Import Export License
In today’s global business landscape, expanding beyond domestic markets is essential for growth and survival. However, before entering the international market, there are several protocols, procedures, and laws that businesses must abide by, including obtaining various registration and licenses. One such requirement for importing or exporting from India is an Import Export License, also known as an Importer-Exporter Code (IEC) certificate. In this article, we will delve into why IEC is essential for international business, the process of obtaining it, and what it entails.
A. Explanation of Import/Export License in India
To expand their business beyond the domestic market in India, importers and exporters need to follow specific procedures and obtain necessary licenses. One of the most important is the Import Export Code (IEC) license, also referred to as the Importer-Exporter Code. Issued by the Director General of Foreign Trade (DGFT), it’s a 10-digit code that’s valid for a lifetime. An IEC registration is required for entities engaging in import and export businesses and commercial purposes. It’s necessary when clearing shipments through customs, when sending money abroad through a bank, when sending shipments through customs ports, and when receiving money in foreign currency directly into the bank account. Importers cannot import goods without the IEC code, while exporters cannot benefit from the DGFT for the export scheme, etc. without it. The customs authorities require the IEC code when an importer has to clear his shipments through customs. Once an entity obtains the IEC registration, they could apply it to all export and import transactions. Moreover, on the basis of their IEC registration, companies could receive many benefits for their imports/exports from the DGFT Export Promotion Council Customs, among others.
To obtain an IEC code, an individual firm or company needs to prepare an application form in the specified format and file it with the appropriate DGFT Regional office. The application must include necessary documents pertaining to the identity and legal entity of the applicant as well as address proof with bank details and ANF2A certificates. Once the application is complete, it must be filed with DGFT via Digital Signature Certificate (DSC) and the IEC Registration fee must be paid. After the application is approved, the entity will receive a soft copy of the IEC code from the government. Aleph India is a reputable service provider that helps with the process of obtaining an IEC registration. It offers a range of ECO-MARK ISI certification services and FMCS consultancy.
B. Importance of obtaining an Import/Export License
Having an import/export license in India is extremely important for any business involved in foreign trade. Here are some reasons why:
1. Legal Compliance
Obtaining an import/export license is mandatory in India. Without it, your business will not be legally authorized to import or export any goods. The license helps businesses stay in compliance with India’s laws and regulations regarding foreign trade.
2. International Reputation
An import/export license adds to a company’s international reputation and credibility. It gives the assurance to foreign partners that the importing and exporting of goods in India meet all legal requirements and standards set by the government.
3. Competitive Edge
Having an import/export license can give companies a competitive edge in the market. It makes them eligible to participate in international tenders and partnerships, providing a wider range of options to source and sell products. It also allows businesses to tap into international markets.
4. Access to Incentives
The Indian government offers various incentives to businesses with an import/export license. These incentives include tax benefits, reduced duty rates, and duty exemption plans for specific products. Having an import/export license would enable businesses to claim these incentives, which can result in significant savings.
Overall, obtaining an import/export license is crucial for businesses involved in foreign trade in India. It not only ensures legal compliance but also enhances credibility, competition, and access to incentives, making it a worthwhile investment for any business involved in international trade.
C. Overview of the DGFT
The General of Foreign Trade (DGFT) is a government organization responsible for implementing the foreign trade policies of India. It falls under the Ministry of Commerce and Industry, Government of India. The DGFT is responsible for issuing the Import Export Code (IEC) to businesses in India, which is a prerequisite for importing or exporting goods. The IEC is a 10-digit code that is mandatory for international trade in India and has lifetime validity.
Apart from issuing the IEC, the DGFT also holds the responsibility of administering foreign trade policies and laws. They aim to promote India’s international trade by reducing trade barriers and increasing exports. The DGFT provides accurate and up-to-date information on foreign trade policies, procedures, and regulations through its website.
India maintains a list of items controlled for export known as the Special Chemicals Organism Material Equipment and Technologies (SCOMET) list. This list is presently aligned with the regulations of the Missile Technology Control Regime (MTCR) and the Wassenaar Munitions List. The DGFT is responsible for administering this list and implementing the guidelines set forth by the Inter-ministerial Cooperation Group (IMCG).
The DGFT is also responsible for issuing licenses for items that require special authorization for export. Approval for such export licenses is reviewed by the IMCG. These are typically items that fall under the SCOMET list or items related to defense and atomic energy.
Overall, the DGFT plays a crucial role in promoting India’s international trade and administering the regulations governing it. The IEC code is an essential requirement for businesses looking to import or export goods, and they can obtain it through the services provided by the DGFT.
II. Procedures and Document Requirements for Import Export License
B. Role of the DGFT in issuing the IEC Code
The Directorate General of Foreign Trade (DGFT) is responsible for issuing the Import Export Code (IEC) in India. The IEC is a unique 10-digit number that is required by anyone who seeks to import or export goods in India. The DGFT is an attached office of the Ministry of Commerce and Industry and is responsible for formulating and implementing the Foreign Trade Policy of India. Its main objective is to promote India’s exports and regulate foreign trade through licensing. The DGFT also issues scrips/authorization to exporters and monitors their corresponding obligations through its network of regional offices located across the country.
The role of the DGFT in issuing the IEC Code is pivotal in regulating foreign trade in India. The DGFT ensures that businesses comply with all the necessary regulations and laws governing imports and exports, including obtaining the IEC Code. The IEC Code is essential for clearing shipments from customs, sending money abroad through banks, and receiving money in foreign currency directly into a bank account. The DGFT ensures that the IEC Code is issued only to eligible entities that fulfill the required criteria and follow the necessary procedures. The DGFT also provides assistance to exporters regarding the latest developments in international trade and anti-dumping issues to help exporters make informed decisions. Overall, the role of the DGFT in issuing the IEC Code is crucial in facilitating and promoting foreign trade in India.
C. Benefits of having an IEC Code
There are numerous benefits that come with obtaining an Import/Export License in India, also known as an Importer-Exporter Code (IEC) which has lifetime validity. The most significant benefits are listed below:
1. Global Market Access: With an IEC, businesses can take their services or products to the global market and grow their businesses beyond the boundaries of their domestic market. The IEC Code provides a hassle-free way to expand your business to other countries and continents.
2. Avail Export Promotion Council Benefits: The DGFT Export Promotion Council Customs and other organisations offer many benefits to companies based on their IEC registration. An IEC is mandatory for import and export transactions, and it helps to unlock the export promotion schemes and other benefits offered by DGFT.
3. No Returns Required: Once an IEC is obtained, there is no need to file any returns. There is no requirement to follow any process to sustain its validity. For export transactions, there is no requirement for filing any returns with DGFT.
4. Easy to Obtain: Obtaining an IEC is a simple process, and it can be acquired within 10 to 15 days after submitting all the required documents and fees. There is no need to provide any proof of export or import to obtain IEC.
5. Effective for a Lifetime: An IEC code is effective for the lifetime of an entity and requires no renewal. It can be used by an entity against all export and import transactions, making it a one-time investment.
In conclusion, obtaining an IEC is essential for businesses looking to expand globally. Having an IEC helps companies avail many benefits and simplifies the overall process of import/export.
C. Approval and Receipt of IEC Code
Once you have successfully completed the online registration process for IEC (Import Export Code) on the DGFT website, you can expect to receive your IEC code within 10 to 15 days. It is important to note that the IEC code is a digital document that is issued in electronic format and does not require any physical documentation. As such, once the IEC code is generated, you can simply download and print it from the DGFT website.
To obtain the IEC code, you will be required to submit a number of documents, including a copy of your PAN (Permanent Account Number) card, a copy of your voter ID or Aadhaar card or passport, copies of your current bank account’s canceled cheques, a copy of your rent or electricity bill for your business premise, and a self-addressed envelope for delivery of the IEC certificate by registered post.
Once you receive your IEC code, you can start taking your business to the global market and enjoy the benefits that come along with it, including availing yourself of several benefits for your imports/exports from the DGFT Export Promotion Council Customs on the basis of the IEC registration. It is important to note that the IEC code is effective for the lifetime of an entity and requires no renewal.
Overall, obtaining an IEC code is crucial for any individual or company that is looking to start an import/export business in India, and it is a fairly easy and straightforward process.
III. Benefits of Having an Import Export License
B. Sending money abroad through a bank
When comes to international trade, sending and receiving payments is a crucial aspect that cannot be overlooked. To send money abroad, one can take the help of a bank. There are various payment modes available for transferring funds from one country to another, such as telegraphic transfer, mail transfer, bank draft, cheques, bill of exchange, and letter of credit. However, it is important to keep in mind that foreign exchange dealings are riskier for banks compared to domestic transactions. Here are some important points to consider when sending money abroad through a bank:
1. Telegraphic Transfer: This is one of the quickest methods of transmitting funds, involving no risk. As the funds are paid in the foreign centers on the same day as the receipt of domestic currency in the local center, no interest or capital risks are involved.
2. Mail Transfer: This is similar to a telegraphic transfer, with the difference that the order is sent through the post.
3. Bank Draft: This is a pay order issued by a bank on its own branch or correspondent bank abroad. Banks charge commission for issuing bank drafts.
4. Bill of Exchange: This is an order drawn by a person upon a bank or another person asking the latter to make payment to a third party. A documentary bill may be of two types: documents against payment (D/P) or documents against acceptance (D/A).
In conclusion, sending money abroad through a bank is a safe and secure process that can be done in various ways. However, it is important to choose the right payment mode based on the requirements and situation.
C. Sending shipments through customs port
Sending shipments through a customs port is an essential step in the process of importing or exporting goods in India. The customs port is responsible for all processing of goods entering or leaving the country. Here are some important things to keep in mind when sending shipments through the customs port:
1. Proper documentation is crucial: All shipments should be accompanied by the necessary documents, including the commercial invoice, packing list, bill of lading, and airway bill. The customs officials will verify all details mentioned in these documents, and any discrepancies might lead to delays or even rejection of the shipment.
2. Compliance with regulations: India has strict regulations when it comes to importing and exporting goods. The shipment should comply with all regulations related to safety, quality, and labeling. Non-compliance might result in penalties or even seizure of the shipment.
3. Payment of duties and taxes: The customs officials will assess the import duties and taxes based on the declared value of the shipment. The importer or exporter should ensure that the necessary payment is made in advance to avoid delays or penalties.
4. Inspection of goods: Customs officials might inspect the shipment to ensure that it conforms to the declared details. The inspection might include physical examination, X-ray scanning, and sample testing.
5. Clearance and release of shipment: Once all the necessary formalities are completed, the customs officials will release the shipment for further transportation or delivery.
In conclusion, sending shipments through the customs port is a complex process that requires careful planning, documentation, compliance, and payment. Proper execution of all these steps will ensure hassle-free and timely clearance of the shipment.
D. Receiving money in foreign currency directly into bank account
Receiving money in foreign currency directly into a bank account is an essential component of international trade. It is more profitable and convenient than dealing in cash or payments through intermediaries. The Foreign Exchange Management Act makes it obligatory on the part of the exporter to realize and repatriate the full value of goods or software or services within a stipulated period from the date of export. Exporters must use an authorized dealer (AD) bank to repatriate the full value of the goods exported. The amount representing the full export value of the goods exported shall be received in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations 2016.
Online Payment Gateway Service Providers (OPGSPs) have been allowed to offer the facility of repatriation of export-related receipts by entering into standing arrangements with AD Category-I banks. To avail of this facility, the AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP. As an exporter, if you sell physical goods and services and plan to accept international payments, an Importer Exporter Code (IEC) is mandatory for all export transactions, including selling physical goods and services. The IEC is a code issued by the Indian Director-General of Foreign Trade (DGFT) to Indian companies that intend to export from India. The IEC is required under certain conditions. Opting in or updating export details such as change in IEC or transaction purpose code is possible after the onboarding process at the Stripe account.
Overall, receiving money in foreign currency directly into a bank account simplifies international transactions, provided the necessary documentation is in place. It is essential to choose an authorized dealer bank with a robust online payment gateway provider and to fulfill the legal requirements, such as the IEC code and the Transaction Purpose Code, to ensure seamless foreign exchange transactions.
II. What is an IEC Code?
A. Definition and Explanation
When it comes to importing or exporting goods in India, a necessary requirement is obtaining an Import/Export License. This license, also known as the Import Export Code (IEC), is issued by the Directorate General of Foreign Trade (DGFT). The IEC is a unique 10-digit number that serves as an identification number for individuals and companies involved in foreign trade transactions.
An Import/Export License is mandatory for clearance of goods through customs. Although most goods can be freely imported without any restriction, some items fall under the category of restricted, canalized or prohibited goods, which require a license or special permission for import. Additionally, certain exports may also require a license.
The significant role of DGFT in this process cannot be denied. The DGFT acts as an interface between the exporter(s) and the various regulatory and administrative authorities, thereby influencing its decision-making. It plays a vital role in issuing the IEC code, which aids in obtaining the license. Apart from this, the DGFT also provides various incentives, such as duty credit scrips and financial assistance, to promote exports.
Having an IEC code comes with a plethora of benefits, including availing various government schemes and incentives, and easy accessibility to global markets. The approval and receipt of IEC code can be obtained within two to three working days by applying online through the DGFT portal.
To ensure smooth financial transactions, importers can send money abroad through a bank, while exporters can receive payment in foreign currency directly into their bank account. Additionally, clearing shipments through customs requires proper documentation and adherence to all the established regulations and guidelines.
To sum it up, obtaining an Import/Export License is of utmost importance in India for foreign trade transactions. The DGFT plays a significant role in issuing IEC codes, and having this code comes with several benefits. It is essential to adhere to the regulations and guidelines set forth while importing or exporting goods.
III. Situations Where IEC is Necessary
A. Clearing shipments through customs
Clearing shipments through customs is an essential part of the import/export process. Customs clearance is required for all goods imported to India and involves an examination of the goods to determine proper tax and check against illegal imports. The process can be time-consuming, depending on the nature of the imported goods. The customs clearance process includes obtaining, preparing, and submitting the documentation required to facilitate export procedures and imports into the country, informing the client about customs examination, evaluation, and payment of duty, and bringing the cargo into the country after it has been cleared with documentation.
To undergo the import customs clearance process, all investors, manufacturers, and businesses need to comply with certain guidelines. These guidelines involve calling vessels, filing an Import General Manifest (IGM), obtaining a Bill of Entry, and submitting the necessary documents required for customs clearance processing.
It is essential to file a Bill of Entry whenever the imported goods are cleared for consumption. The importer must file an entry for home consumption or warehousing and comply with the import customs clearance formalities as the goods arrive at the customs station. There are documents required for non-EDI systems like the signed invoice, packing list, and insurance certificate for customs clearance processing.
Clearing shipments through customs effectively is crucial for timely import and export. It can also save additional detention and demurrage charges, making it more profitable to operate and invest in India. However, clearance delays are frequent, and delays can cost time and money, making it more expensive to operate and invest in India.
IV. Documents required for Import Export License in India
To obtain an Import Export License in India, the following documents are necessary:
1. Certificate of Incorporation / Partnership deed / Proprietorship
2. PAN Card/ TAN card / Income tax return of last 3 years
3. Bank account statement of the firm.
4. GST registration certificate & IEC Code.
5. Address proof of the firm – electricity bill / telecom bill / rent agreement etc.
6. Letter of authorization from the partners / directors, if the applicant is a firm / company.
7. A copy of canceled cheque of the company’s bank account or a bank certificate.
V. Advantages of Import Export License in India
1. It provides an opportunity for businesses to expand their operations overseas.
2. It allows businesses to access a wider and diverse market, increasing sales and revenue.
3. It enhances the competitive advantage of businesses by providing access to cost-efficient raw materials and technology from foreign markets.
4. It promotes international cooperation and trade relationships, leading to economic growth and development.
5. It helps to reduce foreign exchange constraints by increasing the inflow of foreign currency.
VI. Disadvantages of Import Export License in India
1. The process of obtaining an Import- Export License can be time-consuming and tedious.
2. Businesses need to comply with various laws and regulations related to customs, taxes, and documentation.
3. Foreign transactions involve risks such as currency fluctuations, political instability, and shipping delays.
4. Businesses need to invest in infrastructure, logistics, and marketing to expand operations overseas, which may require significant investment.
VII. Process of getting Import Export License in India
1. Apply for IEC or Import Export Code by submitting the necessary documents to the DGFT online.
2. Obtain a PAN Card and open a bank account in the name of the business.
3. Register under GST if the business meets the required threshold.
4. Fill out the application form for Import Export License.
5. Submit the application along with the required documents to the regional authority of DGFT.
6. Wait for approval from DGFT.
7. Once approved, receive the Import Export License.
VIII. Types of Import Export License in India
1. General License – It is issued to import and export goods that are freely allowed in India.
2. Special License – It is issued for the import or export of restricted goods like agricultural products, wildlife, hazardous chemicals, and others.
3. Negative list License – It restricts the import or export of goods that are prohibited by the Indian government.
IX. Frequently Asked Questions about Import Export License in India
Q1. What is an Import- Export License, and why is it necessary?
Ans: An Import-Export License is a permit that allows businesses to import or export goods from foreign countries. It is mandatory to have an Import-Export License to conduct international trade in India.
Q2. How long does it take to obtain an Import-Export License in India?
Ans: The duration for obtaining an Import-Export License in India varies from 5-7 working days to 3-4 weeks, depending on the type of license and the documents submitted.
Q3. Is GST registration necessary for obtaining an Import-Export License?
Ans: Yes, GST registration is mandatory for businesses that want to obtain an Import-Export License. It is a prerequisite for all the applicants.
Q4. Can individuals apply for an Import-Export License in India?
Ans: Yes, both individuals and businesses can apply for an Import-Export License in India.
Q5. What are the benefits of having an Import-Export License in India?
Ans: An Import-Export License in India provides businesses with access to a global market, cost-efficient raw materials, technology, and resources, helping businesses increase their sales and revenue and enhance their competitiveness globally.