION), you should apply to the DGFT Norms Committee to officially decide the exact quantity of the QCO-exempt raw material needed for each finished product you export.

This documented, pre-approved rule acts as solid proof of how much material you used during the final license closing process. It protects you completely from any future questions or penalties from Customs or auditors about the duties you saved. Making this specific compliance step a priority is the key to managing your Advance Authorisation wisely.