1.INTRODUCTION: (UPDATED 12th January 2018)
Export trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices, functioning under the Ministry of Commerce and Industry, Department of Commerce, Government of India.
AD Category – I banks may conduct export transactions in conformity with the Foreign Trade Policy in vogue and the Rules framed by the Government of India and the Directions issued by Reserve Bank from time to time.
All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realised in freely convertible currency. However, export proceeds against specific exports may also be realised in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan.” Indian Rupee is not a freely convertible currency, as yet.
2.TIME FOR REALISATION OF EXPORT:
It is obligatory on the part of the exporter to realise and repatriate the full value of goods / software / services to India within a stipulated period from the date of export, as under:
(i) Nine months from the date of export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further notice.
(ii) For goods exported to a warehouse established outside India, the proceeds shall be realized within fifteen months from the date of shipment of goods.
3.MANNER OF RECEIPT OF PROCEEDS:
(i) The amount representing the full export value of the goods exported shall be received through an AD Bank in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2016.
(ii) When payment for goods sold to overseas buyers during their visits is received in this manner, EDF (duplicate) should be released by the AD Category – I banks only on receipt of funds in their Nostro account.
(iii) Settlement System under ACU Mechanism
In order to facilitate transactions / settlements, effective January 01, 2009, participants in the Asian Clearing Union will have the option to settle their transactions either in ACU Dollar or in ACU Euro. Accordingly, the Asian Monetary Unit (AMU) shall be denominated as ‘ACU Dollar’ and ‘ACU Euro’ which shall be equivalent in value to one US Dollar and one Euro, respectively.
(iv) Third party payments for export / import transactions
Third party payments for export / import transactions are permitted subject to conditions as under:
a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/ invoice has been produced subject to:
b) Third party payment should be routed through the banking channel only;
c) The exporter should declare the third party remittance in the Export Declaration Form and it would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF;
d) Reporting of outstanding, if any, in the XOS would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realized, the name of the declared third party should appear in the XOS;
4. FOREIGN CURRENCY ACCOUNTS:
Foreign Currency accounts like EEFC and Diamond Dollar Accounts can be opened by the exporters. Please get the full details of such accounts in RBI-Master Directions on Deposits and Accounts.
5.EDF / SOFTEX PROCEDURE:
Export of goods through Customs ports
(i) Customs shall certify the value declared and give running serial number on the two copies of Export Declaration Form (EDF), submitted by exporter at Non- Electronic Data Interchange (EDI) port.
(ii) Customs shall retain the original EDF for transmission to the Reserve Bank and return the duplicate copy to the exporter.
(iii) At the time of shipment of goods, exporters shall submit the duplicate copy of the EDF to Customs. After examining the goods, Customs shall certify the quantity in the form and return it to the exporter for submission to AD for negotiation or collection of export bills.
(iv) Within 21 days from the date of export, exporter shall lodge the duplicate copy together with relative shipping documents and an extra copy of the invoice to the AD named in the EDF.
(v) After the documents have been negotiated / sent for collection, the AD shall report the transaction through Export Data Processing and Monitoring System (EDPMS) to the Reserve Bank and retain the documents at their end.
(vi) In case of exports made under deferred credit arrangement or to joint ventures abroad against equity participation or under rupee credit agreement, the number and date of the Reserve Bank approval and/or number and date of the relative RBI circular shall be recorded at the appropriate place on the EDF.
(vii) Where duplicate copy of EDF is misplaced or lost, AD may accept copy of duplicate EDF duly certified by Customs.
Export of goods/ software done through EDI ports
(i) The shipping bill shall be submitted in duplicate to the Commissioner of Customs concerned.
(ii) After verifying and authenticating, the Commissioner of Customs shall hand over to the exporter, one copy of the shipping bill marked ‘Exchange Control (EC) Copy’ for being submitted to the AD within 21 days from the date of export for collection/negotiation of shipping documents.
(iii) The manner of disposal of EC copy of Shipping Bill shall be the same as that for EDF. The duplicate copy of the form together with a copy of invoice etc. shall be retained by ADs and may not be submitted to the Reserve Bank
Export of goods through Post
Postal Authorities shall allow export of goods by post only if the original copy of the EDF has been countersigned by an AD. Therefore, EDF which involve sending goods by post should be first presented by the exporter to an AD for countersignature. The procedure is as under:
(i) AD shall countersign EDF after ensuring that the parcel has been addressed to their branch or correspondent bank in the country of import and return the original copy to the exporter, who shall then submit the EDF to the post office with the parcel.
(ii) The duplicate copy of EDF shall be retained by the AD to whom the exporter shall submit relevant documents together with an extra copy of invoice for negotiation/collection, within the prescribed period of 21 days.
(iii) The concerned overseas branch or correspondent shall be instructed to deliver the parcel to consignee against payment or acceptance of relative bill.
(iv) AD may, however, countersign EDF covering parcels addressed direct to the consignees, provided:
- An irrevocable letter of credit for the full value of export has been opened in favor of the exporter and has been advised through the AD concerned.Or
- The full value of the shipment has been received in advance by the exporter through an AD.Or
- The AD is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realisation of the export proceeds.
In such cases, particulars of advance payment/letter of credit / AD’s certification of standing, etc., of the exporter should be furnished on the form under proper authentication.
(v) Any alteration in the name and address of consignee on the EDF form should also be authenticated by AD under its stamp and signature.
(i) All software exporters can now file single as well as bulk SOFTEX form in the form of a statement in excel format to the competent authority for certification. Since the SOFTEX data from STPI/SEZ are being transmitted in electronic format to RBI, the exporters now have to submit the SOFTEX form in duplicate as per the revised procedure. STPI/SEZ will retain one copy and handover duplicate copy to exporters after due certification. As hitherto, the exporters have to provide information about all the invoices including the ones lesser than US$25000, in the bulk statement in excel format.
Export of Services
it is clarified that, in respect of export of services to which none of the Forms specified in these Regulations apply, the exporter may export such services without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the Act, and these Regulations, as also other rules and regulations made under the Act.
In all the above procedures, AD Category – I bank should ensure, by random check of the relevant duplicate forms by their internal / concurrent auditors, that non-realization or short realization allowed, if any, is within the powers delegated to them or has been duly approved by the Reserve Bank, wherever necessary.
Exemption from Declaration
The requirement of declaration of export of goods and software in the prescribed form will not apply to the cases indicated in Regulation 4 of Foreign Exchange Management (Export of Goods and Services) Regulations dated January 12, 2016. The exporters shall, however, be liable to realise and repatriate export proceeds as per FEMA Regulations.
6.OBLIGATIONS OF ADs:
Grant of EDF waiver
AD Category – I banks may consider requests for grant of EDF waiver from exporters as under:
Status holders shall be entitled to export freely exportable items (excluding Gems and Jewellery, Articles of Gold and precious metals) on free of cost basis for export promotion subject to an annual limit of Rupees One Crore or 2% of average annual export realisation during preceding three licensing years, whichever is lower. For export of pharma products by pharmaceutical companies, the annual limit would be 2% of average annual export realisation during preceding three licensing years. In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to health programmes of international agencies such as UN,WHO-PAHO and Government health programmes, the annual limit shall be upto 8% of the average annual export realisation during preceding three licensing years. Such free of cost supplies shall not be entitled to Duty Drawback or any other export incentive under any export promotion scheme.
Receipt of advance against exports
(1) In terms of Regulation 15 of Notification No. FEMA 23 (R)/2015-RB dated January 12, 2016, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that the shipment of goods is made within one year from the date of receipt of advance payment; the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points; and the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received.
Provided that in the event of the exporter’s inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilized portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one year, without the prior approval of the Reserve Bank.
EDPMS will capture the details of advance remittances received for exports in EDPMS. AD Category – I banks will have to report all the inward remittances including advance as well as old outstanding inward remittances received for export of goods/ software to EDPMS. Further, AD Category – I banks need to report the electronic FIRC to EDPMS wherever such FIRCs are issued against inward remittances.
(2) AD Category- I banks can also allow exporters having a minimum of three years’ satisfactory track record to receive long term export advance up to a maximum tenor of 10 years to be utilised for execution of long term supply contracts for export of goods subject to stipulated conditions.
(3) AD Category- I banks may allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship and where the ‘export agreement’ provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment subject to stipulated conditions.
EDF Approval for Trade Fair/Exhibitions abroad
Firms / Companies and other organisations participating in Trade Fair/Exhibition abroad can take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank. Unsold exhibit items may be sold outside the exhibition/trade fair in the same country or in a third country. Such sales at discounted value are also permissible. It would also be permissible to ‘gift’ unsold goods up to the value of USD 5000 per exporter, per exhibition/trade fair. AD Category – I banks may approve EDF of export items for display or display-cum-sale in trade fairs/exhibitions outside India subject to the following:
(i) The exporter shall produce relative Bill of Entry within one month of re-import into India of the unsold items.
(ii) The exporter shall report to the AD Category – I banks the method of disposal of all items exported, as well as the repatriation of proceeds to India.
(iii) Such transactions approved by the AD Category – I banks will be subject to 100 per cent audit by their internal inspectors/auditors.
EDF approval for export of goods for re-imports
(i) AD Category – I banks may consider request from exporters for granting EDF approval in cases where goods are being exported for re-import after repairs / maintenance / testing / calibration, etc., subject to the condition that the exporter shall produce relative Bill of Entry within one month of re-import of the exported item from India.
(ii) Where the goods being exported for testing are destroyed during testing, AD Category – I banks may obtain a certificate issued by the testing agency that the goods have been destroyed during testing, in lieu of Bill of Entry for import.
Re-export of unsold rough diamonds from Special Notified Zone of Customs without Export Declaration Form (EDF) formality
(i) In order to facilitate re-export of unsold rough diamonds imported on free of cost basis at SNZ, it is clarified that the unsold rough diamonds, when re-exported from the SNZ (being an area within the Customs) without entering the Domestic Tariff Area (DTA), do not require any EDF formality.
(ii) Entry of consignment containing different lots of rough diamonds into the SNZ should be accompanied by a declaration of notional value by way of an invoice and a packing list indicating the free cost nature of the consignment. Under no circumstance, entry of such rough diamonds is permitted into DTA.
(iii) For the lot/ lots cleared at the Precious Cargo Customs Clearance Centre, Mumbai, Bill of Entry shall be filed by the buyer. AD bank may permit such import payments after being satisfied with the bona-fides of the transaction. Further, AD bank shall also maintain a record of such transactions.
Delay in submission of shipping documents by exporters
In cases where exporters’ present documents pertaining to exports after the prescribed period of 21 days from date of export, AD Category – I banks may handle them without prior approval of the Reserve Bank, provided they are satisfied with the reasons for the delay.
Return of documents to exporters
The duplicate copies of EDF and shipping documents, once submitted to the AD Category – I banks for negotiation, collection, etc., should not ordinarily be returned to exporters, except for rectification of errors and re-submission.
Direct dispatch of documents by the exporter
(i) AD Category – I banks should normally dispatch shipping documents to their overseas branches/correspondents expeditiously. However, they may dispatch shipping documents direct to the consignees or their agents resident in the country of final destination of goods in cases where:
a) Advance payment or an irrevocable letter of credit has been received for the full value of the export shipment and the underlying sale contract/letter of credit provides for dispatch of documents direct to the consignee or his agent resident in the country of final destination of goods.
b) The AD Category – I banks may also accede to the request of the exporter provided the exporter is a regular customer and the AD Category – I bank is satisfied, on the basis of standing and track record of the exporter and arrangements have been made for realization of export proceeds.
(ii) AD Category – I banks may also permit ‘Status Holder Exporters’ (as defined in the Foreign Trade Policy), and units in Special Economic Zones (SEZ) to dispatch the export documents to the consignees outside India subject to the terms and conditions that:
a) The export proceeds are repatriated through the AD banks named in the EDF.
b) The duplicate copy of the EDF is submitted to the AD banks for monitoring purposes, by the exporters within 21 days from the date of shipment of export.
(iii) AD Category – I banks may regularize cases of dispatch of shipping documents by the exporter direct to the consignee or his agent resident in the country of the final destination of goods, up to USD 1 million or its equivalent, per export shipment, subject to the following conditions:
a) The export proceeds have been realized in full.
b) The exporter is a regular customer of AD Category – I bank for a period of at least six months.
c) The exporter’s account with the AD Category – I bank is fully compliant with the Reserve Bank’s extant KYC / AML guidelines.
d) The AD Category – I bank is satisfied about the bonafides of the transaction.
e) In case of doubt, the AD Category – I bank may consider filing Suspicious Transaction Report (STR) with FIU_IND (Financial Intelligence Unit in India).
(i) When goods have been exported on consignment basis, the AD Category-I bank, while forwarding shipping documents to his overseas branch/ correspondent, should instruct the latter to deliver them only against trust receipt/undertaking to deliver sale proceeds by a specified date within the period prescribed for realisation of proceeds of the export. This procedure should be followed even if, according to the practice in certain trades, a bill for part of the estimated value is drawn in advance against the exports.
(ii) The agents/consignees may deduct from sale proceeds of the goods expenses normally incurred towards receipt, storage and sale of the goods, such as landing charges, warehouse rent, handling charges, etc. and remit the net proceeds to the exporter.
(iii) The account sales received from the Agent/Consignee should be verified by the AD Category – I banks. Deductions in Account Sales should be supported by bills/receipts in original except in case of petty items like postage/cable charges, stamp duty, etc.
(iv) In case the goods are exported on consignment basis, freight and marine insurance must be arranged in India.
(v) AD Category – I banks may allow the exporters to abandon the books, which remain unsold at the expiry of the period of the sale contract. Accordingly, the exporters may show the value of the unsold books as deduction from the export proceeds in the Account Sales.
Export Bills Register
AD Category – I banks should maintain Export Bills Register, in physical or electronic form aligned with Export Data Processing and Monitoring System (EDPMS). The bill number should be given to all type of export transactions on a financial year basis (i.e. April to March) and same should be reported in EDPMS.
Follow-up of overdue bills
(i) AD Category – I banks should closely watch realisation of bills and in cases where bills remain outstanding, beyond the due date for payment from the date of export, the matter should be promptly taken up with the concerned exporter. If the exporter fails to arrange for delivery of the proceeds within the stipulated period or seek extension of time beyond the stipulated period, the matter should be reported to the Regional Office concerned of the Reserve Bank stating, where possible, the reason for the delay in realising the proceeds.
(ii) The duplicate copies of EDF/SOFTEX Forms should, continue to be held by AD Category – I banks until the full proceeds are realized, except in case of undrawn balances.
(iii) AD Category – I banks should follow up export outstanding with exporters systematically and vigorously so that action against defaulting exporters does not get delayed.
(iv) With EDPMS in operation from March 01, 2014, realisation of all export transaction for shipping documents after February 28, 2014 should be reported in EDPMS.
Reduction in invoice value on account of prepayment of usance bills
Occasionally, exporters may approach AD Category – I banks for reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills. AD Category – I banks may allow cash discount to the extent of amount of proportionate interest on the unexpired period of usance, calculated at the rate of interest stipulated in the export contract or at the prime rate/LIBOR of the currency of invoice where rate of interest is not stipulated in the contract.
Reduction in invoice value in other cases
(i) If, after a bill has been negotiated or sent for collection, its amount is to be reduced for any reason, AD Category – I banks may approve such reduction, if satisfied about genuineness of the request, provided:
a) The reduction does not exceed 25 per cent of invoice value:
b) It does not relate to export of commodities subject to floor price stipulations
c) The exporter is not on the exporters’ caution list of the Reserve Bank,
d) The exporter is advised to surrender proportionate export incentives availed of, if any.
(ii) In the case of exporters who have been in the export business for more than three years, reduction in invoice value may be allowed, without any percentage ceiling, subject to the above conditions as also subject to their track record being satisfactory, i.e., the export outstanding do not exceed 5 per cent of the average annual export realization during the preceding three financial years.
(iii) For the purpose of reckoning the percentage of export bills outstanding to the average export realizations during the preceding three financial years, outstanding of exports made to countries facing externalization problems may be ignored provided the payments have been made by the buyers in the local currency.
Change of buyer/consignee
Prior approval of the Reserve Bank is not required if, after goods have been shipped, they are to be transferred to a buyer other than the original buyer in the event of default by the latter, provided the reduction in value, if any, involved does not exceed 25 per cent of the invoice value and the realisation of export proceeds is not delayed beyond the period of 9 months from the date of export. Where the reduction in value exceeds 25%, all other relevant conditions stipulated should also be satisfied.
Export of goods by Special Economic Zones (SEZs)
(i) Units in SEZs are permitted to undertake job work abroad and export goods from that country itself subject to the conditions that:
a) Processing / manufacturing charges are suitably loaded in the export price and are borne by the ultimate buyer.
b) The exporter has made satisfactory arrangements for realization of full export proceeds subject to the usual EDF procedure.
(ii) AD Category – I banks may permit units in DTAs to purchase foreign exchange for making payment for goods supplied to them by units in SEZs. Authorised Dealer Banks are permitted to sell foreign exchange to a unit in the DTA for making payment in foreign exchange to a unit in the SEZ for the services rendered by it (i.e. a unit in SEZ) to a DTA unit. It must be ensured that in the Letter of Approval (LoA) issued to the SEZ unit by the Development Commissioner(DC) of the SEZ, the provisions pertaining to the goods / services supplied by the SEZ unit to the DTA unit and for payment in foreign exchange for the same should be mentioned.
Extension of time
(i) The Reserve Bank of India has permitted the AD Category – I banks to extend the period of realisation of export proceeds beyond stipulated period of realisation from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions:
a) The export transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies,
b) The AD Category – I bank is satisfied that the exporter has not been able to realize export proceeds for reasons beyond his control,
c) The exporter submits a declaration that the export proceeds will be realized during the extended period,
d) While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realizations during the preceding three financial years, whichever is higher.
e) In cases where the exporter has filed suits abroad against the buyer, extension may be granted irrespective of the amount involved / outstanding.
(ii) Cases which are not covered by the above instructions would require prior approval from the concerned Regional Office of the Reserve Bank.
(iii) Reporting should be done in EDPMS.
(i) AD Category – I banks may remit export claims on application, provided the relative export proceeds have already been realised and repatriated to India and the exporter is not on the caution list of the Reserve Bank.
(ii) In all such cases of remittances, the exporter should be advised to surrender proportionate export incentives, if any, received by him.
Write-off of unrealized export bills
(i) An exporter who has not been able to realize the outstanding export dues despite best efforts, may either self-write off or approach the AD Category – I banks, who had handled the relevant shipping documents, with appropriate supporting documentary evidence. The limits prescribed for write-offs of unrealized export bills are as under:
|Self “write-off” by an exporter
(Other than Status Holder Exporter)
|Self “write-off” by Status Holder Exporters||10%*|
|‘Write-off” by Authorized Dealer Bank-||10%*|
|*of the total export proceeds realized during the previous calendar year.|
(ii) The above limits will be related to total export proceeds realized during the previous calendar year and will be cumulatively available in a year.
(iii) The above write-off will be subject to conditions that the relevant amount has remained outstanding for more than one year, satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realize the dues, and the case falls under any of the undernoted categories:
a) The overseas buyer has been declared insolvent and a certificate from the official liquidator indicating that there is no possibility of recovery of export proceeds has been produced.
b) The overseas buyer is not traceable over a reasonably long period of time.
c) The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country.
d) The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization;
e) The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made by the exporter;
f) The cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control;
g) Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amounts have remained unrealized consequent on dishonor of the bills by the overseas buyer and there are no prospects of realization.
(iv) The exporter has surrendered proportionate export incentives if any, availed of in respect of the relative shipments. The AD Category – I banks should obtain documents evidencing surrender of export incentives availed of before permitting the relevant bills to be written off.
(v) In case of self-write-off, the exporter should submit to the concerned AD bank, a Chartered Accountant’s certificate, indicating the export realization in the preceding calendar year and also the amount of write-off already availed of during the year, if any, the relevant EDF to be written off, Bill No., invoice value, commodity exported, country of export. The CA certificate may also indicate that the export benefits, if any, availed of by the exporter have been surrendered.
(vi) However, the following would not qualify for the write off facility:
a) Exports made to countries with externalisation problem i.e. where the overseas buyer has deposited the value of export in local currency but the amount has not been allowed to be repatriated by the central banking authorities of the country.
b) EDF which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are subject matter of civil / criminal suit.
vii) AD banks should report write off of export bills through EDPMS to the Reserve Bank.
viii) AD banks are advised to put in place a system under which their internal inspectors or auditors (including external auditors appointed by authorised dealers) should carry out random sample check / percentage check of write-off outstanding export bills.
ix) Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India.
Write off in cases of payment of claims by ECGC and private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA)
(i) AD Category – I banks shall, on an application received from the exporter supported by documentary evidence from the ECGC and private insurance companies regulated by IRDA confirming that the claim in respect of the outstanding bills has been settled by them, write off the relative export bills in EDPMS.
(ii) Such write-off will not be restricted to the limit of 10 per cent indicated above.
(iii) Surrender of incentives, if any, in such cases will be as provided in the Foreign Trade Policy.
(iv) The claims settled in rupees by ECGC and private insurance companies regulated by IRDA should not be construed as export realization in foreign exchange.
Write-off – relaxation
As announced in the Foreign Trade Policy (FTP), 2015-20, realization of export proceeds shall not be insisted upon under any of the Export Promotion Schemes under the said FTP, subject to the following conditions:
a) The write off on the basis of merits is allowed by the Reserve Bank or by AD Category – I bank on behalf of the Reserve Bank, as per extant guidelines;
b) The exporter produces a certificate from the Foreign Mission of India concerned, about the fact of non-recovery of export proceeds from the buyer; and
c) This would not be applicable in self write off cases.
Set-off of export receivables against import payables
AD category –I banks may deal with the cases of set-off of export receivables against import payables, subject to following terms and conditions:
(i) The import is as per the Foreign Trade Policy in force.
(ii) Invoices/Bills of Lading/Airway Bills and Exchange Control copies of Bills of Entry for home consumption have been submitted by the importer to the Authorized Dealer bank.
(iii) Payment for the import is still outstanding in the books of the importer.
(iv) Both the transactions of sale and purchase may be reported separately in R-Returns and FETERS.
(v) The relative EDF will be released by the AD bank only after the entire export proceeds are adjusted / received.
(vi) The set-off of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for set-off has been obtained from him.
(vii) The export / import transactions with ACU countries should be kept outside the arrangement.
(viii) All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions.
Netting-off of export receivables against import payments – Units in Special Economic Zones (SEZs)
AD Category – I banks may allow requests received from exporters for ‘netting off’ of export receivables against import payments for units located in Special Economic Zones subject to the following:
(i) The netting off of export receivables against import payments is in respect of the same Indian entity and the overseas buyer / supplier (bilateral netting) and the netting may be done as on the date of balance sheet of the unit in SEZ.
(ii) The details of export of goods are documented in EDF (O) forms / DTR as the case may be while details of import of goods / services are recorded through A1 / A2 form as the case may be. The relative EDF will be treated as complete by the designated AD Category – I banks only after the entire proceeds are adjusted / received.
(iii) Both the transactions of sale and purchase in R- Returns under FETERS are reported separately.
(iv) The export / import transactions with ACU countries are kept outside the arrangement.
(v) All the relevant documents are submitted to the concerned AD Category – I banks who should comply with all the regulatory requirements relating to the transactions.
Exporters’ Caution List
Caution Listing/ de-caution Listing of exporters is automated in EDPMS. The updated list of caution listed exporters can be accessed through EDPMS on a daily basis.
Issue of Guarantees by an Authorised Dealer
(1) An authorized dealer may give guarantee in respect of any debt, obligation or other liability incurred by a person resident in India and owned to a person resident outside India, where the debt, obligation or other liability is incurred by the person resident in India as an exporter, on account of exports from India.
(2) An authorised dealer may give a guarantee in respect of any debt, obligation or other liability incurred by a person resident outside India, in the following cases, namely:
(i) where such debt, obligation or liability is owned to a person resident in India in connection with a bonafide trade transaction:
Provided that the guarantee given under this clause is covered by a counter-guarantee of a bank of international repute resident broad;
(ii) as a counter-guarantee to cover guarantee issued by his branch or correspondent outside India, on behalf of Indian exporter in cases where guarantees of only resident banks are acceptable to overseas buyers.
Issuance of Electronic Bank Realisation Certificate (eBRC)
AD Category-I banks are required to update the EDPMS with data of export proceeds on “as and when realised basis” and, with effect from October 16, 2017, they are required to generate Electronic Bank Realisation Certificate (eBRC) only from the data available in EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC.
7.REMITTANCES CONNECTED WITH EXPORT:
Agency commission on exports
(i) AD Category – I banks may allow payment of commission, either by remittance or by deduction from invoice value, on application submitted by the exporter. The remittance on agency commission may be allowed subject to conditions as under:
a) Amount of commission has been declared on EDF/SOFTEX form and accepted by the Customs authorities or Ministry of Information Technology, Government of India / EPZ authorities as the case may be. In cases where the commission has not been declared on EDF/SOFTEX form, remittance may be allowed after satisfying the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement/written understanding between the exporters and/or beneficiary for payment of commission exists.
b) The relative shipment has already been made.
(ii) AD Category – I banks may allow payment of commission by Indian exporters, in respect of their exports covered under counter trade arrangement through Escrow Accounts designated in US Dollar, subject to the following conditions:
a) The payment of commission satisfies the conditions as at (a) and (b) stipulated in paragraph (i) above.
b) The commission is not payable to Escrow Account holders themselves.
c) The commission should not be allowed by deduction from the invoice value.
(iii) Payment of commission is prohibited on exports made by Indian Partners towards equity participation in an overseas joint venture / wholly owned subsidiary as also exports under Rupee Credit Route except commission up to 10 per cent of invoice value of exports of tea & tobacco.
Refund of export proceeds
AD Category – I banks, through whom the export proceeds were originally realized may consider requests for refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality. While permitting such transactions, AD Category – I banks are required to:
(i) Exercise due diligence regarding the track record of the exporter
(ii) Verify the bona-fides of the transactions
(iii) Obtain from the exporter a certificate issued by DGFT / Custom authorities that no incentives have been availed by the exporter against the relevant export or the proportionate incentives availed, if any, for the relevant export have been surrendered
(iv) Obtain an undertaking from the exporter that the goods will be re-imported within three months from the date of remittance and
(v) Ensure that all procedures as applicable to normal imports are adhered to.
8. EXPORT CREDITS:
Banks shall have Board Approved policies for interest rate chargeable on Export Credits in INR and Foreign Currencies. For further details, please go through RBI- Master Direction on Interest Rate on advances.
DEPOSITS AND ACCOUNTS:
Exchange Earner’s Foreign Currency (EEFC) Account – EEFC Account
A person resident in India may open an EEFC account with an AD in India as per the conditions stipulated in Schedule I to FEMA 10(R). The salient features of the scheme are:
1) Credits: The credits permitted to this account are:
- 100 percent of the foreign exchange earnings by way of inward remittance through normal banking channel, (other than loans or investments);
- payments received for the purpose of counter trade;
- advance remittance received by an exporter towards export of goods or services;
- professional earnings including director’s fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity;
- interest earned on the funds held in the account;
- Re-credit of unutilised foreign currency earlier withdrawn from the account;
- repayment of trade related loans/ advances (which were granted to the account holder’s importer customer out of balances held in the EEFC accounts);
- disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs under the 7DR Scheme, 2014; and
- Payments received in foreign exchange by an Indian startup arising out of sales/ export made by the startup or its overseas subsidiaries.
2) Debits: The debits allowed in these accounts are:
- Payment outside India towards capital or current account transactions in accordance with the provisions of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 or Foreign Exchange Management (Current Account Transactions) Rules, 2000, respectively;
- payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in an Export Processing Zone/ Software Technology Park/ Electronic Hardware Technology Park;
- payment of customs duty in accordance with the provisions of Export Import Policy;
- trade related loans/ advances, by an exporter account holder to his importer customer outside India, subject to complying the provisions of FEMA and the rules/ regulations made thereunder;
- payment in foreign exchange to a person resident in India for supply of goods/ services including payments for air fare and hotel expenditure
3) Withdrawal in rupees are permitted from this account, provided the amount so withdrawn cannot be re-credited to the account.
4) The account will be in the form of a non-interest bearing account.
5) The claims settled in rupees by ECGC/ insurance companies should not be construed as export realisation in foreign exchange and the claim amount will not be an eligible credit to the EEFC account.
6) The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
7) Fund-based/ non-fund based credit facilities should not be granted against the balances held in EEFC Accounts.
8) Exporters can repay packing credit advances, whether availed of in Rupee or in foreign currency, from balances in their EEFC account to the extent exports have actually taken place.
9) Balances held in the account may be credited to NRE/ FCNR (B) Accounts, at the option/ request of the account holders consequent upon change of their residential status from resident to non-resident.
Diamond Dollar Account (DDA) Scheme – DDA Account
Firms and companies which comply with the eligibility criteria stipulated in the Foreign Trade Policy of the Government of India may open DDA accounts, details of which are laid down in Schedule II of FEMA 10(R), as amended from time to time, with an AD in India. The salient features of the Scheme are:
- Realisation of export proceeds and local sales (in USD) of rough, cut, polished diamonds; and pre and post shipment finance availed in USD can be credited to such account.
- Payments for purchase of rough, cut and polished diamonds can be made from DDA account. Funds can also be transferred to rupee account of the exporter.
- The account should be maintained in the form of a non-interest bearing current account.
- The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
Indian agent of shipping or airline companies incorporated outside India can maintain foreign currency account in India for meeting the local expenses of the overseas company. The credits permitted to such accounts are freight or passage fare collections in India or from his principal outside India.
Ship-manning/ crew managing agencies in India may maintain non-interest bearing foreign currency account in India for the purpose of undertaking transactions in the ordinary course of their business, as detailed:
- Credits: Only by way of inward remittances through normal banking channels from the overseas principal.
- Debits: Towards various expenses in connection with the management of the ships/ crew in the ordinary course of its business.
- No credit facility (fund based or non-fund based) should be granted against security of funds held in the account.
- The bank should meet the prescribed Reserve Requirements in respect of such accounts.
- No EEFC facility should be allowed in respect of the remittances received in the account.
- The account will be maintained only during the validity period of the agreement.
Project Offices of foreign companies can open non-interest bearing one or more foreign currency accounts in India for the project to be executed in India. Such accounts will be subject to the following conditions:
1) The Project Office has been established in India, with the general/ specific permission of Reserve Bank, having the requisite approval from the concerned Project Sanctioning Authority,
2) The contract under which the project has been sanctioned, specifically provides for payment in foreign currency,
3) Each Project has only one Foreign Currency Account.
a. Payment of project related expenditure.
a. Foreign currency receipts from the Project Sanctioning Authority, and
b. Remittances from parent/ Group Company abroad or bilateral/ multilateral international financing agency.
6) The Foreign Currency account should be closed at the completion of the Project.
7) Inter-project transfer of funds will be permitted with the prior permission of the Regional Office of the Reserve Bank under whose jurisdiction the project office is situated.
8) In case of disputes between the Project Office and the project sanctioning authority or other Government/ Non-Government agencies etc., the balance held in such account shall be converted into INR and credited to a special account which shall be dealt with as per the settlement of the dispute.
An exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may open, hold and maintain a Foreign Currency Account with a bank in India, provided that approval as required under the Foreign Exchange Management (Export of goods and services) Regulations, 2015, as amended from time to time has been obtained for undertaking the contract/ project/ export of goods or services, and the terms and conditions stipulated in the letter of approval have been duly complied with.
A unit located in a Special Economic Zone (SEZ) – may open hold and maintain a foreign currency account with an authorized dealer in India to credit all foreign exchange funds received by the unit.
- The account can be used for bona fide trade transactions between the unit and a person resident in/ outside India.
- Foreign exchange purchased in India against rupees cannot be credited to the account without prior permission from the Reserve Bank.
- The balances in the accounts are from the restrictions imposed under Rule 5, of Foreign Exchange Management (Current Account Transaction) Rules, as amended from time to time, except for the use of the balances for gift etc.
- The funds held in these accounts cannot be lent or made available to any person or entity resident in India not being a unit in Special Economic Zones.
Foreign Currency Accounts that can be held outside India
The following persons can open a foreign currency account with a bank outside India for carrying on normal business and incidental transactions.
- An authorized dealer in India with its branch/ head office/ correspondent outside India.
- A branch outside India of a bank incorporated in India.
- An Indian shipping or airline company.
- Insurance/ reinsurance companies registered with Insurance Regulatory and Development Authority of India (IRDA) to carry out insurance/ reinsurance business.
- An India firm/ company/ body corporate in the name of its foreign office/ branch or its representative posted outside India.
- An exporter who is exporting services and engineering goods on deferred payment terms or executing a turnkey project or a construction contract abroad.
A person going abroad to participate in an exhibition/ trade fair may open a foreign currency account with a bank outside India for crediting the sale proceeds of goods. The balance should be repatriated to India within one month from the date of closure of the exhibition/ trade fair.