AD Code Registration for Export-Oriented Units (EOU)

Under the Foreign Trade Policy, the Government of India established the scheme “Export-Oriented Units.” In short, the core role of the establishment of EOU is to enhance the exportation in India. The development of the scheme was to support the exporters or manufacturing units by providing benefits. The businesses that are linked as Export Oriented Units are required to adhere to the specific requirements of DGFT. The top one is AD code registration for EOUs. Registration for the authorized dealer code is a prerequisite, as it helps with customs clearance and manages foreign transactions. This guide will explore the Export Oriented Units’ compliance with the AD code, including benefits and the code’s role for shipments. 

Export-Oriented Units (EOU)- An Overview

In India, EOUs act as the service or manufacturing units. These units work based on domestic sales. In general, the manufacturing or service units export their entire production items through domestic sales. The major aim of such units is to increase exportation at the international level as well as boost foreign currency earnings. Another role of units is to create employment for Indian youths. When an Export Oriented Unit (EOU) exports goods or services, including raw materials, they do not need to pay customs duties. They can easily connect to potential global buyers and dealers. Furthermore, EOU is a recognized scheme that is described as the government’s export promotion strategy. 

How does AD Code Registration link to Export-Oriented Units?

Under the Export Oriented Units scheme, the businesses or manufacturers who are active in international exportation must be verified by registering for the AD code. DGFT and SEZs (Development Commissioners of Special Economic Zones) are responsible for overseeing the performance of EOUs. Read more points in the next section:

• Banks Request: The export-oriented units open their current account with RBI’s authorized banks, which deal in foreign exchange. Initially, they are required to submit an official letter to request that banks issue them an AD code letter.
• Customs Registration: After the AD code letter approval on the letterhead by banks, the EOUs then submit a 14-digit unique code to the customs authority. Usually, the process is done through the online DGFT’s portal, ICEGATE. 
• Electronic Linkage: The customs department scrutinizes all information and then links the AD code with the EOU’s Import Export Code (IEC Number). 
• Activation: Upon successful linking of the 14-digit code with the 10-digit IEC code, the export-oriented units can activate the process of export shipments to expand international trade activities. 

Why do Export-Oriented Units (EOUs) Need an AD Code?

There is not a single reason to explain why the registration of the AD code is mandatory, but there are several critical reasons. The common causes that are EOUs depend on the authorized dealer code:

Help for Shipping Bill

To export goods or services internationally, the EOUs are required to generate the shipping bill and submit it to the customs department. It determines that exporters can only get customs clearance when they have a valid shipping bill. The invoice helps to authenticate the transaction’s legitimacy and ensure compliance with export regulations. 

Ease in Foreign Transactions

The guidelines and regulations for foreign exchange transactions are too strict. Meanwhile, the EOUs that hold the AD code can easily receive the foreign currency into their bank account. A 14-digit code helps to adhere to foreign trade policies for currency exchanges.

Access to government benefits

To participate in foreign trade fairs and other benefits, such as GST refunds, duty drawbacks, etc., AD Code Registration for EOUs is mandatory. By getting certified, EOUs can easily access these financial benefits directly in their bank account. 

Track Foreign Exchange

To keep the foreign exchange transaction transparent and disciplined, navigating the AD Code registration process for exporters is essential. With registration, the code helps the regulatory body to manage and track foreign currency trades. Management of economic stability and transparency for a nation is critical to keep a positive image in front of the world. 

Port registration and ICEGATE

For the registration of the port from where goods are expected to be exported, the DGFT AD Code for Export Units is also important to generate the shipping bills on the ICEGATE (Indian Customs Electronic Gateway) portal.

Key Points for EOUs Must Know about AD Code

In case you are part of a new EOU and are not aware of its requirements, then this page is for you. In the previous sections, we have discussed why the 14-digit export code is compulsory for export-oriented units. But have you ever searched about its different key considerations? This can be under:

• An AD code is issued by the banks where the exporter holds its current account.
• AD code letters can only be provided by those banks that deal with foreign exchange.
• The AD code registration process is dead without the Import Export Code (IEC).
• Authorized dealer code registration is a one-time process. It means export-oriented units do not require renewal.
• The code will remain the same until the changes come in business details or the bank account.
• The digital signature certificate is further crucial when applying for code, as it is required for online application submission.
• Export-originated units are required to submit the AD code at each separate port.
• In case you make changes to bank details or business details, you must update the authorized dealer code.
• Without a valid export code, units cannot claim the duty benefits, IGST refunds, and export incentives. 

Final Discussion |  Bank AD Code for EOU shipments

To conduct international trade, the export-oriented units are required to first obtain authorization. Meanwhile, the AD code registration for EOUs is critical, as this 14-digit code allows them to trade globally. Shipping bills further depend on the code required during navigation of the ICEGATE portal. In essence, the export-oriented units must register their AD codes on ICEGATE against their IEC at each port. Registration is the commitment to adhere to foreign trade regulations with compliance. Still confused about how to navigate the DGFT AD Code for Export Units? Seek consultancy at LegalRaasta. We provide end-to-end service as your trusted partner. 

User Query: Role of Banks in the AD Code Registration Process

Frequently Asked Questions

1. How can one obtain the AD code?

Ans. Individuals or businesses that import and export goods for international trade are eligible for an AD bank account registration in India. 

2. Which document is mandatory during the registration process?

Ans. To fulfill the requirements for authorized dealer code registration, businesses such as export-oriented units must hold a valid IEC number. 

3. Is a separate AD code required for each port?

Ans. Importers must apply for a new AD code for each port from which they desire to ship or receive goods. 

4. What is the timeline of the AD code?

Ans. The exporters don’t need to apply for the code, as it is valid for a lifetime.

5. Is GST registration mandatory for the AD code?

Ans. Yes, to apply for the code, the businesses need to apply for registration of a GST certificate.