Your buyer has cancelled the export order. However, you already imported raw materials duty-free under Advance Authorisation (AA). What can you do now?
A cancelled order doesn't mean that you have to pay customs duty directly. Also, your export obligation will not disappear.
You have to check whether you can find another new buyer and export the same product within the time allowed under the Authorisation. If this is not possible, check the prescribed rules for your unused materials and how to close your Authorisation correctly.
What Does the Cancellation Change?
Your Advance Authorisation is not tied to just one buyer. It is linked to the export product which is mentioned in your Authorisation, and you have to complete your exports within the allowed time under the Authorisation.
- If your buyer cancels the order: You are still required to fulfil your export commitment. Normally, you get 18 months from the date your Authorisation is issued, unless a special rule applies.
- What about the imported materials? You have to use the imported material for making the export product that is mentioned in your Authorisation.
- Can you sell or move the materials elsewhere? You cannot freely sell or transfer them. If you need to move them to another unit or send them to a job worker, you must follow the required procedure.
What Should You Do? Follow This Order
1. Check Your Authorisation
Check which product you can export, which materials are covered and how much time you have left to complete your exports.
2. Try to Find Another Buyer
Look for a new buyer for the same product. This may help you complete your export obligation within the allowed time.
3. Ask for More Time
If you cannot finish the exports on time, apply to the Regional Authority for an extension. Approval depends on the applicable rules.
4. Regularise Your Case
If you cannot complete your exports, follow the applicable rules to regularise your case and complete the required process to obtain your EODC and close the Authorisation.
Where Are Your Goods?
1. Raw Materials Imported but Not Used
If your buyer cancels the order, try to find a new buyer for the product you planned to make and export under your Authorisation. If you need more time, check whether you can get an extension.
2. Goods Already Made or Still Being Made
Try to find a new buyer to complete your Export Obligation. If you cannot complete it in time, check whether you can get an extension. If not, follow the applicable rules to regularise your case.
Extension of the Export Obligation Period
If you need more time to complete your exports, contact the Regional Authority and check whether an extension of the export obligation period is possible in your case. Apply as early as possible and follow the applicable rules and procedures.
What Not to Do
- Do not use the inputs for a different export product. The imported materials are meant for the specific export product mentioned in your Authorisation.
- Do not sell unused inputs freely. You should check the applicable rules before you sell or transfer them.
- Don't re-export the inputs because your buyer cancelled the order. If the imported goods are defective or unsuitable for use, re-export may be permitted (as provided by the rules). Notify the Regional Authority before re-exporting them.
- Do not assume you can cancel your Authorisation after importing. This option is only available where you have not imported inputs.
How to Regularise Your Case If You Cannot Export
If you cannot complete your Export Obligation, you have to follow the prescribed rule for closing your Authorisation. What you need to do depends on your situation.
| What should you check? | Why does it matter? |
|---|---|
| Are you short in export quantity, value or both? | The rules differ in each case. You may have to pay duty, interest or another amount, depending on your situation. |
| How much of the imported material is left unused? | The unused material may affect how much duty and interest you have to pay. |
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What If You Cannot Export Anything?
You may still have to pay duty and interest on unused materials, depending on the applicable rules.
How to Close Your Authorisation
- Check the regularisation rules that apply to your case.
- Pay any duty, interest or other amount due through the prescribed process.
- Submit the required documents and payment details.
- Complete the required process to get your Export Obligation Discharge Certificate (EODC) and close your Authorisation.
Remember: Paying duty alone does not close your Authorisation.
Example
Suppose a manufacturer gets an export order worth ₹50 lakh and imports raw materials worth ₹30 lakh under an Advance Authorisation. Before the goods can be shipped, the buyer cancels the order.
The manufacturer now has to decide what to do with the imported materials.
What Can the Manufacturer Do Next?
| Situation | What can the manufacturer do? |
|---|---|
| A new buyer is found | Sell the product to the new buyer by exporting it and complete the Export Obligation within the allowed time. |
| More time is needed | Check whether an extension is possible and apply under the applicable rules. |
| The goods cannot be exported | Check how to regularise the case and pay any amount due under the applicable rules. |
| The manufacturer wants to sell the materials or goods in India | Check the rules before selling them. Selling them without meeting the required conditions can create problems. |
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Remember: The cancelled order value of ₹50 lakh is not the amount payable to Customs. Any amount due depends on the imported materials, how much is left unused and the rules that apply to the case.
Checklist for a Cancelled Export Order
If your buyer cancels the order after you have imported raw materials under Advance Authorisation, here are a few things to check:
- Check your Authorisation: See which product and raw materials are covered and when you need to complete your Export Obligation.
- Check the unused materials: Find out how much of the imported material is still left.
- Look for a new buyer: Try to get another order for the same product mentioned in your Authorisation.
- Check if you can get more time: If you cannot complete your exports on time, check whether an extension is possible.
- Regularise your case if needed: If you cannot complete your Export Obligation, check the applicable rules to find out what you need to do next.
- Keep your records ready: Keep your import documents, export records and details of the materials used and left unused.
How Kireeti Group Helps
- Check your Authorisation and explain your available options.
- Help you apply for an extension, if allowed.
- Guide you through regularisation if you cannot complete your Export Obligation.
- Help you complete the EODC process.
Buyer cancelled your order after AA imports? Contact Kireeti Group to understand your next steps.
Official Sources
- Chapter 4 of Foreign Trade Policy 2023
- Chapter 4 of Handbook of Procedures 2023
