CBIC Clarifies Correlation Requirements Under DFIA Scheme

The Central Board of Indirect Taxes and Customs (CBIC), through Circular No. 20/2025-Cus dated 24th July 2025, has provided clarity on the correlation of technical characteristics, quality, and specifications of inputs with export products under the Duty-Free Import Authorization (DFIA) Scheme. This circular addresses concerns raised by the trade community regarding the challenges faced during the clearance of materials under the DFIA Scheme.

Key Highlights of the Circular:

1. Policy Provisions:

The circular references paragraphs 4.12, 4.28(iv), and 4.29 of the Foreign Trade Policy (FTP), 2023, and condition (iii) of Notification No. 25/2023-Cus dated 01.04.2023. These provisions outline the requirements for declaring inputs used in the manufacture of export products.

2. Challenges Faced by Exporters: 

Exporters have reported difficulties in clearing materials under the DFIA Scheme due to Customs insisting on establishing a close nexus between imported goods and the inputs used in the manufacture of exported products. This has led to confusion and delays in the clearance process.

3. Clarifications Provided:

The Central Board of Indirect Taxes and Customs (CBIC) has examined the matter and clarified the following:

Inputs under Paragraph 4.29: For inputs specified in paragraph 4.29 of FTP, 2023, exporters must establish a correlation of technical characteristics, quality, and specifications of the inputs with the export product. This includes providing a declaration in the Shipping Bill regarding the quality, technical characteristics, and specifications of the materials used.
Inputs under Paragraphs 4.12 and 4.28(iv): For inputs mentioned in these paragraphs, exporters are only required to declare the specific name or description of the material used along with the quantity in the Shipping Bill. There is no requirement to establish a correlation of technical characteristics, quality, or specifications.

4. Simplified Requirements:

The circular emphasizes that correlation of technical characteristics, quality, and specifications is only required for inputs specified in paragraph 4.29. For other inputs, a simpler declaration of name and quantity suffices, reducing the compliance burden on exporters.

5. Action Points for Stakeholders:

The circular directs Customs authorities to issue suitable Public Notices and Standing Orders to guide the trade and staff. Exporters are encouraged to familiarize themselves with these provisions to ensure smooth clearance of materials under the DFIA Scheme.

Implications for Exporters:

This clarification is a welcome move for exporters as it simplifies the compliance requirements under the DFIA Scheme. By clearly distinguishing between inputs requiring detailed correlation and those requiring basic declarations, the circular aims to streamline the clearance process and reduce unnecessary delays.

Conclusion:

The DFIA Scheme is a critical tool for promoting exports by allowing duty-free import of inputs. The recent clarifications provided by the CBIC ensure that exporters can leverage this scheme effectively without facing undue challenges. Exporters should stay updated with the latest notifications and ensure their documentation aligns with the clarified requirements.

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Source: CBIC, Ministry of Finance, Govt. of India

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