CBIC Clarifies DFIA Input Correlation Rules Under FTP 2023
The DFIA correlation rule under the Foreign Trade Policy 2023 has now been clarified by CBIC. As per CBIC Circular No. 13/2024-Customs dated 10th July 2024, the requirement to establish a clear correlation between inputs imported and the exported goods applies only to items listed in Paragraph 4.29 of FTP 2023. This clarification comes after confusion among exporters and customs authorities regarding the scope of correlation.
Let’s break down what this means for exporters using the Duty-Free Import Authorisation (DFIA) scheme.
What is the DFIA Scheme?
The Duty-Free Import Authorisation (DFIA) is a post-export benefit that allows duty-free import of inputs used in the manufacture of export products.
Key features:
- Import permitted for inputs listed in SION (Standard Input Output Norms)
- Only duty-exempted Basic Customs Duty (BCD)
- Transferability allowed post-export obligation fulfillment
What Did CBIC Clarify?
CBIC has received representations from exporters facing difficulties in DFIA clearances due to varying interpretations of the “correlation requirement”. To resolve this, the Board issued Circular No. 13/2024-Customs, stating:
✅ Correlation Requirement — Applicable Only to Para 4.29 Items
“The correlation requirement between import inputs and export product… shall be limited only to items covered under Paragraph 4.29 of FTP 2023.”
This means:
- Only items like fuel, oils, catalysts, solvents, etc., which are mentioned in Para 4.29, require strict correlation.
- For all other items under SION, correlation is assumed based on norms notified by DGFT.
What is Paragraph 4.29 of FTP 2023?
Paragraph 4.29 covers sensitive inputs which need closer scrutiny during import:
- Fuels
- Oils
- Catalysts
- Solvents
- Refrigerants
- Any input that is not physically incorporated in the final product but may be consumed during processing
CBIC’s clarification now ensures that only these items need additional proof to link their import to actual export manufacturing.
Why This Clarification Matters
- ✅ Reduces compliance burden on exporters using standard SION inputs
- ✅ Prevents delays and disputes at the time of customs clearance
- ✅ Aligns Customs practice with DGFT norms under FTP 2023
Legal Reference
- Circular No. 13/2024-Customs
Read CBIC Circular - Foreign Trade Policy 2023-28 – Para 4.29
Read FTP 2023 (DGFT)
Expert View: Keep Documentation Clean for Para 4.29 Inputs
For exporters importing fuel, catalysts, etc., maintaining batch-level records and process documentation is essential. Correlation must be demonstrated with actual usage data—especially in industries like pharmaceuticals, chemicals, and food processing.
Summary
CBIC clarifies that DFIA correlation rules under FTP 2023 apply only to Paragraph 4.29 inputs like fuel and solvents. Other SION inputs are exempt from strict correlation, easing customs compliance for exporters.
FAQs on DFIA Correlation Clarification
Q1. Does the clarification apply to old DFIAs issued before FTP 2023?
Only if such licences are governed by FTP 2023 and correlation disputes arise. Past FTP rules may differ.
Q2. Can customs still demand correlation proof for non-Para 4.29 inputs?
No, as long as the input is covered under valid SION norms and not in Para 4.29.
Q3. What if my input partially falls under 4.29 category?
Seek advance ruling or DGFT clarification if classification is unclear.
Final Thoughts
The DFIA correlation rule clarification is a much-needed step towards smoother compliance. Exporters must now focus their documentation efforts only on sensitive items under Para 4.29, avoiding unnecessary delays.
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