Key Regulations Governing Foreign Trade in India

Every shipment that leaves an Indian port or arrives at one passes through a web of rules designed to track money, goods, and the people moving them. For anyone starting a trading business, these rules can feel like a maze of acronyms. But the logic behind them is simple: the government wants to know who is trading, what they are sending or receiving, and whether the foreign currency involved is being handled properly. Three registrations sit at the centre of this system, and understanding them is the first practical step before any commercial import or export can legally happen.

The legal framework behind foreign trade 🔗

Foreign trade in India is governed by two main pillars. The first is the Foreign Trade (Development and Regulation) Act, 1992, which empowers the central government to frame the Foreign Trade Policy and to control imports and exports. The second is the Foreign Exchange Management Act (FEMA), 1999, which manages the foreign currency side of every transaction.

Older textbooks still refer to the Foreign Exchange Regulation Act (FERA) of 1973 and the Export-Import Policy of 1992-97. It helps to know that this framework has since changed. FEMA replaced the stricter FERA, shifting India from a regime that treated currency violations as criminal offences to one built around facilitating trade. The day-to-day administration of trade rules now sits with the Directorate General of Foreign Trade (DGFT), a body under the Ministry of Commerce and Industry, while the Reserve Bank of India (RBI) oversees the flow of foreign exchange. Almost everything described below has moved online, which has made these registrations faster than the paper-driven era the textbooks describe.

The Import-Export Code number 🔗

The single most important registration for any trader is the Import-Export Code (IEC). This is a 10-digit business identification number issued by the DGFT and is mandatory for sending goods out of the country or bringing them in. No commercial import or export can take place without it, unless the transaction is specifically exempted.

The reason the IEC matters so much is what happens without it. Customs authorities will not clear a consignment that has no valid IEC attached, which means goods can get stuck at the port and pile up storage charges. Banks also need the code before they will process any payment in foreign currency. In short, without an IEC, the shipment cannot move and the money cannot be received.

How the IEC has changed 🔗

The textbook describes applying to a “Regional Import-Export Licensing Authority.” Today the entire process is online through the DGFT portal. Since the rollout of the Goods and Services Tax, the IEC number is the same as the PAN of the firm, though a separate certificate is still issued by the DGFT after you formally apply. The nature of the applicant can be a proprietorship, partnership, LLP, limited company, trust, HUF, or society.

A few practical points are worth remembering. The application uses an online form, and the fee is modest. Once granted, the IEC is valid for the lifetime of the entity with no renewal required, but holders must update their details on the portal at least once a year. Skipping this annual update can deactivate the code, which is one of the more common mistakes new exporters make.

Who is exempt 🔗

The exemptions are narrow. Individuals importing or exporting goods purely for personal use, not connected to trade or manufacture, do not need an IEC. Central and State Government ministries with their own PAN are also exempt. Service exporters generally do not need an IEC either, unless they are claiming benefits under the Foreign Trade Policy. Everyone else carrying out commercial trade must hold a valid code.

Registration with an Export Promotion Council 🔗

The second registration in the textbook concerns the Export Promotion Council (EPC). The old policy made registration with bodies like an EPC, APEDA, MPEDA, or FIEO compulsory for exporters who wanted licences or benefits. That principle still holds, but the document and the process have a clearer name today.

An exporter now obtains a Registration-Cum-Membership Certificate (RCMC). This is a certificate that confirms you are a registered exporter dealing in a particular category of goods or services, issued by an authority recognised by the DGFT. There are several such registering authorities, including Export Promotion Councils, Commodity Boards, and Development Authorities. The RCMC is what unlocks incentives and concessions under the Foreign Trade Policy, such as duty remission schemes and the Export Promotion Capital Goods scheme.

Picking the right council 🔗

Which body issues your RCMC depends on what you export. The system is organised by product category, so you register with the council that oversees your line of business. A few common examples make this clear:

• APEDA handles agricultural and processed food products.
• MPEDA covers marine products.
• The Engineering Export Promotion Council serves engineering goods exporters.
• FIEO, the Federation of Indian Export Organisations, is used by exporters dealing in multiple unrelated categories.

You must declare your main line of business during the application, because that declaration decides which authority issues the certificate. Commodity-specific boards, such as the Spices Board, Coffee Board, and Tea Board, work the same way for their sectors.

How registration works now 🔗

Since 1 April 2022, the DGFT has required exporters to file for an RCMC electronically. The DGFT introduced a common digital platform, the e-RCMC module, which acts as a single point of access for all exporters and importers instead of approaching each council separately on paper. To apply, you need an active IEC and an updated IEC profile, which is why the IEC always comes first.

One nuance is worth flagging. While the textbook frames EPC registration as compulsory, the current position is that you can technically export without an RCMC, but you cannot claim benefits or concessions under the Foreign Trade Policy without it. The RCMC must be valid on the date you apply to the DGFT for any such benefit. For a serious exporter, that makes it a practical necessity rather than an optional extra. The certificate is generally valid for five financial years before it needs renewal.

The Reserve Bank code and how it became the AD Code 🔗

The third registration in the textbook is the Reserve Bank Code Number. Under the old FERA system, an export firm had to apply to the RBI’s divisional office for this code, maintain a current account and a permanent income-tax account number, and inform the RBI within fifteen days of the code being allotted. The purpose was to let the RBI keep track of who was earning foreign exchange and ensure it was brought back into the country.

That tracking function has not disappeared. It has simply moved closer to the banks. Today the equivalent registration is the Authorised Dealer Code (AD Code). This is a 14-digit number issued by an RBI-authorised bank, that is, a bank permitted to deal in foreign exchange, and it links your business bank account to your trade transactions. The AD Code lets the RBI monitor the inflow and outflow of foreign currency under FEMA, much as the Reserve Bank Code Number did under FERA.

Why the AD Code matters in practice 🔗

The AD Code is not just a formality. It must be registered at the port through which you ship, and without it your shipping bill cannot be generated for customs clearance. It also links your account so that government incentives, such as duty drawback and tax remission on exported products, are credited directly to the right bank account. Registering the AD Code before your first shipment avoids delays both at the port and in receiving these incentives.

The broader logic behind FEMA is that export proceeds must be received and reported properly to the RBI. As the RBI enforces FEMA and monitors transactions through authorised dealers, the AD Code is the thread that ties an individual exporter’s payments back to the central monitoring system. This protects both the business and the country’s foreign exchange reserves.

How the three registrations fit together 🔗

It is easy to see these as three separate hurdles, but they form a logical sequence. The IEC is the foundation, the licence to trade at all. The RCMC builds on it, registering you with the right council so you can claim the benefits that make exporting profitable. The AD Code connects your bank account to the system, making sure foreign currency moves legally and incentives reach you.

A typical exporter therefore obtains the IEC first, opens a current account with a bank authorised to deal in foreign exchange, registers the AD Code through that bank, and then applies for the RCMC through the DGFT’s online platform. Compliance does not end there. Once goods are shipped, the export has to be declared and the payment reconciled with the bank, after which the exporter receives an electronic bank realisation certificate used for tax and incentive claims. Each piece exists so that the government can answer three questions for every shipment: who is trading, what is being traded, and where the money went.

What do you think? If FEMA was designed to make foreign trade easier than the older FERA regime, do these multiple registrations still strike the right balance between control and convenience? And as more of this process moves to digital platforms, which of these three steps do you think will be simplified or merged next?

References

1. https://cleartax.in/s/fema-foreign-exchange-management-act
2. https://www.dgft.gov.in/CP/?opt=iec-profile-management
3. https://indiaxports.com/page.php?slug=import-export-code-number
4. https://www.cajiteshtelisara.com/iec-registration/
5. https://razorpay.com/blog/rcmc-certificate/
6. https://www.indiafilings.com/learn/rcmc-2
7. https://www.skydo.com/blog/export-promotion-council-registration-rcmc
8. https://www.skydo.com/blog/ad-code
9. https://www.bhartiaxa.com/knowledge-hub/tax-savings/foreign-exchange-management-act-fema