Features of an AD code
- Bank issuance: The AD code is issued by an authorised bank upon request by the exporter
- Mandatory for exports: It is essential for filing shipping bills and conducting export transactions through the customs portal
- DGFT linkage: The code must be registered with the DGFT to claim export incentives
- Customs verification: Helps customs track and validate export transactions
The AD code ensures compliance with regulatory requirements and facilitates smooth transactions within the import-export framework.
Example of AD code
An AD code is required for various export processes, including generating shipping bills and accessing the Indian Customs Electronic Gateway (ICEGATE) platform. For example, when an exporter files a shipping bill, the AD code is linked to verify the bank details and track foreign exchange inflows.
Practical example:
- An exporter registers the AD code issued by their bank with the ICEGATE portal
- While submitting a shipping bill, the AD code ensures the payment from the foreign buyer is credited to the correct bank account
- The customs department uses the AD code to validate the transaction and monitor compliance
This code ensures streamlined financial operations for export businesses and is mandatory for customs clearance. For more information, refer to our articles on ICEGATE and shipping bill.
The role of the AD code in export and import
Customs clearance: The AD code is required when submitting shipping bills to customs authorities. It helps customs officials verify the legitimacy of the transaction and ensures compliance with export and import regulations.
Foreign exchange tracking: The AD code allows for the tracking of foreign exchange transactions related to exports and imports. This helps the Reserve Bank of India (RBI) monitor the flow of foreign currency and ensures adherence to exchange control regulations.
Regulatory compliance: The AD code ensures that businesses follow the legal requirements for international trade, helping to prevent illegal activities like money laundering and tax evasion.
Importance of AD code in import-export business
The AD code plays a crucial role in facilitating seamless financial transactions and regulatory compliance in the import-export sector. Below are the key benefits of having an AD code:
- Customs clearance: The AD code is required for filing shipping bills and for customs officers to approve goods for export or import. It acts as a key link between the shipment and the exporter’s bank.
- Foreign exchange tracking: The AD code helps the Reserve Bank of India (RBI) keep track of money coming into and going out of the country through foreign trade, ensuring that all transactions follow exchange control rules and preventing illegal transfers.
- Regulatory compliance: It ensures that businesses follow all laws and policies related to international trade and helps stop illegal practices such as money laundering.
- Access to government benefits: Exporters need the AD code to claim government benefits like GST refunds and Duty Drawback. These amounts are directly sent to the bank account connected with the code.
- Smooth operations: Having a registered AD code makes customs procedures easier, simplifies foreign currency dealings, and ensures that payments are correctly routed to the business’s bank account.
Validity of AD code
An AD code, once registered, stays valid for life as long as the linked bank account remains the same. If you change your bank account or update any business details connected to it, you must inform customs and update your AD code.
When you need to update your AD code
You must apply for a new AD code and register it again in the following cases:
- Changing your bank: If your business moves its current account to another bank, you need to get a new AD code from the new bank.
- Changing your bank account: Even if you open a new account within the same bank, you still need to re-register the AD code.
- Changing business details: If your business name, address, or other key details change, you must update your bank and ensure the same changes are reflected in your AD code registration with customs.
- Changing export ports (before June 14, 2022): Earlier, exporters had to register a separate AD code for each port. Since 14 June 2022, one AD code registered at any Indian port is valid across all customs locations in the country.
Format of AD code
An AD code is a 14-digit number that identifies an exporter’s bank account for international trade transactions. It is a unique code issued by an authorised bank and is required for customs clearance as well as for handling foreign exchange related to imports and exports.
Example:
- Example AD Code: SBIN0123456EX01
- Breakdown:
- SBIN: Code for the State Bank of India.
- 012: Code for the Fort Branch, Mumbai.
- 3456EX01: A unique number given by the bank to the exporter, ABC Textiles Pvt. Ltd.
How to apply for an AD code?
Step 1: Get an AD code from your bank
- Contact an AD bank: Visit a bank authorised by the Reserve Bank of India (RBI) to handle foreign exchange.
- Submit an application: Fill out the AD code application form provided by the bank. Write a formal request letter to the branch manager and include all required business details.
Step 2: Collect the necessary documents
- Company documents:
- Copy of your Importer Exporter Code (IEC)
- Company PAN Card
- GST Registration Certificate
- Company’s cancelled cheque
- ID proof of the Director/Proprietor/Partner
- Class 3 Digital Signature Certificate (DSC)
- Bank document:
- Bank Certificate (if required by your bank)
Step 3: Get the AD code letter
- After submitting your form and documents, the bank will check and verify them.
- Once approved, the bank will issue an official AD code letter on its letterhead. You’ll need this letter for the next step.
Step 4: Register your AD code on ICEGATE
- Log in to the ICEGATE portal.
- Go to the “Bank Account” section and choose “Foreign Remittance Account (Authorised Dealer Code)”.
- Click “Add New Bank Account”, enter your details, choose your customs location, and upload the AD code letter from your bank.
- Submit the information to complete your AD code registration.
Conclusion
The AD code is an integral part of India’s import-export framework, facilitating customs clearance, foreign exchange monitoring, and access to export incentives. Businesses must ensure accurate registration and compliance to streamline their international trade operations.
For exporters facing financial challenges, securing a business loan can help maintain cash flow and manage operations effectively.
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