RBI/2006-07/27 Master Circular No/09/2006-07, DT. 01/07/2006 (Part - I)
Master Circular on Export of Goods and Services
Export of Goods and Services from India is allowed in terms of clause (a) of sub-section (1) and sub-section (3) of Section 7 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. GSR 381(E) dated May 3, 2000 and FEMA Notification 23/RB-2000 dated May 3, 2000 as amended from time to time.
2. This Master Circular consolidates the existing instructions on the subject of "Export of Goods and Services from India" at one place. The list of underlying circulars is furnished in Appendix.
3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 01, 2007 and be replaced by an updated Master Circular on the subject.
Yours faithfully,
M. Sebastian
Chief General Manager
Part IIntroduction
Export trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices, functioning under the Ministry of Commerce and Industries, Department of Commerce, Government of India. Policies and procedures required to be followed for exports from India are announced by the DGFT.
2. Authorised Dealer 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.
3. In terms of the Government of India Notification No.G.S.R.381 (E) dated May 3, 2000, notifying the Foreign Exchange Management (Current Account Transactions) Rules, 2000, drawing exchange for certain current account transactions has been prohibited, and restrictions have been placed on certain other transactions.
4. As per Rules 4 and 5 ibid, the transactions specified in Schedule II to the said Notification require prior approval of the Government of India. In terms of the Rule 5, the transactions specified in Schedule III to the Notification require prior approval of the Reserve Bank. Authorised Dealer banks may follow directions contained in Part III while dealing with applications relating to export of goods and services from India. The directions contained in this Circular should be read with the Rules notified by the Government of India, Ministry of Finance, vide Notification dated May 3, 2000, and annexed as Annex 1 to this circular as also Regulations notified by Reserve Bank vide its Notification No. FEMA 23/2000-RB dated 3rd May 2000 as amended from time to time (Annex 2).
5. Reserve Bank has notified the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 vide its Notification No. FEMA 6/RB-2000 dated 3rd May 2000 subsequently amended vide Notification No. FEMA 38 / 2001-RB dated 27th February, 2001. Any export of Indian currency of value exceeding Rs.5000/- except to the extent permitted under any general permission granted under the Regulations, will require prior permission of Reserve Bank.
6. In terms of Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000, notified vide Reserve Bank Notification No.FEMA 8 / RB dated 3rd May 2000, Authorised Dealer banks have been permitted to issue guarantees on behalf of exporter clients on account of exports out of India.
7. Export of goods and services against repayment of state credits granted by erstwhile Soviet Union will continue to be governed by the extant directions issued by Reserve Bank, as amended from time to time. Further, Reserve Bank will continue to consider as hitherto, counter trade proposals from Indian exporters with Romania involving adjustment of value of exports from India against value of imports made into India in terms of a voluntarily entered arrangement between the concerned parties, subject to the condition, among others that the Indian exporter should utilise the funds for import of goods from Romania into India within six months from the date of credit to Escrow Accounts allowed to be opened.
PART IIExport of Goods and Services
Section A: General
A.1 Trade and Foreign Exchange Regulations
(i) In exercise of the powers conferred by clause (a) of sub-section (1), sub-section (3) of section 7 and sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank has made the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 relating to export of goods and services from India, hereinafter referred to as the ‘Export Regulations’. These Regulations have been notified vide Notification No. FEMA 23/2000-RB dated May 3, 2000, as amended from time to time.
(ii) Any reference to Reserve Bank should be made to the regional office of the Foreign Exchange Department situated in the jurisdiction where the applicant person, firm or company resides or functions, unless otherwise indicated. If for any particular reason, a firm or company desires to deal with a different office of the Foreign Exchange Department, it may approach the regional office of its jurisdiction for necessary approval.
A.2 Exemptions from Declarations
(i) The requirement of declaration of export of goods and software in the prescribed form will not apply to the cases indicated in Regulation No. 4, ibid.. Exporters have been exempted from submission of declaration in the prescribed format for exports of value not exceeding US $ 25,000 or its equivalent. The exporters shall however, be liable to realise and repatriate export proceeds as per FEMA Regulations.
(ii) Gift of goods exceeding Rupees Five lakhs in value requires approval of the Reserve Bank.
(iii) Authorised Dealer banks may consider requests for grant of GR waiver from exporters for export of goods free of cost, for export promotion up to 2 percent of the average annual exports of the applicant during the preceding three years subject to a ceiling of Rs.5 lakhs. For status holder exporters, the limit as per the present Foreign Trade Policy is Rs.10 lakhs or 2 percent of the average annual export realisation during the preceding three licensing years, whichever is higher.
(iv) Export of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of GR/PP procedure from the Reserve Bank.
A.3 Numbering of Forms
GR, PP and SOFTEX forms will bear specific identification numbers. In all applications/ correspondence with the Reserve Bank, this identification number should invariably be cited. In the case of declarations made on SDF form, the port code number and shipping bill number should be cited.
A. 4 Manner of Payment
(i) The amount representing the full export value of the goods exported shall be received through an Authorised Dealer bank in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2000 notified vide Notification No. FEMA 14/2000-RB dated May 3, 2000.
(ii) Payment for export may also be received by the exporter in the following manner:
a. Bank draft, pay order, banker’s or personal cheques.
b. Foreign currency notes/foreign currency travellers’ cheques from the buyer during his visit to India.
c. Payment out of funds held in the FCNR/NRE account maintained by the Buyer
d. International Credit Cards. When payment, in respect of goods sold to overseas buyers during their visits is received in this manner the GR/SDF (duplicate) should be released by the Authorised Dealer banks only on receipt of funds in their Nostro account or if the Authorised Dealer bank concerned is not the Credit Card servicing bank, on production of a certificate by the exporter from the Credit Card servicing bank in India to the effect that it has received the equivalent amount in foreign exchange, Authorised Dealer banks may also receive payment for exports made out of India by debit to the credit card of an importer where the reimbursement from the card issuing bank/organisation will be received in foreign exchange.
e. All transactions between a person resident in India and a person resident in Nepal may be settled in Indian Rupees. However, in case of export of goods to Nepal, where the importer has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange, such payments shall be routed through the ACU mechanism.
f. Precious metals i.e. Gold / Silver / Platinum by the Gem & Jewellery units in SEZs and EOUs in equivalent to value of jewellery exported on the condition that the sale contract provides for the same and the approximate value of the precious metals is indicated in the relevant GR / SDF / PP Forms.
A. 5 Guarantees against Exports
Authorised Dealer banks should obtain prior approval of the Reserve Bank for issuing guarantees for caution-listed exporters.
A.6 Accounts in Foreign Currency
(I) Foreign Currency Account
(a) Participants in international exhibition/trade fair have been granted general permission vide Regulation 7(7) of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 notified under Notification No. FEMA 10/2000-RB dated May 3, 2000 for opening a temporary foreign currency account abroad. Exporters may deposit the foreign exchange obtained by sale of goods at the international exhibition/trade fair and operate the account during their stay outside India provided that the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair and full details are submitted to the Authorised Dealer bank concerned.
b) Reserve Bank may consider applications in Form EFC from exporters having good track record for opening a foreign currency account with banks subject to certain terms and conditions. Applications for opening the account with a branch of an Authorised Dealer bank in India may be submitted through the branch at which the account is to be maintained. If the account is to be maintained abroad the application should be made by the exporter giving details of the bank with which the account will be maintained.
c) An Indian entity has also been permitted to open, hold and maintain in the name of its office/branch set up outside India, a foreign currency account with a bank outside by making remittance for the purpose of normal business operations of the said office/branch or representative subject to conditions stipulated in Notification No. FEMA 47/2001-RB dated December 5, 2001.
c) A unit located in a Special Economic Zone (SEZ) may be allowed to open, hold and maintain a Foreign Currency Account with an Authorised Dealer bank in India subject to conditions stipulated in Notification No. FEMA 63/2002-RB dated June 21, 2002.
d) A person resident in India being a project / service exporter may open, hold and maintain foreign currency account with a bank outside or in India, subject to the standard terms and conditions in the Memorandum PEM.
(II) Diamond Dollar Account
Under the scheme of Government of India, firms and companies dealing in purchase / sale of rough or cut and polished diamonds / diamond studded jewellery, with track record of at least three years in import or export of diamonds and having an average annual turnover of Rs. 5 crores or above during the preceding three licensing years (licensing year is from April to March) are permitted to transact their business through Diamond Dollar Accounts and may be allowed to open not more than five Diamond Dollar Accounts with their banks. Accordingly, eligible firms and companies may apply for permission through their Authorised Dealer bank to the Chief General Manager, Foreign Exchange Department, Trade Division, Reserve Bank of India, Central Office, Amar Building, Mumbai 400 001.
(III) Exchange Earners’ Foreign Currency (EEFC) Account
i) A person resident in India may open with, an Authorised Dealer bank in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account.
ii) The limits of eligible credits to the EEFC accounts are 100 per cent for
Status Holder Exporter (as defined in Foreign Trade Policy in force),
a resident in India for professional services rendered in his personal capacity and
100% Export Oriented Unit/s, Unit/s in Export Processing Zones (EPZs), Software Technology Parks (STPs) and Electronic Hardware Technology Parks (EHTPs), and 50 per cent for other persons resident in India.
iii) This account shall be maintained only in the form of non-interest bearing current account and no credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held in EEFC accounts by the Authorised Dealers banks.
iv) The eligible credits represent inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder.
v) Payments received in foreign exchange by a unit in Domestic Tariff Area (DTA) for supplying goods to a unit in Special Economic Zone out of its foreign currency account are to be treated as eligible foreign exchange earnings for the purpose of credit to the EEFC account.
vi) Authorised Dealer banks may, till further notice, permit their exporter constituents to extend trade related loans / advances to overseas importers out of their EEFC balances without any ceiling subject to compliance of provisions of Notification No. FEMA 3/2000-RB dated 3rd May 2000 as amended from time to time.
Vii) Authorised Dealer banks may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or rupee resources to the extent exports have actually taken place.
A.7 Setting Up Offices Abroad and Acquisition of Immovable Property for Overseas Offices
Authorised Dealer banks may allow remittances up to 10 per cent for initial and up to 5 per cent for recurring expenses of the average annual sales / income or turnover during last two accounting years [A.P. (DIR Series) Circular No. 32 dated 21st April 2006] for the purpose of normal business operations of the office (trading / non-trading) / branch or representative office outside India as per the provisions of the Regulations in this regard subject to the following terms and conditions that the overseas office (trading / non-trading) / branch / representative should not:
i) Create any financial liabilities contingent or otherwise for the head office in India.
ii) Invest surplus funds abroad without prior approval of Reserve Bank of India. Any funds rendered surplus should be repatriated to India.
iii) The details of bank accounts opened in the overseas country should be promptly reported to the Authorised Dealer bank.
In addition to the above, the overseas office / branch of software exporter company/firm may repatriate to India 100 per cent of the contract value of each ‘off-site’ contract as also at least 30 per cent of the contract value of each ‘on-site’ contract. It may accordingly utilize the balance amount (70 per cent) of the contract value of ‘on-site’ contracts for contract related expenses including office/branch expenses abroad.
A duly audited yearly statement showing receipts under ‘off-site’ and ‘on-site’ contracts undertaken by the overseas office, expenses and repatriation thereon may be sent to the Authorised Dealer bank.
Prior permission of RBI is required to be taken by Indian corporates who have set up overseas offices abroad and wish to acquire immovable property outside India for their business as also staff residential purposes.
A.8 Counter-Trade Arrangement
(i) Counter trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in U.S. dollar will be considered by the Reserve Bank.
(II) All imports and exports under the arrangement should be at international prices in conformity with the Foreign Trade Policy and Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under.
(III) No interest will be payable on balances standing to the credit of the Escrow Account but the funds temporarily rendered surplus may be held in a short-term deposit up to a total period of three months in a year (i.e., in a block of 12 months) and the banks may pay interest at the applicable rate. No fund based/or non-fund based facilities would be permitted against the balances in the Escrow Account.
(IV) Application for permission for opening an Escrow Account may be made by the overseas exporter/organisation through his Authorised Dealer bank to the concerned Regional Office of the Reserve Bank.
A.9 Export of Goods on Lease, Hire, etc
Prior approval of the Reserve Bank is required for export of machinery, equipment, etc., on lease, hire, etc., basis under agreement with the overseas lessee against collection of lease rentals/hire charges and ultimate re-import. Exporters should apply for necessary permission, through an Authorised Dealer bank, to the concerned Regional Office concerned of the Reserve Bank, giving full particulars of the goods to be exported.
A.10 GR Approval for Export
(i) Firms / Companies and other organisations participating in Trade Fair/Exhibition abroad are now permitted to take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank of India. 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 US $ 5000 per exporter, per exhibition/trade fair.
Authorised Dealer banks may approve GR Form 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 sale proceeds of the items sold are repatriated to India in accordance with the Foreign Exchange Management (Realisation, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000.
iii. The exporter shall report to the Authorised Dealer the method of disposal of all items exported, as well as the repatriation of proceeds to India.
Such transactions approved by the Authorised Dealers will be subject to 100 per cent audit by their internal inspectors/auditors..
(ii) Export of Goods for re-import after repairs / maintenance / testing / calibration etc.
AD banks may consider request from exporters for granting GR 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.
Where the goods being exported for testing are destroyed during testing, AD 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. [cf. AP (DIR) Circular No. 21 dated 10th January, 2006]
A. 11 Project Exports and Service Exports
Export of engineering goods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are collectively referred to as ‘Project Exports’. Indian exporters offering deferred payment terms to overseas buyers and those participating in global tenders for undertaking turnkey/civil construction contracts abroad are required to obtain the approval of the Authorised Dealer /Exim Bank/Working Group at post-award stage before undertaking execution of such contracts. Regulations relating to ‘Project Exports’ and ‘Service Exports’ are laid down in the revised Memorandum on Project Exports (PEM).
A. 12 Export on Elongated Credit Terms
Exporters intending to export goods on elongated credit terms may submit their proposals giving full particulars through their banks for consideration to the Regional Office concerned of the Reserve Bank.
In the case of export of books on consignment basis, Authorised Dealer banks may approve such proposals allowing for realisation of export proceeds up to 360 days from the date of shipment. The exporters may be allowed 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.
A. 13 Export of goods by Special Economic Zones (SEZs)
a) Units in SEZs are permitted to undertake job work abroad and export goods from that country itself subject to the conditions that -
i. Processing / manufacturing charges are suitably loaded in the export price and are borne by the ultimate buyer.
ii. The exporter has made satisfactory arrangements for realisation of full export proceeds subject to the usual GR procedure.
b) Authorised Dealer banks may permit units in DTAs to purchase foreign exchange for making payment for goods supplied to them by units in SEZs.
A. 14 Forfaiting
Export-Import Bank of India (Exim Bank) and Authorised Dealer banks have been permitted to undertake forfaiting, for financing of export receivables. Authorised Dealer banks may allow remittance of commitment fee / service charges, etc., payable by the exporter as approved by the Exim Bank/ Authorised Dealer bank concerned. Such remittances may be permitted in advance in one lump sum or at monthly intervals as approved by the agency concerned.
Section B-GR/ SDF / PP / SOFTEX PROCEDURE
B.1 Export Declaration Form
Copies of export declaration forms should be disposed of as under:
(i) GR forms should be completed by the exporter in duplicate and both the copies submitted to the Customs at the port of shipment along with the shipping bill.
(ii) Customs will give their running serial number on both the copies after admitting the corresponding shipping bill. The Customs serial number will have ten numerals denoting the code number of the port of shipment, the calendar year and a six- digit running serial number.
(iii) Customs will certify the value declared by the exporter on both the copies of the GR form at the space earmarked and will also record the assessed value.
(iv) They will then return the duplicate copy of the form to the exporter and retain the original for transmission to Reserve Bank.
(v) Exporters should submit the duplicate copy of the GR form again to Customs along with the cargo to be shipped.
(vi) After examination of the goods and certifying the quantity passed for shipment on the duplicate copy, Customs will return it to the exporter for submission to the Authorised Dealer bank for negotiation or collection of export bills.
(vii) Within twenty-one days from the date of export, exporter should lodge the duplicate copy together with relative shipping documents and an extra copy of the invoice with the Authorised Dealer bank named in the GR form.
(viii) After the documents have been negotiated / sent for collection, the Authorised Dealer bank should report the transaction to Reserve Bank in statement ENC under cover of appropriate R-Supplementary Return. However, the duplicate copy of the form together with a copy of invoice etc. will henceforth be retained by the Authorised Dealer bank and may not be submitted to Reserve Bank.
Note: (i) In the 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 Reserve Bank approval and/or number and date of the relative RBI circular should be recorded at the appropriate place on the GR form.
(ii) Where Duplicate copy of GR form is misplaced or lost, Authorised Dealer bank may accept another copy of duplicate GR form duly certified by Customs.
B.2 SDF Forms
On account of introduction of Electronic Data Interchange (EDI) System at certain Customs offices where shipping bills are processed electronically, the existing declaration in GR form is replaced by a declaration in form SDF (Statutory Declaration Form). The following system may be followed:
(i) The SDF form should be submitted in duplicate (to be annexed to the relative shipping bill) to the Commissioner of Customs concerned.
(ii) After verifying and authenticating the declaration in form SDF, the Commissioner of Customs will hand over to the exporter, one copy of the shipping bill marked ‘Exchange Control Copy’ in which form SDF has been appended for being submitted to the Authorised Dealer bank within 21 days from the date of export.
(iii) The Authorised Dealer banks should accept the Exchange Control (EC) copy of the shipping bill and form SDF appended thereto, submitted by the exporter for collection/negotiation of shipping documents. The manner of disposal of EC copy of shipping Bill (and form SDF appended thereto) is the same as that for GR forms.
(iv) In cases where ECGC initially settles the claims of exporters in respect of exports insured with them and subsequently receives the export proceeds from the buyer/buyer’s country through the efforts made by them, the share of exporters in the amount so received is disbursed through the bank which had handled the shipping documents. In such cases, ECGC will issue a certificate to the bank which had handled the relevant shipping documents after full proceeds have been received. The certificate will indicate the number of declaration form, name of the exporter, name of the Authorised Dealer bank, date of negotiation, bill number, invoice value and the amount actually received by ECGC.
B. 3. A. PP FORMS
(i) The manner of disposal of PP forms is the same as that for GR forms. Postal Authorities will allow export of goods by post only if the original copy of the form has been countersigned by an Authorised Dealer bank. Therefore, PP forms should be first presented by the exporter to an Authorised Dealer bank for countersignature.
(ii) The Authorised Dealer bank will countersign the forms in accordance with the directions in paragraph B.2 and return the original copy to the exporter, who should submit the form to the post office with the parcel.
(iii) The duplicate copy of the PP form will be retained by the Authorised Dealer bank to whom the exporter should submit relevant documents together with an extra copy of invoice for negotiation/collection, within the prescribed period of twenty-one days.
B. 3. B. Counter Signature on PP Forms
(i) The exporter will present the PP forms to the Authorised Dealer bank for counter signature.
(ii) Authorised Dealer banks should countersign the PP forms after ensuring that the parcel is being addressed to their branch or correspondent bank in the country of import.
(iii) The concerned overseas branch or correspondent should be instructed to deliver the parcel to consignee against payment or acceptance of relative bill.
(iv) Authorised Dealer banks may, however, countersign PP forms covering parcels addressed direct to the consignees, provided:
a. An irrevocable letter of credit for the full value of the export has been opened in favour of the exporter and has been advised through the Authorised Dealer bank concerned
Or
The full value of the shipment has been received in advance by the exporter through an Authorised Dealer bank
Or
b. The Authorised Dealer bank is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realisation of the export proceeds, that he could do so.
In such cases, particulars of advance payment/letter of credit / AD bank’s certification of standing, etc., of the exporter should be furnished on the form under proper authentication. Any alteration in the name and address of consignee on the PP form should also be authenticated by the Authorised Dealer bank under his stamp and signature.
B.4. Disposal of SOFTEX Forms
The procedure indicated in Regulation 6 of Export Regulations is to be observed. However, the duplicate copy of the form together with a copy of invoice etc. will henceforth be retained by the Authorised Dealer bank and may not be submitted to Reserve Bank.
Note: (i) In all the above procedures Authorised Dealer banks should ensure, by random check of the relevant duplicate forms by their internal / concurrent auditors, that non-realisation or short realisation allowed, if any, is within the powers delegated to them or has been duly approved by Reserve Bank, wherever necessary.
(ii) Where a part of the export proceeds are credited to an EEFC account, the export declaration (duplicate) form may be certified as under:
"Proceeds amounting to....... representing ......% of the export realisation credited to the EEFC account maintained by the exporter with......"
B.5. Terms of Payment - Invoicing - (Software)
(i) For long duration contracts involving series of transmissions, the exporters should bill their overseas clients periodically, i.e., at least once a month or on reaching the ‘milestone’ as provided in the contract entered into with the overseas client and the last invoice / bill should be raised not later than 15 days from the date of completion of the contract. It would be in order for the exporters to submit a combined SOFTEX form for all the invoices raised on a particular overseas client, including advance remittances received in a month.
(ii) Contracts involving only ‘one-shot operation’, the invoice/bill should be raised within 15 days from the date of transmission.
(iii) The exporter should submit declaration in Form SOFTEX in triplicate in respect of export of computer software and audio / video / television software to the designated official concerned of the Government of India at STPI / EPZ /FTZ /SEZ for valuation / certification not later than 30 days from the date of invoice / the date of last invoice raised in a month, as indicated above. The designated officials may also certify the SOFTEX Forms of EOUs which are registered with them.
(iv) The invoices raised on overseas clients as at (i) to (iii) above will be subject to valuation of export declared on SOFTEX form by the designated official concerned of the Government of India and consequent amendment made in the invoice value, if necessary.
B.6 Shut out Shipments and Short Shipments
(i) When part of a shipment covered by a GR form already filed with Customs is short-shipped, the exporter must give notice of short-shipment to the Customs in the form and manner prescribed. In case of delay in obtaining certified short-shipment notice from the Customs, the exporter should give an undertaking to the Authorised Dealer bank to the effect that he has filed the short-shipment notice with the Customs and that he will furnish it as soon as it is obtained.
(ii) Where a shipment has been entirely shut out and there is delay in making arrangements to re-ship, the exporter will give notice in duplicate to the Customs in the form and manner prescribed, attaching thereto the unused duplicate copy of GR form and the shipping bill.
(iii) The Customs will verify that the shipment was actually shut out, certify the copy of the notice as correct and forward it to the Reserve Bank together with unused duplicate copy of the GR form. In this case, the original GR form received earlier from Customs will be cancelled. If the shipment is made subsequently, a fresh set of GR form should be completed.
B. 7 Consolidation of Air Cargo
Where air cargo is shipped under consolidation, the airline company’s Master Airway Bill will be issued to the Consolidating Cargo Agent.
(i)The Cargo agent in turn will issue his own House Airway Bills (HAWBs) to individual shippers.
(ii) Authorised Dealer banks may negotiate HAWBs only if the relative letter of credit specifically provides for negotiation of these documents in lieu of Airway Bills issued by the airline company.
(iii) They may also accept Forwarder’s Cargo Receipts (FCR) issued by steamship companies or their agents (instead of 'IATA' approved agents), in lieu of bills of lading, for negotiation / collection of shipping documents, of export transactions backed by letters of credit, only if the relative letter of credit specifically provides for negotiation of this document, in lieu of bill of lading.
(iv) Further, relative sale contract with the overseas buyer should also provide that FCR may be accepted in lieu of bill of lading as a shipping document.
B.8 Exports to neighbouring countries by Road, Rail or River:
The following procedure should be adopted by exporters for filing original copies of GR/SDF forms where exports are made to neighbouring countries by road, rail or river transport:
a. In case of exports by barges/country craft/road transport, the form should be presented by exporter or his agent at the Customs station at the border through which the vessel or vehicle has to pass before crossing over to the foreign territory. For this purpose, exporter may arrange either to give the form to the person in charge of the vessel or vehicle or forward it to his agent at the border for submission to Customs.
b. As regards exports by rail, Customs staff has been posted at certain designated railway stations for attending to Customs formalities. They will collect the GR/SDF forms for goods loaded at these stations so that the goods may move straight on to the foreign country without further formalities at the border. The list of designated railway stations can be obtained from the Railways. For goods loaded at stations other than the designated stations, exporters must arrange to present GR/SDF forms to the Customs Officer at the Border Land Customs Station where Customs formalities are completed.
B.9 Border Trade with Myanmar
This is goverened by the Agreement on Border Trade between India and Myanmar. People living along both sides of the India-Myanmar border are permitted to exchange certain specified locally produced commodities under the barter trade arrangement. They can also trade in freely convertible currency, Authorised Dealer banks should follow strictly the revised guidelines issued in terms of A.P.(DIR Series) Circular No.17 dated 16th October 2000.
B.10 Deep Sea Fishing - Transfer of catch at high seas
The procdure to be followed by exporters who have been granted approval by the Ministry of Food Processing Industries (MOFP) for transfer of catch at the high seas is as below :
(i) The Customs' certification on the GR need not be insisted upon.
(ii) Instead of Customs' certification on the GR form, the exporters may submit, with the GR form, certificates duly signed by the Master of the vessel, indicating the composition of the catch, quantity, export value, date of transfer of catch etc. duly supported by a certificate from a recognized cargo surveyor as per the list of such surveyors approved by Ministry of Commerce.
(iii) Rules, Regulations and directions issued in respect of the procedure for submission of the GR form by exporter to the AD banks, and the disposals of these forms by AD banks will be same as applicable to the other exporters.
(iv) The prescribed period of realization, i.e. 180 days should be reckoned with reference to the date of transfer of catch as certified by the approved cargo surveyor.
(v) The GR form both original and duplicate, should indicate, in brief, particulars of :-
(a) MOFP's approval No. and date for transfer of catch at the high seas.
(b) Reserve Bank's approval No. and date in case of charter party agreement where charter hire is permitted to be paid out of the export value of the catch.
(vi) There will be no change with regard to other procedures, like submission of ENC statements, GR duplicates, XOS etc., except that the date of transfer of catch may be indicated in the column for 'Date of Shipment' with a suitable remark.
Section C –Obligations of Authorised Dealer banks
C. 1 Delay in submission of shipping documents by exporters
In cases where exporters present documents pertaining to exports after the prescribed period of twenty-one days from date of export, Authorised Dealers Banks may handle them without prior approval of Reserve Bank, provided they are satisfied with the reasons for the delay.
C. 2 Check-list for Scrutiny of Forms
Authorised Dealer Banks may ensure :
i. The number on the duplicate copy of a GR form presented to them is the same as that of the original which is usually recorded on the Bill of Lading/Shipping Bill and the duplicate has been duly verified and authenticated by appropriate Customs authorities.
ii. In SDF form, that the Shipping Bill No. should be the same as that appearing on the Bill of Lading.
iii. In the case of c.i.f., c.& f. etc. contracts where the freight is sought to be paid at destination, that the deduction made is only to the extent of freight declared on GR/SDF form or the actual amount of freight indicated on the Bill of Lading/Airway Bill, whichever is less.
iv. The documents submitted do not reveal any material inter se discrepancies in regard to description of goods exported, export value or country of destination.
v. where the marine insurance is taken by the exporters on buyer’s account to verify, that the actual amount paid is received from the buyer through invoice and the bill.
vi. To accept the Bill of Lading/Airway Bill issued on ‘freight prepaid’ basis where the sale contract is on f.o.b., f.a.s. etc. basis provided the amount of freight has been included in the invoice and the bill.
Note :
A. The export realisable value may be more than what was originally declared to/accepted by the Customs on the GR/SDF form in certain circumstances such as where in c.i.f. or c. & f. contracts, part or whole of any freight increase taking place after the contract was concluded is agreed to be borne by buyers or where as a result of subsequent devaluation of the currency of the contract, buyers have agreed to an increase in price.
B. In cases where the documents are being negotiated by a person other than the exporter who has signed GR/PP/SDF/SOFTEX Form for the export consignment concerned, Authorised Dealer banks may negotiate the documents after ensuring compliance with Regulation 12 of "Export Regulations".
C. In certain lines of export trade, the final settlement of price may be dependent on the results of quality analysis of samples drawn at the time of shipment; but the results of such analysis will become available only after the shipment has been made. Sometimes, contracts may provide for payment of penalty for late shipment of goods in conformity with trade practice concerning the commodity. In these cases, while exporters declare to the Customs the full export value based on the contract price, invoices submitted along with shipping documents for negotiation/collection may reflect a different value arrived at after taking into account the results of analysis of samples or late shipment penalty, as the case may be.
As these variations stem from the terms of contract, Authorised Dealer banks may accept them on production of documentary evidence after verifying the arithmetical accuracy of the calculations and on conforming the terms of underlying contracts.
C. 3 Trade Discount
Bills for exports by sea or air which fall short of the value declared on GR/SDF forms on account of trade discount may be accepted for negotiation or collection only if the discount has been declared by the exporter on relative GR/SDF form at the time of shipment and accepted by Customs.
C. 4 Advance Payments against Exports
Exporters may receive advance payments (with or without interest) from their overseas buyers. It should, however, be ensured that the shipments made against the advance payments are monitored by the Authorised Dealer bank through whom the advance payment is received. The appropriations made against every shipment must be endorsed on the original copy of the inward remittance certificate issued for advance remittance.
Note: Purchase of foreign exchange from the market for refunding advance payment credited to EEFC account may be allowed only after utilising the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks.
C. 5 Part Drawings
In certain lines of export trade, it is the practice to leave a small part of the invoice value undrawn for payment after adjustment due to differences in weight, quality, etc. to be ascertained after arrival for inspection, or analysis of the goods. In such cases, Authorised Dealer banks may negotiate the bills, provided:
a. The amount of undrawn balance is considered normal in the particular line of export trade, subject to a maximum of 10 per cent of the full export value
b. An undertaking is obtained from the exporter on the duplicate of GR/SDF/PP forms that he will surrender/account for the balance proceeds of the shipment within the period prescribed for realisation.
Note: In cases where the exporter has not been able to arrange for repatriation of the undrawn balance in spite of best efforts, Authorised Dealer banks, on being satisfied with the bona fides of the case, should ensure that the exporter has realised at least the value for which the bill was initially drawn (excluding undrawn balances) or 90 per cent of the value declared on GR/PP/SDF form, whichever is more and a period of one year has elapsed from the date of shipment.
C. 6 Consignment Exports
(i) When goods have been exported on consignment basis, Authorised Dealer 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 Authorised Dealer bank. 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.
Note:
A. In case of goods exported on consignment basis, freight and marine insurance must be arranged in India.
B. Reserve Bank will permit on application, exporters with satisfactory track record, a longer period up to twelve months for realisation of export proceeds for exports on consignment basis made to CIS countries and East European countries financed in any permitted currency.
C. Authorised Dealer banks may consider the applications received from exporters and grant permission for opening / hiring warehouses abroad subject to the following conditions:
a) Applicant's export outstanding does not exceed 5 per cent of exports made during the previous year.
b) Applicant has a minimum export turnover of USD 1,00,000/- during the last year.
c) Period of realisation should be as applicable i.e., 180 days for non-status holder exporters and 12 months for status holder exporters.
d) All transactions should be routed through the designated branch of the Authorised Dealer bank.
The above permissions may be granted to the exporters initially for a period of one year and their renewals may be considered subject to the applicant satisfying the requirement at (a) above. Authorised Dealer banks granting such permission / approvals should maintain a proper record of the approvals granted.
C.7 Dispatch of Shipping Documents
A. (i) Authorised Dealer banks should normally dispatch shipping documents to their overseas branches/correspondents expeditiously.
(ii) 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 exporter is a regular customer and the Authorised Dealer bank is satisfied, on the basis of standing and track record of the exporter and the arrangements made for realisation of export proceeds, that the request can be acceded to.
c) Documents in respect of goods or software are accompanied with a declaration by the exporter that they are not more than Rupees Twenty Five Thousand in value and not declared on GR/SDF/PP/SOFTEX form, in terms of paragraph A.2
(iii) Authorised Dealer 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 Authorised Dealer bank named in the GR Form.
b. The duplicate copy of the GR form is submitted to the Authorised Dealer bank for monitoring purposes, by the exporters within 21 days from the date of export.
B Direct dispatch of documents by the exporter
Where exporters have received 100 per cent advance remittance in terms of paragraph C.4 above, they may dispatch shipping documents directly to the consignee.
C.8 Handing Over Negotiable Copy of Bill of Lading to Master of Vessel / Trade Representative
Authorised Dealer banks may deliver one negotiable copy of the Bill of Lading to the Master of the carrying vessel or trade representative for exports to certain landlocked countries if the shipment is covered by an irrevocable letter of credit and the documents conform strictly to the terms of the Letter of Credit which, inter alia, provides for such delivery.
C. 9 Export Bills Register
i. Authorised Dealer banks should maintain Export Bills Register, in physical or electronic form. Details of GR/SDF/PP form number, due date of payment, the fortnightly period of R Supplementary Return with which the ENC statement covering the transaction was sent to Reserve Bank, should be available.
ii. Authorised Dealer banks should ensure that all types of export transactions are entered in the Export Bills Register and are given bill numbers on calendar year basis (i.e. January to December). The bill numbers should be recorded in ENC statement and other relevant returns submitted to Reserve Bank.
C.10 Follow-up of Overdue Bills
(i) Authorised Dealer banks should closely watch realisation of bills and in cases where bills remain outstanding, beyond the due date for payment or six months 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 six months or seek extension of time beyond six months, the matter should be reported to the RO concerned of the Reserve Bank stating, where possible, the reason for the delay in realising the proceeds. The duplicate copies of GR / SDF / PP Forms should, however, continue to be held by Authorised Dealer bank until the full proceeds are realised, except in case of undrawn balances covered by “Note” under paragraph C 5.
(ii) Authorised Dealer banks should follow up export outstandings with exporters systematically and vigorously so that action against defaulting exporters does not get delayed. Any laxity in the follow up of realisation of export proceeds by Authorised Dealer banks will be viewed seriously by Reserve Bank, leading to the invocation of the penal provision under FEMA 1999.
(iii) Exporters who have been certified as `Status Holder' in terms of Foreign Trade Policy are permitted to realise and repatriate the full value of export proceeds within a period of 12 months from the date of shipment.
(iv) 100 per cent Export Oriented Units (EOUs) and units set up under Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) Schemes are permitted to realise and repatriate the full value of export proceeds within a period of 12 months from the date of export in respect of export made on or after September 1, 2004.
(v) The stipulation of twelve months or extended period thereof for realisation of export proceeds is no longer applicable for units located in Special Economic Zones (SEZs). The units in SEZs will however continue to follow the GR/ PP / Softex export procedure outlined in Section B - Part II of this circular.
(vi) Authorised Dealer banks should furnish to the RO concerned of the Reserve Bank, on half-yearly basis, a consolidated statement in Form XOS giving details of all export bills outstanding beyond six months from the date of export as at the end of June and December every year. The statement should be submitted in triplicate within fifteen days from the close of the relative half-year.
C. 11 Reduction in Invoice Value on Account of Prepayment of Usance Bills
Occasionally, exporters may approach Authorised Dealer banks for reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills. Authorised Dealer 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.
C. 12 Reduction in Value
If, after a bill has been negotiated or sent for collection, its amount is to be reduced for any reason, Authorised Dealer bank may approve such reduction, if satisfied about genuineness of the request, provided:
a. The reduction does not exceed 10 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 Reserve Bank, and
d. The exporter is advised to surrender proportionate export incentives availed of, if any.
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 outstandings do not exceed 5 per cent of the average annual export realisation during the preceding three calendar years. For the purpose of reckoning the percentage of export bills outstanding to the average export realisations during the preceding three calendar years, outstanding of exports made to countries facing externalisation problems may be ignored provided the payments have been made by the buyers in the local currency.
C. 13 Export Claims
Authorised Dealer 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 Reserve Bank. In all such cases of remittances, the exporter should be advised to surrender proportionate export incentive, if any, received by him.
C.14 Change of buyer/consignee
Prior approval of 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 10 per cent and the realisation of export proceeds is not delayed beyond the period of six months from the date of export. Where the reduction in value exceeds 10 per cent, all other relevant conditions stipulated in paragraph C.12 should also be satisfied.
C.15 Self write-off and Extension of Time
For export proceeds due within the prescribed period during a calendar year
All exporters (including Status Holder exporters) have been allowed to:
(a) Write off (including reduction in invoice value) outstanding export dues and,
(b) Extend the prescribed period of realisation beyond 180 days or further period as applicable, provided
I) the aggregate value of such export bills written-off (including reduction in invoice value) and bills extended for realisation does not exceed 10 per cent of the export proceeds due during the calendar year and
ii) such export bills are not a subject of investigation by Enforcement Directorate / Central Bureau of Investigation or any other Investigating Agencies.
Exporters dealing with more than one Authorised Dealer bank can avail of this facility through each AD bank, i.e., the limit of 10 per cent for self write-off (including reduction in invoice value) and extension of time for realisation of export proceeds would be applicable for export bills lodged for realisation with that Authorised Dealer bank. However, exporters operating under a consortium of banks or with multiple banks will also have the option of computing the 10 per cent limit on an aggregate basis with all the banks, provided the lead bank of the consortium or in case of multiple banking, a nodal bank, undertakes to verify the exporters’ annual performance on behalf of all the banks.
Within a month from the close of the calendar year, exporters should submit a statement (Annex 3), giving details of export proceeds due, realised and not realised to the Authorised Dealer bank concerned.
Export bills due in the year for which the exporter has extended the period of realisation on his own (within the 10 per cent limit) or sought extension of time from the Authorised Dealer bank but unrealised as at the end of calendar year will be computed for export proceeds due in the following year. The Authorised Dealer bank will be required to verify the statement with his records and review the export performance of the exporter during the calendar year to ascertain that in cases where the 10 per cent limit of self extension, write-off (including reduction in invoice value) and non-realisation has been breached, the exporter has sought necessary approval for write-off, reduction in invoice value or extension of time, as the case may be, for the excess over the 10 per cent limit before the end of the calendar year.
In cases where exporters have failed to comply with the above requirement, Authorised Dealer banks may promptly advise the exporter concerned to seek extension of time/reduction in invoice value/write-off in respect of non-realisation in excess of the 10 per cent limit, failing which, the Authorised Dealer banks may inform the exporter about the withdrawal of this facility of self write-off / extension of time, within a month, under advice to the Regional Office concerned of the Reserve Bank.
C.16 Extension of Time Limit in Other Cases
1. (i) In cases where an exporter has not been able to realise proceeds of a shipment made within the period prescribed, for reasons beyond his control, but expects to be able to realise proceeds if extension of the period is allowed to him, necessary application (in duplicate) should be made to the Regional Office concerned of Reserve Bank in form ETX through his Authorised Dealer bank with appropriate documentary evidence in respect of cases not falling under para (ii) below.
(ii) Reserve Bank of India has permitted the Authorised Dealer banks to extend the period of realisation of export proceeds beyond 6 months from the date of export where the invoice value does not exceed US $ 1mn. subject to the following conditions:
a. The Authorised Dealer bank is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control.
b. The exporter submits a declaration that he will realise the export proceeds during the extended period.
c. The extension may be granted up to a period of 3 months at a time and while considering the extension beyond one year from the date of export the total export outstanding of the exporter should not be more than 10 per cent of the average of export realisations during the preceding 3 financial years.
2. The ceiling of US $ 1 mn. would not apply where the exporter has filed suits abroad against the importer. In such cases extension may be granted up to six months at a time, irrespective of the amount involved.
3. Cases which are not covered by the above instructions and cases indicated below would require prior approval from the Regional Office of the Reserve Bank.
i. Where the export invoices are under investigation by Enforcement Directorate / Central Bureau of Investigation or other investigating agencies.
ii. Where the invoice value exceeds US $ 1 mn. (except in cases covered under paragraph 2 above).
All the export bills outstanding beyond six months from the date of export may be reported in XOS statement as usual. However, where extension of time has been granted by the Authorised Dealer bank, the date up to which extension has been granted may be indicated in the 'Remarks' column.
C.17 Shipments Lost in Transit
When shipments from India for which payment has not already been received either by negotiation of bills under letters of credit or otherwise are lost in transit, the Authorised Dealer bank must ensure that insurance claim is made as soon as the loss is known. The duplicate copy of GR/SDF/PP form should be forwarded to Reserve Bank with following particulars:
a. Amount for which shipment was insured.
b. Name and address of the insurance company.
c. Place where the claim is payable.
In cases where the claim is payable abroad, the Authorised Dealer bank must arrange to collect the full amount of claim due on the lost shipment, through the medium of his overseas branch/correspondent and release the duplicate copy of GR/SDF/PP form only after the amount has been collected. A certificate for the amount of claim received should be furnished on the reverse of the duplicate copy.
Note: Sometimes claims on shipments lost in transit are also partially settled directly by shipping companies/airlines under carrier’s liability. Authorised Dealer banks should ensure that amounts of such claims if settled abroad are also repatriated to India by exporters.
C. 18 Payment of Claims by ECGC
Authorised Dealer banks shall, on an application received from the exporter supported by documentary evidence from the ECGC confirming that the claim in respect of the outstanding bills has been settled by them, write off the relative export bills and delete them from the XOS statement. Such write-off will not be restricted to the limit of 10 per cent indicated in paragraph C.19 (A) below. Surrender of incentives, if any, in such cases will be as provided in the Foreign Trade Policy.
The claims settled in rupees by ECGC should not be construed as export realisation in foreign exchange.
C. 19 A "Write off" of Unrealised Export Bills
(i) An exporter who has not been able to realise the outstanding export dues despite best efforts, may approach the Authorised Dealer bank, who had handled the relevant shipping documents, with appropriate supporting documentary evidence with a request for write off of the unrealised portion. Authorised Dealer banks may accede to such requests subject to the under noted conditions:
a. The relevant amount has remained outstanding for one year or more;
b. The aggregate amount of write off allowed by the Authorised Dealer bank during a calendar year does not exceed 10 per cent of the total export proceeds realised by the concerned exporter through the concerned Authorised Dealer bank during the previous calendar year;
c. Satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realise the dues;
d. The case falls under any of the under noted categories:
i. 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 produced.
ii. The overseas buyer is not traceable over a reasonably long period of time.
iii. The goods exported have been auctioned or destroyed by the Port/Customs/Health authorities in the importing country.
iv. The unrealised amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organisation.
v. The unrealised amount represents the undrawn balance of an export bill (not exceeding 10 per cent of the invoice value) remained outstanding and turned out to be unrealisable despite all efforts made by the exporter.
vi. The cost of resorting to legal action would be disproportionate to the unrealised 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.
vii. 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 amount has remained unrealised consequent on dishonour of the bills by the overseas buyer and there are no prospects of realisation.
e. The case is not the subject matter of any pending civil or criminal suit.
f. The exporter has not come to the adverse notice of the Enforcement Directorate or the Central Bureau of Investigation or any such other law enforcement agency.
g. The exporter has surrendered proportionate export incentives, if any, availed of in respect of the relative shipments. The Authorised Dealer bank should obtain documents evidencing surrender of export incentives availed of before permitting the relevant bills to be written off. Authorised Dealer banks are to put in place a system under which their internal inspectors or auditors carry out random sample check / percentage check of outstanding export bills written off.
(ii) Where there is no further amount to be realised against the GR/SDF/PP form covered by the write off, Authorised Dealer bank should certify the duplicate form as under:
"Write off of...........……… (Amount in words and figures) permitted in terms of paragraph C.18 of Directions to Authorised Dealer banks."
Date …………………………..
Stamp & Signature of
Authorised Dealer bank
(iii) Status holders exporters, as defined under in the Foreign Trade Policy, and manufacturer exporters exporting more than 50 per cent of their production, and recognised as such by DGFT, may be permitted to " write off" outstanding export bills up to an annual limit of 5 per cent of their average annual realisations (not turnover) during the preceding three calendar years. The limit of 5 per cent will be cumulatively available in a year and subject to the following conditions.
1. The exporter should submit to the concerned Authorised Dealer bank a Chartered Accountant’s certificate indicating –
a. the export realisation in the preceding three calendar years and also the amount of "write off " already availed of during the year, if any.
b. the relevant GR/SDF Nos. to be written off, Bill No., invoice value, commodity exported, country of export,
c. the export benefits, if any, availed of by the exporter have been surrendered.
2. The following do 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. GR/SDF forms 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.
3. After the "write off" has been permitted Authorised Dealer bank may certify the duplicate form as under:-
"Write off of ........................................................(Amount in words and figures)
permitted in terms of A. P. (DIR Series) Circular No.30 dated April 4, 2001."
Date
Stamp & Signature of
Authorised Dealer bank
4. Authorised Dealer banks may note to take into account the amount written off under this facility while arriving at the eligible amount under paragraph C.18 of A. P. (DIR Series) Circular No.12 of September 9, 2000.
5. Authorised Dealer banks may forward a statement in form EBW to the Regional Office of Reserve Bank under whose jurisdiction they are functioning, indicating details of write offs etc., every half year ended 30th June and 31st December within 15 days from the date of completion of the relevant half year.
C. 19 B 'Netting off' of export receivables against import payments - Units in Special Economic Zones (SEZs)
Authorised Dealer 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 date of balance sheet of the unit in SEZ.
ii. The details of export of goods is documented in GR (O) forms / DTR as the case may be while details of import of goods / services is recorded through A1 / A2 form as the case may be. The relative GR / SDF forms will be treated as complete by the designated Authorised Dealer bank only after the entire proceeds are adjusted / received.
iii. Both the transactions of sale and purchase in 'R' Returns under FET-ERS 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 Authorised Dealer bank who should comply with all the regulatory requirements relating to the transactions.
C.20 Return of Documents to Exporters
The duplicate copies of GR/SDF/PP forms and shipping documents, once submitted to the Authorised Dealer banks for negotiation, collection, etc., should not ordinarily be returned to exporters, except for rectification of errors and resubmission.
C.21 Exporters’ Caution List
Authorised Dealer banks will also be advised whenever exporters are cautioned in terms of provisions contained in Regulation 17 of "Export Regulations". They may approve GR/SDF/PP forms of exporters who have been placed on caution list if the exporters concerned produce evidence of having received an advance payment or an irrevocable letter of credit in their favour covering the full value of the proposed exports. Such approval may be given even in cases where usance bills are to be drawn for the shipment provided the relative letter of credit covers the full export value and also permits such drawings and the usance bill mature within six months from the date of shipment.
Section D-REMITTANCES CONNECTED WITH EXPORT
D.1 Agency Commission on Exports
(i) Authorised Dealer 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 the following conditions:
a. Amount of commission has been declared on GR/SDF/PP/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 GR/SDF/PP/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 exporter and/or beneficiary for payment of commission exists.
b. The relative shipment has already been made.
(ii) Authorised Dealer banks may allow payment of commission by Indian exporters, in respect of their exports covered under counter trade arrangement through Escrow Accounts designated in U.S. Dollar, subject to the following conditions:
a. The payment of commission satisfies the conditions as at (a) and (b) stipulated in paragraph 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.
NOTE: 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.
D.2 Refund of Export Proceeds
Refund of export proceeds may be allowed by the Authorised Dealer banks through whom the proceeds were originally received, provided such goods are re-imported into India on account of poor quality etc. and evidence of re-import has been submitted. In all such cases, exporters should be advised to surrender the proportionate incentives availed of, if any, against the relevant export.
Annex-1
Foreign Exchange Management (Current Account Transactions) Rules, 2000Notification No. G.S.R.381 (E) dated 3rd May 2000 (as amended from time to time)*: In exercise of the powers conferred by Section 5 and sub-section (1) and clause (a) of sub-section (2) of Section 46 of the Foreign Exchange Management Act, 1999, and in consultation with the Reserve Bank, the Central Government having considered it necessary in the public interest, makes the following rules, namely:--
1. Short title and commencement.---(1) These rules may be called the Foreign Exchange Management (Current Account Transactions) Rules, 2000;
(2) They shall come into effect on the 1st day of June 2000.
2. Definitions-In these rules, unless the context otherwise requires:
(a) “Act” means the Foreign Exchange Management Act, 1999 (42 of 1999);
(b) “Drawal” means drawal of foreign exchange from an Authorised Person and includes opening of Letter of Credit or use of International Credit Card or International Debit Card or ATM Card or any other thing by whatever name called which has the effect of creating foreign exchange liability;
(c) “Schedule” means a schedule appended to these rules;
(d) The words and expressions not defined in these rules but defined in the Act shall have the same meanings respectively assigned to them in the Act.
3. Prohibition on drawal of Foreign Exchange - Drawal of foreign exchange by any person for the following purpose is prohibited, namely:
a. a transaction specified in the Schedule I; or
b. a travel to Nepal and/or Bhutan; or
c. a transaction with a person resident in Nepal or Bhutan.
Provided that the prohibition in clause (c) may be exempted by RBI subject to such terms and conditions as it may consider necessary to stipulate by special or general order.
4. Prior approval of Government of India - No person shall draw foreign exchange for a transaction included in the Schedule II without prior approval of the Government of India;
Provided that this Rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter.
5. Prior approval of Reserve Bank
No person shall draw foreign exchange for a transaction included in the Schedule III without prior approval of the Reserve Bank;
Provided that this Rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter.
6. (1) Nothing contained in Rule 4 or Rule 5 shall apply to drawal made out of funds held in Exchange Earners’ Foreign Currency (EEFC) account of the remitter.
(2) Notwithstanding anything contained in sub-rule (1), restrictions imposed under rule 4 or rule 5 shall continue to apply where the drawal of foreign exchange from the Exchange Earners Foreign Currency (EEFC) Account is for the purpose specified in items 10 and 11 of Schedule II, or item 3, 4, 11, 16 & 17 of Schedule III as the case may be.
7. Use of International Credit Card while outside India
Nothing contained in Rule 5 shall apply to the use of International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India.
Schedule I
(See Rule 3)
1. Remittance out of lottery winnings.
2. Remittance of income from racing/riding etc. or any other hobby.
3. Remittance for purchase of lottery tickets, banned/proscribed magazines, football pools, sweepstakes, etc.
4. Payment of commission on exports made towards equity investment in Joint Ventures/ Wholly Owned Subsidiaries abroad of Indian companies.
5. Remittance of dividend by any company to which the requirement of dividend balancing is applicable.
6. Payment of commission on exports under Rupee State Credit Route, except commission upto 10% of invoice value of exports of tea and tobacco.
7. Payment related to "Call Back Services" of telephones.
8. Remittance of interest income on funds held in Non-Resident Special Rupee (Account) Scheme.
Schedule II
(See Rule 4)
| Purpose of Remittance | Ministry/Department of Govt. of India whose approval is required |
| 1. Cultural Tours | Ministry of Human Resources Development, (Department of Education and Culture) |
| 2. Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding USD 10,000) by a State Government and its Public Sector Undertakings | Ministry of Finance, (Department of Economic Affairs) |
| 3. Remittance of freight of vessel chartered by a PSU | Ministry of Surface Transport, (Chartering Wing) |
| 4. Payment of import by a Govt. Department or a PSU on c.i.f. basis (i.e. other than f.o.b. and f.a.s. basis) | Ministry of Surface Transport, (Chartering Wing) |
| 5. Multi-modal transport operators making remittance to their agents abroad | Registration Certificate from the Director General of Shipping |
| 6. Remittance of hiring charges of transponders by (a) TV Channels (b) Internet Service providers | Ministry of Information and BroadcastingMinistry of Communication and Information Technology |
| 7. Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping | Ministry of Surface Transport (Director General of Shipping) |
| 8. Remittances under technical collaboration agreements where payment of royalty exceeds 5% on local sales and 8% on exports and lump-sum payment exceeds USD 2 million | Ministry of Industry and Commerce |
| 9. Remittance of prize money/sponsorship of sports activity abroad by a person other than International / National / State Level sports bodies, if the amount involved exceeds USD 100,000. | Ministry of Human Resources Development (Department of Youth Affairs and Sports) |
| 10. Omitted | |
| 11. Remittance for membership of P& I Club | Ministry of Finance, (Insurance Division) |
Schedule III
(See Rule 5)
1. Omitted
2. Release of exchange exceeding USD 10,000 or its equivalent in one calendar year, for one or more private visits to any country (except Nepal and Bhutan).
3. Gift remittance exceeding USD 5,000 per remitter/donor per annum.
4. Donation exceeding USD 5000 per remitter/donor per annum.
5. Exchange facilities exceeding USD 100,000 for persons going abroad for employment.
6. Exchange facilities for emigration exceeding USD 100,000 or amount prescribed by country of emigration.
7. Remittance for maintenance of close relatives abroad,
i. exceeding net salary (after deduction of taxes, contribution to provident fund and other deductions) of a person who is resident but not permanently resident in India and –
(a) is a citizen of a foreign State other than Pakistan; or
(b) is a citizen of India, who is on deputation to the office or branch or subsidiary or joint venture in India of such foreign company.
ii. exceeding USD 100,000 per year, per recipient, in all other cases.
Explanation: For the purpose of this item, a person resident in India on account of his employment or deputation of a specified duration (irrespective of length thereof) or for a specific job or assignment; the duration of which does not exceed three years, is a resident but not permanently resident.
8. Release of foreign exchange, exceeding USD 25,000 to a person, irrespective of period of stay, for business travel, or attending a conference or specialised training or for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up.
9. Release of exchange for meeting expenses for medical treatment abroad exceeding the estimate from the doctor in India or hospital/doctor abroad.
10. Release of exchange for studies abroad exceeding the estimate from the institution abroad or USD 100,000, per academic year, whichever is higher.
11. Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India exceeding USD 25,000 or 5% of the inward remittance whichever is more.
12. Omitted
13. Omitted
14. Omitted
15. Remittance exceeding USD 1,000,000 per project, for any consultancy service procured from outside India.
16. Remittances for purchase of trade mark or franchise in India.
17. Remittance exceeding USD 100,000 by an entity in India by way of reimbursement of pre-incorporation expenses.
18. Omitted
*(Amendments)
(Notification GSR.663 (E) dated August 9,2000,S.O.301(E) dated March 30,2001, GSR.442 dated October 22,2002, GSR.831(E) dated December 17,2002, GSR.33(E) dated January 15,2003,GSR.397(E) dated May 1,2003, GSR.731(E) dated September 5,2003, GSR.849 (E) dated October 27,2003 and GSR.608(E) dated September 13,2004).
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