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 4.18 of the Policy says what an Advance Authorisation or a DFIA cannot be used for (prohibited items), what needs a No Objection Certificate (items reserved for State Trading Enterprises), and what remains subject to its own authorisation (restricted and SCOMET items). Paragraph 4.05 of the Handbook is the exception: it lets certain items that are prohibited for export be exported under an Advance Authorisation, with a short export obligation period and a heavy penalty.
DFIA is the Policy's abbreviation for the duty-exempt import authorisation scheme, explained in our articles on paragraphs 4.24 to 4.29; this article uses the abbreviation as paragraph 4.18 does.
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. For an item whose import or export policy is restricted, the question of authorisation is separate from the Advance Authorisation; our restricted items import-export licence service covers it.
An item prohibited for import or export cannot be imported or exported under an Advance Authorisation or DFIA, unless separately notified for export (paragraph 4.18(i)). An item reserved for import by a State Trading Enterprise cannot be imported against the authorisation but can be procured from the enterprise against an ARO or invalidation letter (4.18(ii)). Restricted and SCOMET exports keep their own authorisation requirements. Under paragraph 4.05 of the Handbook, certain otherwise prohibited items may be exported subject to a 90-day export obligation, and wheat flour to 180 days.
What the Policy says: paragraph 4.18
The copy consulted prints the last two sub-paragraphs out of order: after (iv) comes a second sub-paragraph numbered "i." on SCOMET items, which reads as the fifth. This article calls it the final sub-paragraph.
Prohibited items: paragraph 4.18(i)
No export or import of an item is allowed under an Advance Authorisation or DFIA if the item is prohibited for export or import respectively. There is one opening: export of a prohibited item may be allowed under an Advance Authorisation provided it is separately so notified, and subject to the conditions given in the notification. Paragraph 4.05 of the Handbook is one such case, discussed below. The item's status is a matter of its entry in ITC(HS); this article lists no item. For the underlying power, see sections 3 and 4 of the FTDR Act, and for the Customs side, section 11 of the Customs Act, 1962.
Items reserved for State Trading Enterprises: paragraph 4.18(ii) and (iii)
| Sub-paragraph | Situation | Rule |
|---|---|---|
| 4.18(ii) | Items reserved for import by State Trading Enterprises (STEs) | Cannot be imported against the authorisation. They can be procured from the STE against an Advance Release Order (ARO) or an invalidation letter. STEs may also sell on high sea sale basis to holders. STEs may issue a No Objection Certificate (NOC) for import and may charge a reasonable fee, subject to a maximum of Rs 5000 from the applicant. |
| 4.18(iii) | Items reserved for export by an STE | Can be exported under the authorisation only after obtaining a No Objection Certificate from the concerned STE. |
The Rs 5000 in paragraph 4.18(ii) is a ceiling on what the STE may charge for the certificate, not a fixed fee. For the STE rules in general, see our article on paragraphs 2.21 to 2.24 of the Policy.
Restricted and SCOMET items: paragraph 4.18(iv) and the final sub-paragraph
Import of restricted items is allowed under an Advance Authorisation or DFIA unless disallowed; the sentence is worded awkwardly in the copy ("allowed under specifically Advance Authorisation/DFIA unless disallowed") and is given here in that sense. Export of restricted or SCOMET items, however, remains subject to all conditions or requirements of the export authorisation or permission required under Schedule 2 of ITC(HS). The Advance Authorisation does not replace that permission. For SCOMET, see our guide on SCOMET export controls and the catch-all provision.
What the Handbook requires: paragraph 4.05
The paragraph is headed as Advance Authorisation for items which are otherwise prohibited for export.
- 4.05(i). Items covered under Chapter 7 and Chapter 15 of ITC(HS) Schedule 2 that are prohibited for export may be exported under the Advance Authorisation scheme, unless specifically disallowed. Export is subject to a pre-import condition under a notified SION or prior fixation of norms by the Norms Committee in terms of paragraph 4.06 of the Handbook. Import and export are permitted only through EDI enabled ports.
- 4.05(ii). The export obligation period for such authorisations is 90 days from the date of clearance of the import consignment, with no extension. The import is subject to the actual user condition, and no transfer of imported raw material for any purpose, including job work, is allowed. For non-fulfilment of the export obligation or non-achievement of the stipulated value addition, a penalty of five times the CIF value of the imported material corresponding to the shortfall is imposed, in addition to applicable duty and interest. Paragraph 4.49 of the Handbook does not apply.
- 4.05(iii). Wheat flour (Atta) may be exported under the scheme, subject to the pre-import condition of wheat under the notified SION only. No domestic sourcing of wheat is permitted, the invalidation letter and ARO facility is not available, and third party exports are not allowed. Import and export are only through EDI enabled ports. The export obligation period is 180 days from the date of clearance of each import consignment, with no extension. Actual user, no transfer (including job work), and the same five-times-CIF penalty apply, and paragraph 4.49 does not apply.
Because paragraph 4.49 is switched off, the usual regularisation of default is not available for these authorisations; see our article on paragraphs 4.49 and 4.50 of the Handbook. The penalty rests on the Act's contravention provisions (section 11 of the FTDR Act). The Policy is made under section 5 (section 5 of the FTDR Act), and the Handbook under section 6 (section 6 of the FTDR Act).
A worked example
Iyer Agro Foods Private Limited, an invented miller, wants to export wheat flour under an Advance Authorisation. Under paragraph 4.05(iii) of the Handbook it must import the wheat first, under the notified SION, and cannot buy wheat locally or use an ARO or invalidation letter. It must use EDI enabled ports, cannot give the wheat out on job work, and must complete exports within 180 days of clearing each import consignment, with no extension. If it falls short, the penalty is five times the CIF value of the imported wheat corresponding to the shortfall, on top of duty and interest, and regularisation under paragraph 4.49 is not available.
Need help with a restricted or prohibited item?
Whether an input needs an NOC, an authorisation or a separate notification is decided by the item's entry in ITC(HS) and the conditions attached. Our restricted items import-export licence team can check the entry and the authorisation route before you apply for the Advance Authorisation.
Key takeaways
- Prohibited items cannot be imported or exported under the authorisation, except exports separately notified (paragraph 4.18(i)).
- STE-reserved imports are procured from the STE against an ARO or invalidation letter; an NOC may carry a fee of up to Rs 5000 (paragraph 4.18(ii)).
- STE-reserved exports need an NOC from the STE (paragraph 4.18(iii)).
- Restricted and SCOMET exports keep their own authorisation conditions.
- Handbook paragraph 4.05: 90 days (180 days for wheat flour), no extension, five times the CIF value penalty, no regularisation.
- The copy prints the final two sub-paragraphs of 4.18 out of order; read the PDF pages.
Read next
- Paragraphs 4.00 to 4.03 and 4.05 of the Foreign Trade Policy, 2023: Advance Authorisation basis and eligible applicant
- Paragraph 4.20 of the Foreign Trade Policy, 2023: domestic sourcing, Advance Release Order and invalidation letter
- Paragraphs 4.49 and 4.50 of the Handbook of Procedures, 2023: regularisation of bona fide default
- Paragraph 4.16 of the Foreign Trade Policy, 2023: actual user condition
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.