This scheme is covered under para 4.2 of Export / Import Policy. It is an alternative to Advance Licence as an Exporter can avail duty free Raw Material against his export but subject to payment of additional Customs duty equal to excise duty at time of Import. : 

4.2
DFRC is issued to a merchant-exporter or manufacturer-exporter for sthe import of inputs used in the manufacture of goods without payment of basic customs duty, and special additional duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import.

4.2.1
DFRC shall be issued on minimum value addition of 25% except foritems in gems and jewellery sector for which value addition as given in paragraph 4.56.1 of the Handbook (Vol.1) shall be applicable.

4.2.2
DFRC may be issued in respect of exports for which payments are received in non-convertible currency. Such exports shall, however, be subject to value addition and conditions as specified in Appendix-32 of Handbook (Vol.1).

DFRC may also be issued for supplies effected under paragraph 8.2 of the Policy.


4.2.3
DFRC shall be issued only in respect of products covered under the SIONs as notified by DGFT. However, DFRC shall not be issued in respect of SIONs which are subject to "actual user" condition or where the input is allowed with prior import condition or where the norms allow import of Acetic Anhydride, Ephedrine and Pseudo Ephedrine in the Handbook (Vol-II).

However DFRC may be issued for SIONs allowing import of Acetic Anhydride, Ephedrine and Pseudo Ephedrine provided these items are specifically deleted from the list of import items.

4.2.4
DFRC shall be issued for import of inputs as per SION as indicated in the shipping bills. The validity of such licences shall be 18 months. DFRC and or the material(s) imported against it shall be freely transferable.

4.2.5
The export products, which are eligible for modified VAT, shall be eligible for CENVAT credit. However, non excisable, non dutiable or non CENVAT products, shall be eligible for drawback at the time of exports in lieu of additional customs duty to be paid at the time of imports under the scheme.

4.2.6
The exporter shall be entitled for drawback benefits in respect ofany of the duty paid materials, whether imported or indigenous, used in the export product as per the drawback rate fixed by Directorate of Drawback (Ministry of Finance). The drawback shall however be restricted to the duty paid materials not covered under SION.


Salient features of this scheme are:-

Sion should be fixed.

Minimum Value addition of 33% required except for Gem and Jewellery sector.

It is transferable.

Validity of Import is 18 months only.

Basically this is a post export scheme.

After issuance from Jt. DGFT verification from Customs required before utilising Licence.

A professional Custom Agent should offer the following services:-

Prescrutiny of Invoice before presentation to Customs.

Preparing application on receipt of S/Bills and Bank Certificate portwise.

Filing online through EDI followed with submission of Hard Copy.

Follow-up till you get DFRC.

Verification from Customs.

Selling DFRC at most competitive premium.

They would require following details for preparing application:-

Profile as per Appendix - 2 in duplicate.

Certified copy of Updated IEC + Valid RCMC.

ITC No. of Import Item.

Duty structure of Import Item.

CIF Value of Import Items.

Original EP Copy of DFRC.

Original Bank Certificate.

Certified copy of Mate Receipt + B/L.

Bank Attested Invoice + Packing List.