In a world where the total number of online buyers globally has spiked to more than 2.14 billion, venturing into the global market and expanding business is every entrepreneur’s dream come true. But stepping into cross-border trade is no small feat. There are legal documentation processes and international compliance requirements one needs to be aware of.
To start with, an Import Export Code (IEC) is a prime requirement to get your goods shipped, whether you’re an exporter or importer. Think of it like the passport for your goods. Other than the IEC code, there are four other documentation requirements that are primary for customs clearance – Shipping Bill, Bill of Lading, Export General Manifest and AD Code.
Let’s delve into what AD code is and why one needs AD code for export.
What is AD Code?
Authorised Dealer Code, or commonly known as AD code, is a 14-digit (sometimes 8 digits) numerical code a seller receives from the bank with which they have account for their international business. AD code is obtained after IEC code registration and is mandatory for export customs clearance.
What is The Significance of an AD Code?
An AD code is necessary for three segments of international shipping –
- For Exporters: When an Indian business or individual engages in international trade, they need an AD code for various foreign exchange transactions, including receiving payments for exports.
- For Importers: Importers may also need an AD code when making payments for imports. This code helps in ensuring that foreign exchange transactions related to imports are properly documented and authorised.
- Trade Documentation: The AD code is often a mandatory requirement in various trade documents, such as the Bill of Lading, Shipping Bill, or Letter of Credit. It helps in tracking and recording foreign exchange transactions associated with international trade.
The AD code does much more for your export/import business:
1. Helps in the Export Process
For customs clearance, a shipping bill is required. Without the AD code, the shipping bill for your cargo cannot be generated.
W.e.f August 03, 2018, commercial shipments up to a value limit of INR 5,00,000 are allowed through courier mode, using CSB-V, or Courier Shipping Bill-V. CSB-V cannot be generated without AD code registration.
The AD Code also allows government benefits such as GST, refunds, duty rebates, as well as exemptions that are credited directly to the current bank account associated with your business.
2. Keeping Tabs on Foreign Currency Trade
The AD code registration system for foreign currency trades allows the government to monitor these transactions. This helps promote transparency and economic stability. It lets authorities track the foreign exchange dealings of firms that import and export goods and services.
Having insight into this cross-border flow of money helps regulators ensure the overall health of the nation’s economy.
3. Necessary for Customs Clearance
Generating a shipping bill is essential for getting your goods through customs during import and export operations. If you don’t have a registered Authorised Dealer code, you’ll hit roadblocks when generating that shipping this bill.
The AD code is a unique identifier that links your business details to customs authorities and greases the wheels for a smooth customs clearance process.
5. Government Benefits Paid Directly
Registering for an AD code gives you the advantage of having any government benefits, incentives or subsidies paid directly into your bank account. This approach eliminates a ton of manual paperwork and bureaucratic processes, ensuring you get quick access to any financial support your exporting business qualifies for.
6. Making Import-Export Processes Easier
Whether you’re a startup or an established business entering the import-export game, you can enjoy a hassle-free trade process by generating this AD code. It’s a standardised ID for engaging in foreign trade activities. Plus, the AD code registration helps the government maintain a comprehensive record of all businesses involved in international trade, which contributes to effective regulation and oversight.
How To Apply for AD Code?
Exporters are required to register an AD code with the airport or port from which they plan to ship their goods across borders. In case an exporter ships packages from more than one port, they must register an AD Code for each of the ports, irrespective of whether the ports are in the same states or different states.
Follow these steps to get your Authorised Dealer code:
- Head over to the bank where your business current account exists. This is the bank that will issue your Authorised Dealer (AD) code.
- Speak to the branch manager and formally apply for an AD code. Provide all the necessary details and supporting documentation that the bank asks for.
- Once your application gets processed and approved, the bank will provide you with an official AD code letter. This should follow the format specified by the Directorate General of Foreign Trade and must be printed on the bank’s letterhead. Hold onto this letter as it’s proof of your AD code registration.
- With that AD code letter in hand, you can then register for an AD code at each port you plan to export from. Present the letter to the respective customs authorities at those ports to complete the registration process.
One Important Note: Keep in mind there is no online application facility to obtain an AD code. The process requires you to visit your business bank in person and then the customs offices at each exporting port location.
AD Code Registration For Customs:
Following are the steps to register AD Code on ICEGATE:
- Go to the ICEGATE portal on the official website.
- Create an ID if you don’t have one
- Enter your credentials, like your user ID and password, to log in.
- After logging in, look for the “Filing Services” section and click on the option labelled “e-Sanchit.”
Upload Supporting Documents and Get Your Reference Numbers
In the e-Sanchit section, you’ll find the option to upload documents. Make sure you have all the required supporting documents ready for your AD Code registration. Upload the necessary ones following the provided guidelines.
After the upload is successful, the system will generate a Document Reference Number (DRN) and an Invoice Reference Number (IRN). Jot these down, as you’ll need them for future reference.
Head to Financial Services
Return to the main ICEGATE portal page by clicking the appropriate link or navigating back. On the main page, look for the Financial Services section. Then do the following:
Choose Bank Account Management and AD Code Registration
Within Financial Services, locate and select the Bank Account Management option.
From the next set of options, choose AD Code Registration.
Fill in the Registration Form
You’ll now see the AD Code registration form. Fill in all the required details completely and accurately. Be sure to provide your company details, contact information, PAN card details, IEC certificate details, GST certificate details, and any other relevant information asked for.
Submit Your AD Code Registration Form
Before hitting that submit button, thoroughly review all the information you entered in the registration form to make sure everything is accurate. Go ahead and submit your AD Code registration. The system will then process your request.
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’re someone looking to kickstart a business involving import-export, it is always advisable to be ready with all legal formalities for a seamless transaction without hindrance, which means registering the IEC Code and AD Code.
An AD Code, once registered, has lifetime validity. In cases where an AD code is not registered, or wrongly fed, the shipment can leave from the shipping carrier’s facility, but is not processed and is barred for entry at the foreign borders.
