Friday, March 9, 2007

Export of Goods and Services -Indian regularions

Export of Goods and Services
RBI/2006-07/27 Master Circular No/09/2006-07 July 1, 2006


A.1 Trade and Foreign Exchange Regulations
Section 7 and section 47 of the Foreign Exchange Management Act 1999 (42 of 1999)
Foreign Exchange Management (Export of Goods and Services) Regulations, 2000
Notification No. GSR 381(E) dated May 3, 2000 and
FEMA Notification 23/RB-2000 dated May 3, 2000
Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2000 notified vide Notification No. FEMA 14/2000-RB dated May 3, 2000.
Notification No. FEMA 47/2001-RB dated December 5, 2001
A.P. (DIR Series) Circular No. 32 dated 21st April 2006

A.2 Exemptions from Declarations
exempted from submission of declaration in the prescribed format for exports of value not exceeding US $ 25,000 eqvt
exporters shall be liable to realise and repatriate export proceeds
Gift of goods exceeding Rupees Five lakhs -RBI Approval rqd
May grant GR Waiver for exporters for export of goods free of cost, for export promotion up to 2 percent of the three years average annual exports , subject to a ceiling of Rs.5 lakhs and Rs.10 lakhs for status holders
Export of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of GR/PP
A.3 Numbering of Forms
GR, PP and SOFTEX forms will bear specific identification numbers ,
the port code number and shipping bill number should be cited inSDF

A. 4 Manner of Payment
full export value of the goods exported shall be received through an Authorised Dealer
a. Bank draft, pay order, banker’s or personal cheques.
b.Foreign currency notes/foreign currency TCs
c.Payment out of funds held in the FCNR/NRE account
d.International Credit Cards
GR/SDF (duplicate) should be released by the AD banks only on receipt of funds in Nostro
e.Between person resident in India and a person resident in Nepal may be settled in Indian Rupees
f.Precious metals i.e. Gold / Silver / Platinum by the Gem & Jewellery units in SEZs and EOUs in equivalent to value of jewellery exported

A. 5 Guarantees against Exports
obtain prior approval of the Reserve Bank for issuing guarantees for caution-listed exporters

A.6 Accounts in Foreign Currency
general permission for Participants in international exhibition/trade fair for opening a temporary foreign currency account abroad , 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 .
Reserve Bank may consider applications , thru Authorised Dealer bank in India ,in Form EFC from exporters having good track record for opening a foreign currency account , giving details of the bank with which the account will be maintained abroad.
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
project / service exporter may open, hold and maintain foreign currency account with a bank outside or in India subject to P E M

(II) Diamond Dollar Account
Firms 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, with RBI permission, if at least three years in import or export of diamonds and having an average annual turnover of Rs. 5 crores or above .
(III) Exchange Earners’ Foreign Currency (EEFC) Account
A person resident in India may open Exchange Earners’ Foreign Currency (EEFC) Account, with AD, in the form of non-interest bearing current account , and no credit facilities granted against the balance held as security.
Eligible credits are , inward remittance , foreign currency loan raised or investment received from outside , received in foreign exchange by a unit in (DTA) for supplying goods to a unit in SEZ out of its Foreign currency
is 100 Pct for Status Holder Exporter , professional services in his personal capacity , 100% EOU, EPZ, STP, EHTP
and 50 per cent for all other persons resident in India
exporter constituents to extend trade related loans / advances to overseas importers out of their EEFC balances without any ceiling
permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC

A.7 Setting Up Offices Abroad and Acquisition of Immovable Property for Overseas Offices
remittances allowed 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 ,for normal business operations Provided should not Create any financial liabilities contingent or otherwise for the head office in India , Invest surplus funds abroad without prior RBI approval , and bank account details are reported to RBI
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.
Prior permission of RBI , to acquire immovable property outside India

A.8 Counter-Trade Arrangement
adjustment of value of goods imported into India against value of goods exported , arrangement voluntarily entered , through an Escrow Account opened in India in U.S. dollar , will be allowed by RBI, when applied thru AD, provided invoiced in Intl Prices, no interest on escrow a/c balances,surplus may be invested in term deposit for 3 months only in any year.
A.9 Export of Goods on Lease, Hire, etc
Prior RBI approval required for export of machinery, equipment, etc., on lease, hire, etc , against collection of lease rentals/hire charges and ultimate re-import

A.10 GR Approval for Export
Participants of Trade Fair/Exhibition abroad are now permitted to take/export goods for exhibition and sale ,
Unsold exhibit items may be sold outside the Fair, at discounted values ,
permissible to `gift' unsold goods up to the value of US $ 5000 per exporter, per exhibition
AD may approve GR Form of export items for display or display-cum-sale in trade fairs provided …
exporter shall produce relative Bill of Entry within one month of re-import of unsold items, sale proceeds of the items sold are repatriated to India , method of disposal of all items exported, as well as the repatriation is reported to AD, subject to 100 per cent audit by their internal inspectors/auditors
GR waiver may be granted, for, Export of Goods for re-import after repairs / maintenance / testing / calibration etc, subject to exporter shall produce relative Bill of Entry within one month of re-import of the exported item and if destroyed during testing obtain a suitable certificate issued by the testing agency

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’
Should obtain the approval of the Authorised Dealer /Exim Bank/Working Group at post-award stage before undertaking execution of such contracts.
Memorandum on Project Exports (PEM).
A. 12 Export on Elongated Credit Terms
submit their proposals giving particulars through their banks to RBI
export of books on consignment basis , allowing for realisation of export proceeds up to 360 days from the date of shipment , allowed to abandon the books which remain unsold at the expiry of the period of the sale contract ,and evidence in Account Sales

A. 13 Export of goods by Special Economic Zones (SEZs)
permitted to undertake job work abroad and export goods from that country itself, if charges are suitably loaded in the export price and arrangements for realisation of full export proceeds is done
units in DTAs Permitted to purchase foreign exchange for making payment for goods supplied to them by units in SEZs
A. 14 Forfaiting

B.1 Export Declaration Form
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.
Customs will give their running serial number (denoting the code number of the port of shipment, the calendar year and a six- digit running serial number )on both the copies after admitting the corresponding shipping bill
Customs will certify the value declared by the exporter , return the duplicate copy of the form to the exporter and retain the original for transmission to Reserve Bank
Exporters should submit the duplicate copy of the GR form again to Customs along with the cargo to be shipped for examination of the goods and certifying the quantity passed for shipment
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
Bank should report the transaction to Reserve Bank in statement ENC under cover of appropriate R-Supplementary Return , of bills handled

B.2 SDF Forms
Electronic Data Interchange (EDI) System at certain Customs , GR form is replaced by a declaration in form SDF
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

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 (after ensuring that the parcel is being addressed to their branch or correspondent bank in the country of import with instructions to deliver against payment or acceptance )

B. 3. B. Counter Signature on PP Forms
Banks may countersign PP forms covering parcels addressed direct to the consignees, provided
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
Or satisfactory arrangements made for realisation of the export proceeds on basis of the standing and track record of the exporter
Any alteration in the name and address of consignee on the PP form should also be authenticated by the AD

B.4. Disposal of SOFTEX Forms
Regulation 6 of Export Regulations
random check of the relevant duplicate forms by their internal / concurrent auditors
non-realisation or short realisation allowed , should be within the powers delegated , or with prior approval of RBI
export declaration (duplicate) form may be duly certified , Where a part of the export proceeds are credited to an EEFC

B.5. Terms of Payment - Invoicing - (Software)
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 and can submit a combined SOFTEX form for all the invoices raised
For ‘one-shot operation’, the invoice/bill should be raised within 15 days from the date of transmission
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 invoices raised on overseas clients as above is subject to valuation by Gov Officials and consequent amendment made in the invoice value, if necessary

B.4. Disposal of SOFTEX Forms
Regulation 6 of Export Regulations
random check of the relevant duplicate forms by their internal / concurrent auditors
non-realisation or short realisation allowed , should be within the powers delegated , or with prior approval of RBI
export declaration (duplicate) form may be duly certified , Where a part of the export proceeds are credited to an EEFC

B.6 Shut out Shipments and Short Shipments
If 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.
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 attaching thereto the unused duplicate copy of GR /Shipping bill
Customs will verify , certify the copy of the notice as correct and forward it to the Reserve Bank , together with unused duplicate copy of the GR form

B. 7 Consolidation of Air Cargo
IF shipped under consolidation, the airline company’s Master Airway Bill will be issued to the Consolidating Cargo Agent
AD may negotiate HAWBs only if the relative letter of credit specifically allows
AD can accept Forwarder’s Cargo Receipts (FCR) issued by (instead of 'IATA' approved agents), in lieu of bills of lading, only if the relative letter of credit specifically allows
relative sale contract with the overseas buyer should also provide that FCR may be accepted in lieu of BL/AWB

B.8 Exports to neighbouring countries by Road, Rail or River:

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
exports by rail, Customs staff has been posted at certain designated railway stations for attending to Customs formalities , exporters must arrange to present GR/SDF forms to the Customs Officer at the Border Land Customs Station
B.9 Border Trade with Myanmar
goverened by the Agreement on Border Trade between India and Myanmar
permitted to exchange certain specified locally produced commodities under the barter trade
A.P.(DIR Series) Circular No.17 dated 16th October 2000

B.10 Deep Sea Fishing - Transfer of catch at high seas
Ministry of Food Processing Industries (MOFP) approval is required for ) for transfer of catch at the high seas and Customs' certification on the GR need not be insisted instead certificates duly signed by the Master of the vessel, indicating the composition of the catch, quantity, export value, date of transfer of catch
prescribed period of realization, i.e. 180 days should be reckoned with reference to the date of transfer
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 , is rqd

C. 1 Delay in submission of shipping documents by exporters
AD may handle with prior RBI approval , Docs presented after the prescribed period of twenty-one days from date of export , if satisfied about reasons for delay

C. 2 Check-list for Scrutiny of Forms – AD to Ensure..
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
In SDF form, that the Shipping Bill No. should be the same as that appearing on the Bill of Lading
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 or freight indicated on the Bill of Lading/Airway Bill, whichever is less

Documents per se should not have any discrepancies as to description of goods exported, export value or country of destination .
If marine insurance is by the exporters ,ensure amount paid is recovered through invoice .
Can 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
Export realisable value may be more than what was originally declared to/accepted by the Customs
IF documents are being negotiated by a person other than the exporter who has signed GR/PP/SDF/SOFTEX Form , comply with Regulation 12 of Export Regulations
Sometimes, contracts may provide for payment of penalty for late shipment of goods , final settlement of price may be dependent on the results of quality analysis , 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 , 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
Necessary to ensure that the shipments made against the advance payments are monitored by the AD bank through whom the advance payment is received .
Every shipment must be endorsed on the original FIRC copy
Purchase of foreign exchange from the market for refunding advance payment credited to EEFC account may be allowed

C. 5 Part Drawings
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 , and can be alllowed if , undrawn balance is maximum of 10 per cent of the full export value , and exporter undertakes 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
AD 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, within one year of shipment.

C. 6 Consignment Exports
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
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 , and evidence in ‘Account Sales’ supported by bills/receipts in original as applicable
freight and marine insurance must be arranged in India.
AD amy consider proposal for hiring warehouses abroad

C.7 Dispatch of Shipping Documents
banks should normally dispatch shipping documents to their overseas branches/correspondents expeditiously
may dispatch shipping documents direct to the consignees where:
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
exporter is a regular customer , standing and track record realization of export proceeds is satisfactory
of goods or software are accompanied with a declaration by the exporter that they are not more than Rs. 25000- in value and not declared on GR/SDF/PP/SOFTEX (SeeA2)
‘Status Holder Exporters’ , SEZ units may dispatch the export documents to the consignees outside India if proceeds are repatriated thru AD mentioned in GR, and GR is submitted to bank within 21 days of export
Where exporters have received 100 per cent advance they may dispatch directly to the consignee

C.8 Handing Over Negotiable Copy of Bill of Lading to Master of Vessel / Trade Representative
banks may deliver one negotiable copy of the Bill of Lading to the Master of the carrying vessel 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
banks should maintain Export Bills Register
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
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 , and recorded in ENC

C.10 Follow-up of Overdue Bills
banks should closely watch realization ,if outstanding, beyond the due date for payment or six months from the date of export, the matter should be promptly, ‘systematically and vigorously’ taken up with the concerned exporter
Any laxity in the follow up of realization of export proceeds may , lead to the invocation of the penal provision under FEMA 1999
Should be reported to the RBI RO stating, the reason for the delay in realizing the proceeds , if still unpaid or seeks extension
`Status Holder' , EOU, EHTP, BTP,STP, permitted , period of 12 months from the date of shipment ,to realize and repatriate .
twelve months for realization is no longer applicable for units located in Special Economic Zones (SEZs).
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

C. 11 Reduction in Invoice Value on Account of Prepayment of Usance Bills
banks may allow ,reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills , to the extent of amount of proportionate interest on the unexpired period of usance

C. 12 Reduction in Value
bank may approve reduction value after bill has been negotiated or sent for collection ,upto 10 per cent of invoice value , if exporter is not in caution list, and proportionate incentives is surrendered and no floor price limitation is applicable
If , the export outstanding do not exceed 5 per cent of the average annual export realisation during the preceding three calendar years , and in business for more than three years, reduction in invoice value may be allowed, without any percentage ceiling

C. 13 Export Claims
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, provided proportionate export incentive is surrendered.
C.14 Change of buyer/consignee
After goods have been shipped, allowed to transfer 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

C.15 Self write-off and Extension of Time
All exporters have been allowed to , Write off (including reduction in invoice value) outstanding export dues, With each bank, and Extend the prescribed period of realisation beyond 180 days or further period as applicable, provided , such export bills written-off (including reduction in invoice value) and bills extended for realisation does not exceed 10 per cent proceeds due during the calendar year and export bills are not a subject of investigation by Gov Agencies.
Within a month from the close of the calendar year, exporters should submit a statement , giving details of export proceeds due, realised and not realised to the Authorised Dealer bank concerned .
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

C.16 Extension of Time Limit in Other Cases
Exporter should apply Bank in form ETX through his AD with appropriate documentary evidence in respect of cases , where extension of realization period is sought, if invoices are under investigation or the invoice value exceeds US $ 1 mn.
AD can , where the invoice value does not exceed USD 1Mi, grant up to a period of 3 months at a time on their own, if satisfied about the reasons for delay, exporter submits a declaration that he will realise the export proceeds during the extended period , and if 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
If suits are filed abroad against the importer no Inv amt Lmt
Continue to report in XOS, with suitable remarks reg extension

C.17 Shipments Lost in Transit
When shipments from India are lost in transit 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
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
Bansk to ensure Claims partially settled directly by shipping companies/airlines under carrier’s liability , if settled abroad are also repatriated

C. 18 Payment of Claims by ECGC
Banks may write off the relative export bills and delete them from the XOS statement , on documentary evidence from the ECGC confirming that the claim in respect of the outstanding bills has been settled by them
The claims settled in rupees by ECGC should not be construed as export realisation in foreign exchange

banks may forward a statement in form EBW , 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 A "Write off" of Unrealised Export Bills
Bank, who had handled the relevant shipping documents , can write off of the unrealized portion , if exporter submits evidence that he been un-able to realize the outstanding export dues despite best efforts, within one year, not to exceed 10 per cent of the total export proceeds AND either,
overseas buyer has been declared insolvent and a certificate from the official liquidator is submitted or buyer is not traceable
goods exported have been auctioned or destroyed by authorities
unrealised amount represents the balance due in a case settled through the intervention of Embassy/ Chamber etc
undrawn balance of an export bill (not exceeding 10 % of the invoice value)
cost of resorting to legal action would be too high
difference between the letter of credit value and actual export value or between the provisional and the actual freight charges etc
is not the subject matter of any pending Civil/Criminal suits
Exporter is not caution listed

C. 19 B 'Netting off' of export receivables against import payments - Units in Special Economic Zones (SEZs) –AD may allow,
The 'netting off' of export receivables against import payments is in respect of the same Indian entity and the overseas buyer / supplier (bilateral netting)
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
Both the transactions of sale and purchase in 'R' Returns under FET-ERS are reported separately

C.20 Return of Documents to Exporters
duplicate copies of GR/SDF/PP forms and shipping documents, once submitted to AD, ., should not ordinarily be returned to exporters, except for rectification of errors and resubmission

C.21 Exporters’ Caution List
banks will be advised, by RBI, whenever exporters are cautioned in terms of provisions contained in Regulation 17 of "Export Regulations".
Can approve approve GR/SDF/PP for such exporters on evidence of having received an advance payment or an irrevocable letter of credit in their favour covering the full value of the proposed exports

D.1 Agency Commission on Exports
Payment of commission, either by remittance or by deduction from invoice value, on application submitted by the exporter is allowed, subject to ..
commission has been declared on GR/SDF/PP/SOFTEX form and accepted by the Customs authorities/ STP/EPZ or after satisfying the reasons adduced by the exporter for not declaring commission provided a valid agreement for payment of commission exists
And the actual shipment is already done
Comn under counter trade arrangement through Escrow Accounts designated in U.S. Dollar if it is not by deduction from the invoice value deduction from the invoice value and is paid to a party other than escrow a/c holders.

D.2 Refund of Export Proceeds
Allowed if 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