Debit of advance authorization/DFIA in freely convertible currency – DGFT clarifies

By Vijay Kumar

Trade & Industry have represented that at the time of clearance of import consignment against DFIA/advance authorization, Customs authority at some of the field formations are not allowing debit of CIF value in freely convertible currency in case the CIF value in Rupee terms has been exhausted.

DGFT informs that

1. Under Advance Authorization and DFIA schemes, value addition is calculated in terms of freely convertible currency and not in terms of Rupee.

2. In terms of para 9.2.1.1 of HBP v.1, “No enhancement in Rupee value shall be necessary if remittance of foreign exchange is covered by CIF value of authorisation shown in freely convertible currency.

So, DGFT clarifies that

1. for the purpose of clearance of imported items against the advance authorization/DFIAs, imports would be allowed as per the balance CIF value in freely convertible currency irrespective of the fact as to whether the CIF value of imports had exhausted in the said authorisation in terms of Rupee.

2. This is subject to other conditions of the Authorisation.

Who is this clarification meant for? Is it for the Customs? If, so, is a circular necessary? Can’t they just tell the Customs to follow the rules?

When even Board Circulars are now, not binding on the field officers, what will be the worth of a clarification issued by DGFT?

DGFT Policy Circular No. 41 (RE- 08) 2004-09, Dated: November 20, 2008