Why AD Code Registration is Mandatory for Exporters?

Under the Foreign Exchange Management Act (FEMA), 1999, the AD code registration certificate is a legal requirement for all exporters from India.  The Indian Customs Department and the Reserve Bank of India (RBI) are required to maintain a reserve of foreign currency. The export environment covers large goods or services. The exportation of goods or services helps to earn foreign currency. But how is it compulsory for exporters? Let’s break down the page to know more about the AD code registration requirements and their key aspects. Read more in the next section.

1. Registration for the AD Code for Custom Clearance

To clear the shipment at the ports, the customs authority requires verification of the exporter’s identity. For the Indian exporters, the Authorized Dealer (AD) code serves as the legal document. This document is primarily to get the customs clearance and facilitate financial transactions. 

For example, if an exporter wants to trade in international markets, they first need to obtain approval from the customs authority. Meanwhile, it can only be possible when exporters get an AD code from their current bank. 

2. What are the AD Code Registration Rules for Exporters?

For the exporters, obtaining the 14-digit code is mandatory before generating the shipping bill. Meanwhile, it has different rules and a managing authority. This can be understood as

1. Reserve Bank of India (RBI): Most of the banks in India are authorized by the RBI.  These banks are allowed to deal in foreign exchange transactions. The banks, which act as the ‘authorized dealer,’ issue the 14-digit AD code to exporters. 
2. Directorate General of Foreign Trade (DGFT): Before applying for the AD Code, the exporters need to first obtain the Import-Export Code (IEC). DGFT itself is the IEC code issuing authority. 
3. Customs Department: To clear the shipments, the customs authority verifies the exporter’s identity. 

For this Reason, the exporters must register the AD code at ports from where they wish to export goods or services. 

Curious to learn more? Click here – Without AD Code Registration, Exporters Face Delay

3. Why is AD Code Compulsory in Export Trade?

AD Code bank account registration is the gateway to aligning with RBI and DGFT’s regulatory compliance with trade standards. The code allows smooth foreign transactions and helps to manage the exporter’s account. The 14-digit code serves as the financial identifier at the customs ports. Meanwhile, the main reasons for which the AD code is mandatory are:

• Smooth Shipping Bill Generation: A complete AD code registration process is mandatory to get customs clearance. Furthermore, for shipping bill filing on ICEGATE, the code is required. Not having a valid AD code can lead to shipment delay or rejection at ports. 
• Compliance with Authority: Authorized Dealer (AD) code helps the exporters to adhere to RBI and FEMA rules & regulations. Compliance with regulatory authorities is important to maintain the inflow and outflow of foreign exchange. 
• RBI Monitor Foreign Exchange: To maintain all foreign exchange records, the code allows RBI to track currency inflow and outflow. RBI conducts tracking for foreign currency to avoid illicit activities.
• Government Export Support: An AD code is required to claim the government benefits and incentives. By being authorized through AD code registration, the exporters can utilize GST refunds and duty drawbacks.
• Smooth Foreign Transactions: AD code links the exporter’s current bank account to international trade activities. Although it makes the foreign currency transactions process smoother and accessible. 

Undoubtedly, AD code gives the accuracy for tracking and reporting of export transactions. 

4. Compliance through AD Code Registration India

Management of compliance after verification by the relevant bank is important for exporters. Meanwhile, since the AD code registration online turned digital, adherence to RBI guidelines becomes easier. Obtaining the vital document is also the route to follow specific rules and regulations. The compliance with RBI and customs authority for international trade involves obtaining the AD code (14-digit code), registration of the AD code on the ICEGATE portal for customs approval, and use of Class 3 DSC (Digital Signature Certificate). 

4.1 Foreign Exchange Management Act (FEMA), 1999

Active since June 1, 2000, it serves as the primary legislation in India. Its role is to regulate the foreign exchange. Initially, it was known as the Foreign Exchange Regulation Act (FERA),  replaced by FEMA. Its major objective is to facilitate the smooth export and import of trade and payments. The FEMA Act applies to all Indian residents and their branches, offices, or agencies located in a foreign country. By enabling this act, the RBI gets access to administer and oversee all cross-border currency exchange movements.

4.2 Indian Customs and the ICEGATE Portal

The AD code with the ICE number is the primary document to get the customs approval. It makes the export goods eligible to clear at the ports. 

For example, if an exporter avoids registering the AD code on the ICEGATE portal, they will not be eligible to create the shipping bill on the portal. 

5. What is mandatory AD Code registration on ICEGATE?

Before registering the AD code on the ICEGATE portal, the exporters first need to link their foreign exchange activities to their current bank account. Follow these simple steps on the online portal:

Step 1: Apply for an AD code

Complete the AD code registration process by getting a 14-digit code from your current bank. Must ensure that the bank deals in foreign exchange.

Step 2: Obtain Documents

Gather the necessary documents, such as the IEC (Import-Export Code), GST certificate, company PAN, cancelled cheque, and other supporting documents.

Step 3: Register on the ICEGATE Portal

• Create a profile on the online portal
• Visit the Bank Account section
• Navigate the ‘Add new bank account’ section after completing the Foreign Remittance Account.
• Enter the 14-digit AD code, including the necessary attachments.
• For the shared documents, provide the IRN (Income Registration Number).
• The code registration will be approved by the customs department

6. Final Thoughts | AD Code Registration Apply Online for exporters

Without the AD code, the exporters who deal in foreign exchange are restricted from trading in international markets. Through the AD code certificate, the exporters get access to receive foreign currency from an international dealer channel. Bank account registration is a prerequisite for exporters to get customs clearance, adhere to FEMA and RBI regulations, and avail government incentives. Reduce the AD registration online challenges with professional support. Get professional and affordable support from LegalRaasta experts. 

7. Frequently Asked Questions

a.) Can exporters deal in foreign exchange transactions without an AD code?

Ans. No, only 14-digit AD code holders can deal in foreign exchange. The registration for the AD code is a prerequisite and a legal requirement.

b.) Why is AD code registration needed for export?

Ans. Registration is mandatory for facilitating customs approval, claiming government benefits, incentives & schemes, and ensuring regulatory compliance.

c.) Is there any registration cost on the ICEGATE portal?

Ans. No, there are no registration fees to link the AD code on the portal. However, exporters need to purchase the Class 3 DSC before registration.

d.) What are the charges for port registration?

Ans. There is no cost for port registration. But registration involves obtaining the IEC code, which costs nearly INR 500, and an AD code from the current bank.

e.) Which port is considered best for seafood export?

Ans. As per the records, Cochin port is considered the best port for the export of seafood.