In a world where the number of online buyers has surged to over 2.14 billion, entering the global market and expanding your business internationally is a dream many entrepreneurs aspire to achieve. However, stepping into cross-border trade is a complex endeavor. Navigating through legal documentation processes and meeting international compliance requirements are critical aspects that must be addressed.
One of the fundamental prerequisites for engaging in international trade is obtaining an Import Export Code (IEC). This code is essential for shipping goods, whether you are an exporter or importer, and can be likened to a passport for your products. In addition to the IEC code, there are four key documents required for customs clearance: the Shipping Bill, Bill of Lading, Export General Manifest, and AD Code.
Let’s explore the significance of the AD Code and why it is necessary for export activities.
What is AD Code?
The Authorized Dealer Code, often referred to as the AD code, is a numeric identifier, typically 14 digits long (though it can sometimes be 8 digits), that a seller acquires from their bank. This bank must be the one where they hold an account for conducting international business transactions. The AD code is issued after the seller has registered for an Importer Exporter Code (IEC) and is an essential requirement for the clearance of export customs.
What is The Significance of an AD Code?
An Authorized Dealer (AD) code is crucial for three key areas of international shipping:
For Exporters: Indian businesses or individuals involved in global trade must obtain an AD code for handling various foreign exchange transactions, such as receiving payments for exported goods.
For Importers: Importers also require an AD code to facilitate payments for imported goods. This code ensures that all foreign exchange transactions related to imports are properly documented and authorized.
Trade Documentation: The AD code is a mandatory element in several trade documents, including the Bill of Lading, Shipping Bill, and Letter of Credit. It plays a vital role in tracking and recording foreign exchange transactions linked to international trade.
The AD code offers significant benefits for your export/import business:
1. Facilitating the Export Process
For customs clearance, generating a shipping bill is mandatory. Without the AD code, it’s impossible to generate a shipping bill for your cargo.
As of August 03, 2018, commercial shipments up to a value limit of INR 5,00,000 can be processed through courier mode using the CSB-V, or Courier Shipping Bill-V. However, generating the CSB-V requires AD code registration.
Additionally, the AD code enables access to various government benefits, including GST refunds, duty rebates, and exemptions, which are directly credited to the bank account linked to your business.
2. Monitoring Foreign Currency Trade
The AD code registration system aids the government in monitoring foreign currency transactions, promoting transparency and economic stability. It allows authorities to track the foreign exchange dealings of firms engaged in import and export activities, ensuring the overall health of the nation’s economy.
3. Essential for Customs Clearance
Generating a shipping bill is crucial for clearing your goods through customs during import and export operations. Without a registered Authorised Dealer (AD) code, generating this shipping bill becomes problematic. The AD code serves as a unique identifier linking your business details to customs authorities, facilitating a smooth customs clearance process.
4. Direct Receipt of Government Benefits
Registering for an AD code ensures that any government benefits, incentives, or subsidies are paid directly into your bank account. This eliminates extensive manual paperwork and bureaucratic hurdles, providing swift access to the financial support your exporting business is eligible for.
5. Streamlining Import-Export Processes
Whether you’re a startup or an established business venturing into import-export activities, having an AD code simplifies the trade process. It acts as a standardized identifier for engaging in foreign trade. Additionally, AD code registration helps the government maintain a comprehensive record of all businesses involved in international trade, contributing to effective regulation and oversight.
How To Apply for AD Code?
Here’s a step-by-step guide to obtaining your AD code:
Visit the bank where you have your business current account. This bank is responsible for issuing your AD code.
Schedule a meeting with the branch manager and formally request an AD code. Ensure you provide all the required information and supporting documents as requested by the bank.
After your application is processed and approved, the bank will issue an official AD code letter. This letter must adhere to the format according to Customs Public Notice No. 93/2020 dated 29.07.2020 (format attached) and be printed on the bank's letterhead. Keep this letter secure as it serves as proof of your AD code registration.
With the AD code letter in hand, proceed to register your AD code at each port where you plan to export goods. Present the letter to the respective customs authorities at those ports to finalize the registration process.
Steps for AD Code Registration on ICEGATE
To register your AD Code on the ICEGATE portal, follow these steps:
1. Access the ICEGATE Portal: Visit the official ICEGATE website.
2. Create an Account: If you don’t already have an account, create one.
3. Log In: Enter your user ID and password to log in.
4. Navigate to Filing Services:
- Once logged in, find the “Filing Services” section.
- Click on “e-Sanchit”.
5. Upload Supporting Documents:
- In the e-Sanchit section, upload all necessary supporting documents as per the guidelines provided.
- Upon successful upload, the system will generate a Document Reference Number (DRN) and an Invoice Reference Number (IRN). Note these numbers for future reference.
6. Access Financial Services:
- Return to the main ICEGATE portal.
- Locate the “Financial Services” section.
7. Select Bank Account Management and AD Code Registration:
- Within Financial Services, select “Bank Account Management”.
- Then choose “AD Code Registration”.
8. Fill in the Registration Form:
- Complete the AD Code registration form with accurate details.
- Include company details, contact information, PAN card details, IEC certificate details, GST certificate details, and any other relevant information.
9. Submit the Form:
- Carefully review all the entered information.
- Submit your AD Code registration form for processing.
By following these steps, you can efficiently register your AD Code on ICEGATE.
Documents needed for AD Code Registration
To register for AD Code, you will need the following documents handy:
AD code letter
Bank Certificate according to Customs Public Notice No. 93/2020 dated 29.07.2020 (format attached)
Copy of Company PAN Card (with seal and signature)
Copy of GST Certificate (with seal and signature)
Copy of IEC Certificate (with Seal and signature)
The company-cancelled cheque
Class 3 Digital Signature Certificate (DSC)
Director or Proprietor or Partner information (Copy of PAN Card, Voter ID, Aadhaar card, Passport)
Export House Certificate (this is optional)
Conclusion
If you are planning to launch an import-export business, it is essential to have all legal formalities in place to ensure smooth and uninterrupted transactions. This includes obtaining both the Importer Exporter Code (IEC) and the Authorised Dealer Code (AD Code).
Once you register your AD Code, it remains valid for a lifetime. However, if the AD Code is not registered or is incorrectly entered, your shipment may depart from the shipping carrier's facility but will be halted and denied entry at foreign borders.
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