Paragraph 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Paragraph 4.16 makes every Advance Authorisation, and every input imported under it, subject to the "actual user" condition: neither can be transferred, even after the export obligation is complete. It also says what the holder may do with the finished product and with waste and scrap, and what happens where input tax credit was taken on the exported goods. Paragraphs 4.10 and 4.33 of the Handbook explain how inputs move between units and who else may process them.
This article is based on the chapter-wise text of the Foreign Trade Policy, 2023 published on the DGFT website, as consulted on 2 October 2026; the copy carries no "updated up to" date. The procedure is taken from Chapter 4 of the Handbook of Procedures, 2023 as published on the DGFT website (file of July 2026), consulted on 2 October 2026. Later Notifications and Public Notices should be checked. Where a transfer or a job-work arrangement is in doubt, it is safer to take advice first through a legal consultation.
An Advance Authorisation, and the material imported under it, is subject to the actual user condition and cannot be transferred, even after the export obligation is completed (paragraph 4.16(i)). The holder may dispose of the manufactured product once the obligation is complete. Where input tax credit was availed on the exported goods, the imported goods may be used only in making dutiable goods, with a Chartered Accountant certificate (paragraph 4.16(ii)). Waste and scrap may be disposed of on payment of applicable duty (paragraph 4.16(iii)).
What the Policy says: paragraph 4.16
Paragraph 4.16(i): no transfer
The authorisation and the material imported under it are subject to the "actual user" condition. They are not transferable even after completion of the export obligation. The paragraph is not the same as the general actual user rule of paragraph 2.09 of the Policy; this one is specific to Advance Authorisation. For the general rule, see our article on paragraphs 2.08 and 2.09 of the Policy.
The same sub-paragraph keeps one door open: once the export obligation is completed, the holder has the option to dispose of the product manufactured out of the duty-exempt input. The condition therefore binds the inputs and the authorisation; it does not bind the finished goods after the obligation is discharged.
Paragraph 4.16(ii): where tax credit was taken
Where CENVAT or input tax credit on the input has been availed for the exported goods, then, even after completion of the export obligation, the goods imported against that authorisation may be used only in the manufacture of dutiable goods. The use may be in the same factory or outside it, by a supporting manufacturer.
For this, the holder gives a Chartered Accountant's certificate when filing the application for the Export Obligation Discharge Certificate with the Regional Authority concerned. An AEO with a valid certificate has the option of a self declaration instead. For income-tax or GST consequences of credit, see our guides to those laws; this article states no tax rule.
Paragraph 4.16(iii): waste and scrap
Waste or scrap arising from the manufacturing process, as allowed, can be disposed of on payment of the applicable duty, even before the export obligation is fulfilled. The paragraph states no rate and neither does this article.
| Sub-paragraph | Subject | Consequence |
|---|---|---|
| 4.16(i) | Authorisation and imported material | Actual user; not transferable even after export obligation is complete |
| 4.16(i) | Manufactured product | May be disposed of once the export obligation is complete |
| 4.16(ii) | Input tax credit availed on exported goods | Imported goods used only for dutiable goods; Chartered Accountant certificate (or AEO self declaration) |
| 4.16(iii) | Waste and scrap | May be disposed of on payment of applicable duty, even before the obligation is fulfilled |
Procedure under the Handbook
Paragraph 4.10: applicants with multiple units
Two sub-paragraphs apply.
- 4.10(i): transfer between units. Moving duty-exempt material imported or procured against the authorisation from one unit of a company to another for manufacturing is done with prior intimation to the jurisdictional Customs Authority. Where the material was procured domestically and GST has been paid, and it moves between units in the same or different States, availment of input tax credit is governed by the GST law and the rules under it.
- 4.10(ii): movement from the port. Imported duty-exempt inputs can be taken from the port or the domestic supplier's premises to the factory or premises of the authorisation holder or co-authorisation holder, or the factory of the supporting manufacturer whose name is endorsed in the authorisation or allowed by the jurisdictional Customs authority. Material can also be taken from the port straight to the project site of the project authority, subject to a bond to the customs authority at the port of import and the other Department of Revenue guidelines, if any.
Paragraph 4.33: supporting manufacturer, jobber and co-licensee
- 4.33(a). Imported material may be used in any unit of the holder, subject to paragraph 4.10, or by a jobber or supporting manufacturer if the Regional Authority endorses it on the authorisation. The applicant may apply to have a manufacturer's or jobber's name added. The endorsement is mandatory where prior import before export is a condition of the scheme and the holder wants the material processed through another manufacturer or jobber.
- 4.33(b). After such endorsement, the authorisation holder and co-authorisation holder are jointly and severally liable for completion of the export obligation. Any one co-holder may import in his name or in joint names, and the Bank Guarantee or Legal Undertaking is furnished in their joint names.
- 4.33(c). A holder registered under GST may have the jobber's name endorsed by the jurisdictional Customs authority under the CGST, SGST and UTGST Rules instead of the Regional Authority's endorsement. If the manufacturer exporter is not registered or not required to be registered, job work may be allowed after the supporting manufacturer's name is endorsed by the Regional Authority concerned. The holder is solely responsible for the imported items and for fulfilment of the export obligation.
The Policy is made under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (section 5 of the FTDR Act), and the Handbook under section 6 (section 6 of the FTDR Act). Misuse of imported goods and false declarations are dealt with in rules 13 and 14 of the Foreign Trade (Regulation) Rules, 1993.
A worked example
Rao Components Private Limited, an invented manufacturer exporter, holds an Advance Authorisation and wants a jobber to machine a part. It cannot simply send the imported material away: under paragraph 4.33(a) the jobber's name must be endorsed, and the endorsement is mandatory because the scheme carries a prior-import condition. It is registered under GST, so under paragraph 4.33(c) it may have the jobber's name endorsed by the jurisdictional Customs authority. Rao remains solely responsible for the imported items and the export obligation. Later it moves material to its second plant: it informs the jurisdictional Customs Authority beforehand (paragraph 4.10(i)). When the export obligation is complete it sells the finished product (paragraph 4.16(i)), but it cannot sell the authorisation itself. Because it availed input tax credit on the exported goods, it files a Chartered Accountant's certificate with its application for the discharge certificate (paragraph 4.16(ii)).
Need help with an Advance Authorisation structure?
Job work, multiple units and project supplies each add an endorsement, an intimation or a certificate. Our team can map your arrangement against paragraph 4.16 and paragraphs 4.10 and 4.33 of the Handbook in a legal consultation.
Key takeaways
- The authorisation and the imported material cannot be transferred, even after the export obligation is complete (paragraph 4.16(i)).
- The manufactured product may be disposed of once the export obligation is complete (paragraph 4.16(i)).
- Where input tax credit was availed, imported goods go only into dutiable goods, supported by a Chartered Accountant certificate or an AEO self declaration (paragraph 4.16(ii)).
- Moving material between units needs prior intimation to Customs (Handbook paragraph 4.10(i)).
- A jobber or supporting manufacturer must be endorsed; co-holders are jointly and severally liable (Handbook paragraph 4.33).
Read next
- Paragraphs 4.12 to 4.15 of the Foreign Trade Policy, 2023: accounting of inputs, duties exempted and drawback
- Paragraph 4.17 of the Foreign Trade Policy, 2023: validity, revalidation and enhancement of Advance Authorisation
- Paragraph 4.11 of the Foreign Trade Policy, 2023: self-declared authorisations and entitlement
- Advance Authorisation: export obligation, clubbing and the EODC
Disclaimer: Based on the chapter-wise text of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023 published on the DGFT website, and on the later Notifications named in this article, as consulted on 2 October 2026. The copies carry no "updated up to" date. Notifications, Public Notices, Trade Notices, the ITC(HS) schedules, Appendices and forms change often; the current text on the DGFT website should be checked before acting. This article is general information, not legal advice; check the official text before acting.