Advance License Closure Procedure: Step-by-Step EODC & Redemption Guide

The Advance License Scheme, operated under the Foreign Trade Policy (FTP), is a vital tool for Indian businesses, offering duty-free access to raw materials for exporters. However, the process does not end at simply obtaining the Advance License for import or completing your exports.

The most critical phase is the Closure (or Redemption) of the license. Failure to close the license properly can result in heavy penalties and non-release of your Bank Guarantees.

This guide details the Advance License Closure Procedure, focusing on how to obtain the Export Obligation Discharge Certificate (EODC) from DGFT and cancel your bond with Customs, ensuring you stay compliant with DGFT Advance Authorisation norms.

Before diving into the specific Advance Authorisation procedure for closure, it is important to understand when you are eligible. The Advance Authorisation Scheme operates on a strict timeline:

• Import Phase: You have 12 months from the license issue date to use Advance License for import of raw materials duty-free.
• Export Phase:  You have 18 months (standard period) to manufacture and complete the Advance License for export of finished products.
• Closure Phase: Once the exports are complete and the foreign exchange (payment) is realised, you must apply to the DGFT Regional Authority (RA) to “redeem” the Advance license.

Why is timely closure important? Leaving an Advance License open beyond the Export Obligation Period (EOP) attracts a Composition Fee. Furthermore, Customs authorities keep your Bond or Bank Guarantee (BG) active until they receive the final EODC from DGFT.

Under the new DGFT online system, you cannot simply fill out a form and submit it. To successfully close your Advance Authorisation, you must first build your Digital Repository.

Before attempting to close the license, log in to the DGFT portal and ensure the following:

• Shipping Bills: All your export Shipping Bills (EDI) must be reflected in your repository. If you have Non-EDI bills, they must be manually uploaded.
• e-BRC (Bank Realisation Certificate): Your bank must realise the payment and generate an e-BRC. You need to link these e-BRCs to your specific Shipping Bills in the system.
• Bill of Entry: Ensure all import details are updated in the Bill of Entry repository.

A common error occurs when the Export Product description in the Shipping Bill differs slightly from the Advance License description. Ensure these match perfectly to avoid queries from the Norms Committee.

The formal application for closure is Form ANF 4F. This is now a completely online process within the Advance Authorisation procedure.

How to calculate your success? DGFT will evaluate your application based on two core metrics:

• Quantity Norms: Did you use the inputs (raw material) as per the SION (Standard Input Output Norms) or Ad-hoc norms allowed for your product?
• Value Addition (VA): Did you achieve the minimum 15% Value Addition?
• Formula to calculate Value Addition: {(FOB Value of Exports – CIF Value of Imports} / CIF Value of Imports * 100

Let us understand this with an example:

So there is an exporter importing inputs worth Rs. 600, and the produced material with that input for export is worth Rs. 700. Then the calculation of Value Addition will be:

VA= {(700-600)/600}*100

= {100/600}*100

= 0.16*100

= 16%

Hence, Value Addition would be 16%.

While the system pulls much of the data automatically, you must upload the following signed documents to process your DGFT Advance Authorisation closure:

• ANF 4F Form: It’s the primary application form, digitally signed.
• Appendix 4H: A certificate from an Independent Chartered Accountant (CA) certifying the consumption of inputs and wastage.
• Bill of Entry List: A statement detailing the duty-free inputs consumed.
• Shipping Bill List: A statement detailing the physical exports made.
• e-BRC: Proof that payment has been received in free foreign exchange.
• Tax Invoices: (For Deemed Exports) Proof of supplies to EOUs or Projects.

Many exporters mistakenly believe that receiving the EODC letter from DGFT is the end of the Advance Authorisation procedure. It is not.

The DGFT and Customs are separate entities. Once you receive the Redemption Letter (EODC) from DGFT, you must physically submit it to the Customs Port where your Advance License is registered.

Submission Checklist for Customs:

• Original EODC / Redemption Letter.
• Copy of the original Advance License.
• No Bond Certificate (if applicable).
• Covering Letter requesting cancellation of the Bond/BG.

Only after the Customs officer verifies these documents will they formally cancel your Bond/Bank Guarantee and release your margin money.

If you are unable to fulfil the Export Obligation within 18 months, you can apply for an extension. However, this comes with a Composition Fee.

Note: These fees are subject to change via DGFT Public Notices. Always consult an expert for the latest rates.

Successfully closing an Advance License is just as important as obtaining one. The process requires meticulous reconciliation of your imports and exports, accurate “Value Addition” calculations, and timely coordination between DGFT and Customs. Neglecting this final step can lead to financial liabilities and legal hurdles.

By following the steps outlined above, preparing your repository, filing ANF 4F accurately, and ensuring Bond Cancellation at Customs, exporters can enjoy the full benefits of duty-free imports under the Advance Authorisation Scheme without the stress of lingering non-compliance.

Need help closing your Advance License? The closure process is sensitive to minor data mismatches. DGFT Guru specialises in handling EODC applications, the regularisation of old cases, and Customs Bond cancellations.