Amazon worldwide sales can be a profitable business venture for you but also involve a bit of compliance. One such compliance requirement is an AD Code (Authorized Dealer Code) if you are an Indian exporter with effect from when you make cross-country transactions. If you’re an Indian supplier who wants access to the overseas markets through Amazon, it’s important that you know if you need an AD Code or not and how you are affected.
AD Code (Authorized Dealer Code) is a unique code given by Reserve Bank of India (RBI) authorized banks to facilitate foreign exchange transactions. AD Code is required by Indian exporters for receiving foreign exchange receipts. Your Amazon sale revenue from abroad would otherwise be in USD, EUR, or the currency of a foreign country. In order to get such money into India, you would have to provide Amazon with your AD Code so that money can be remitted by a sanctioned bank.
Why You Need an AD Code to Sell on Amazon Globally?
If you are an Indian merchant looking to sell on Amazon in marketplaces such as the US, UK, Canada, or Europe, you will need an AD Code for payment receipts. Here’s why:
- RBI Regulation Compliance
RBI brings all foreign exchange transactions through authorized dealer banks. AD Code ensures proper recording of your export proceeds so that you are in line with Foreign Exchange Management Act (FEMA) regulations.
- Convenient Payment Processing
Amazon reimburses foreign currency proceeds on exports. Your bank will request an AD Code to credit such funds into your Indian bank account to verify the payment. The payment will be held up otherwise, affecting your cash flow.
- Easy Export Documentation
When selling on Amazon worldwide, you might be required to provide shipping and customs documents. The AD Code assists in matching shipping documents with export proceeds to avoid discrepancies and minimize payment delays.
How to Obtain an AD Code to Sell on Amazon?
If you have already made up your mind to sell on Amazon FBA worldwide, an AD Code is one that is quite easy to obtain. Here is how you can obtain it:
Step 1: Open a Current Account with an Authorised Dealer Bank
Not all Indian banks are authorized to give an AD Code. You need to open a current account with a bank that has an RBI approval to deal in foreign exchange. SBI, HDFC, ICICI, and Axis Bank are large banks which offer this facility.
Step 2: Provide Mandatory Documents
While applying for an AD Code, you will need to provide the following documents:
- IEC (Import-Export Code) of DGFT
- PAN Card
- GST Registration Certificate
- Proof of business (Partnership Deed, Company Incorporation Certificate, or Sole Proprietorship Proof)
- Cancelled cheque of your current account
Step 3: Complete the AD Code Application Form
The bank will issue you an application form where you must declare your business name, IEC number, and nature of export. Your documents will be verified by the bank and then granted the AD Code when submitted.
Step 4: Connect Your AD Code to Your Amazon Seller Account
Once you get your AD Code, all you have to do is login to your Amazon Seller Central account and modify your payment information. You need to modify your AD Code in the corresponding column so that transactions of cross-border funds are processed successfully.
Can You Sell on Amazon Internationally without an AD Code?
Technically, you can sell without an AD Code globally listing products in Amazon marketplaces all over the world. However, you won’t be able to get paid. Amazon wants Indian sellers to add an AD Code for cross-border remittance. If you don’t, your payment will be held back in Amazon’s system until such compliance is achieved.
Other sellers employ other forms of payments, such as third-party forex companies or foreign bank accounts that are costly and comply with regulatory requirements. The easiest and most efficient option is buying an AD Code to enable smooth payments.
Most Frequently Encountered AD Code Problems and Their Solutions
Even though the AD Code system is meant to make exportation easy, sellers do have a few problems:
- Delay in Code Issuance
Banks can take some time to validate AD Code applications through document verifications. In order to be delay-free, make sure that all documents received are accurate and complete.
- Export Documents Discrepancy
When export declarations in your AD Code are not similar to shipping details on Amazon, banks can refuse the transaction. Make sure that invoice and shipping details are the same.
- Bank Rejections Based on Incorrect Details
A single mistake in the AD Code or IEC number can result in payment rejections. Verify all information prior to submitting it to Amazon and your bank.
Smooth International Selling on Amazon Tips
To sell successfully on Amazon internationally, practice these best practices:
- Apply for an IEC Early
Because the Import-Export Code (IEC) is needed in order to qualify for an AD Code, apply early to eliminate last-minute roadblocks.
- Maintain Export Records in Unusual Order:
Maintain all bills of lading, shipping invoices, and Amazon order records in sequence. They will be needed for bank reconciliations.
- Take Advice from a Seasoned CA:
A Chartered Accountant with sound export compliance knowledge will assist you in managing RBI norms, GST export, and AD Code procedures.
Conclusion
If you’re an Indian seller looking to sell on Amazon internationally, obtaining an AD Code is a non-negotiable requirement. It ensures compliance with RBI regulations, facilitates smooth payment processing, and helps maintain proper export records. While the process may seem bureaucratic, the long-term benefits of having an AD Code far outweigh the initial effort.
With a fast advance pick-up of your AD Code and exporting as per guidelines, you can unleash the full potential of global e-commerce and globalize your Amazon business to international markets worldwide. Start today and globalize with your brand!
