Salient Features of from Master Circular on Export of Goods and Services RBI/2007-2008/25 Master Circular No/ 09 /2007-08 July 2, 2007

Salient Features of from Master Circular on Export of Goods and Services RBI/2007-2008/25 Master Circular No/ 09 /2007-08 July 2, 2007

The circular is organized into five parts as under:
Part 1 : Introduction
Part 2 : General guidelines for exports
Part 3 : Operational guidelines for the AD Banks.
Part 4 : Annex (notifications and the forms for exports)
Foreign Exchange Management (Current Account Transactions) Rules, 2000
Notification No.FEMA 23 /2000-RB dated 3rd May 2000
Forms
Part 5 : List of all circulars consolidated in the master circular.

Issued with sunset clause of one year.

· The Directorate General of Foreign Trade (DGFT) regulates export trade.
· AD 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.
· Notification No. FEMA 23/2000-RB dated May 3, 2000 on Foreign Exchange Management (Export of Goods and Services) Regulations, 2000
· Rules notified by the Government of India, Ministry of Finance, vide Notification No.G.S.R.381 (E) dated May 3, 2000
· Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000, notified vide Notification No. FEMA-8/2000-RB dated 3rd May 2000,
· There is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act 1999.
· Para 2.40 of the Foreign Trade Policy states “All export contracts and invoices shall be denominated either in freely convertible currency or in Indian Rupees but export proceeds shall be realized in freely convertible currency.

GR Exemption: Regulation 4 of Notification No. FEMA 23/2000-RB dated May 3, 2000
Grant of GR waiver export of goods free of cost, for export promotion up to 2 per cent of the annual average Max 5 lakhs (Rs 10 lac for status holders )
Export of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of GR/PP procedure from the Reserve Bank.

Full export value of the goods exported shall be received through an AD Banks 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

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.

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.

Reserve Bank may consider applications in Form EFC from exporters having good track record for opening a foreign currency account with banks in India and outside India

An Indian entity can also open, hold and maintain a foreign currency account with a bank outside India, in the name of its overseas office/branch, by making remittance for the purpose of normal business operations of the said office / branch or representative subject to conditions stipulated in Regulation 7 of Notification No. FEMA 10/2000-RB dated May 3rd, 2000

A unit located in a Special Economic Zone (SEZ) may open, hold and maintain a Foreign Currency Account with an AD Banks in India subject to conditions stipulated in Regulation 6 (A) of Notification No. FEMA 10/2000

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 issued vide AP (Dir Series) Circular No. 32 dated October 28, 2003.

A person resident in India may open with, an AD Banks in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account, in terms of Regulation 4 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 as amended from time to time
All categories of foreign exchange earners are allowed to credit up to 100 per cent of their foreign exchange earnings to their EEFC Accounts,
Account 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
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, 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.
Exporters may 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
Exporters may 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.

Setting up Offices Abroad and Acquisition of Immovable Property for
Overseas Offices AD Banks may allow remittances towards initial expenses up to fifteen per cent of the average annual sales/income or turnover during the last two financial years or up to twenty-five per cent of the net worth, whichever is higher and For recurring expenses, remittances up to ten per cent of the average annual sales/income, subject to certain terms conditions and obligations. Remittances also allowed to acquire immovable property outside India for its business and for residential purpose of its staff
Software exporter company/firm may repatriate to India 100 per cent of the contract value of each ‘off-site’ contract.
In case of companies taking up on site contracts, they should repatriate the profits of such on site contracts after the completion of the said contracts.
An audited yearly statement showing receipts expenses and repatriation thereon may be sent to the AD Banks.

Advance Payments against Exports Regulation 16 of FEMA 23 dated May 3, 2000, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall ensure that, shipment of goods is made within one year from the date of receipt, interest, if any, payable on the advance payment does not exceed LIBOR+ 100 basis points, documents covering the shipment are routed through the AD Bank through whom the advance payment is received;
Provided that in the event of the exporter's inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilised portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one year, without the prior approval of the Reserve Bank.
Where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment, the exporter shall require the prior approval of the Reserve Bank.
Allowed to purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilising the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks.
Guarantees for Export Advance. Is subject to DBOD No.DirBC.72/13.03.00/06-07

GR Approval for Trade Fair :Organisations participating in Trade Fair/Exhibition abroad can take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank of India.
Permissible to `gift' unsold goods up to the value of USD 5000 per exporter, per
exhibition/trade fair.
Exporter shall produce relative Bill of Entry within one month of re-import into India of the unsold items.
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.
Exporter shall report to the AD Banks the method of disposal of all items exported, as well as the repatriation of proceeds to India.
Such Transactions are subject to 100 per cent audit by the Bank’s internal inspectors/auditors.

GR approval for Export of Goods for re-imports. AD Banks may grant 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, and if destroyed during testing, AD banks may obtain a certificate issued by the testing agency that the goods have been destroyed during testing,

Part Drawings / Undrawn balances. If 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, AD Banks may negotiate the bills, provided:
undrawn balance is up to a maximum of 10 per cent of the full export value,
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.
AD Banks, exporter should ensure repatriation of at least 90 per cent of the value declared on GR/PP/SDF form, or the amount for which the bill was drawn whichever is more within a period of one year from the date of shipment.

Consignment Exports
AD Banks, 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 realization of proceeds of the export, even if, a bill for part of the estimated value is drawn in advance against the exports.
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
account sales received from the Agent/Consignee should be verified by the AD Banks. Deductions in Account Sales should be supported by bills/receipts in
original except in case of petty items like postage/cable charges, stamp duty, etc
Freight and marine insurance must be arranged in India.
Banks may approve export of books on consignment basis allowing for realisation of export proceeds up to 360 days from the date of shipment.
Reserve Bank will permit 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.

Opening/Hiring of Ware houses abroad
AD Banks may grant permission for opening / hiring warehouses abroad, initially for a period of one year, subject to:
Export outstanding does not exceed 5 per cent of exports made during the previous financial year. Minimum export turnover of USD 100,000/- during the last financial year. Period of realisation should be 180 days for non-status holder exporters and 12 months for status holder
All transactions should be routed through the designated branch of the AD Bank
AD Banks granting such permission/approvals should maintain a proper record of the approvals granted.

Direct dispatch of documents by the exporter
AD Banks should dispatch shipping documents to their overseas branches / correspondents expeditiously.
May dispatch shipping documents direct to the consignees or their agents 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 dispatch of documents direct to the consignee
The exporter is a regular customer and the AD Banks is satisfied, of standing and track record, arrangements made for realisation of export proceeds,
Documents if accompanied with a declaration by the exporter that they are not more than Rs. 25,000/- in value and not declared on GR/SDF/PP/SOFTEX form.
AD 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 provided ., proceeds are repatriated through the AD Banks named in the GR Form. duplicate copy of the GR form is submitted to the AD Banks for monitoring purposes, by the exporters within 21 days from shipment.

Invoicing of Software Exports
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 , and last invoice / bill should be raised not later than 15 days from the date of completion of the contract
Contracts involving only ‘one-shot operation’, the invoice/bill should be raised within 15 days from the date of transmission.
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.
Designated officials may also certify the SOFTEX Forms of EOUs

Shut out Shipments and Short Shipments
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 case of delay in obtaining certified short-shipment notice from the Customs,
exporter should give an undertaking to the AD, along copy of short shipment notice filed with customs, that he will furnish it as soon as received.
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 form and the shipping bill. Customs will certify the copy of the notice as correct and forward it to the Reserve Bank together with unused duplicate copy of the GR form. 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.

Counter-Trade Arrangement
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 requires approval of Reserve Bank
imports and exports under the arrangement should be at international prices in conformity with the Foreign Trade Policy Application for permission for opening an Escrow Account may be made by the overseas exporter/organisation through his AD. 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. No fund based / or non-fund based facilities would be permitted against the balances in the Escrow Account.

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.

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 RBI

Export of goods by units in SEZs
Units in SEZ are permitted to undertake job work abroad and export goods from that country itself subject to : Processing / manufacturing charges are suitably loaded in the export price and are borne by the ultimate buyer ; exporter has made satisfactory arrangements for realisation of full export
Banks may permit units in DTA to purchase foreign exchange for making payment for goods supplied to them by units in SEZ

Project Exports . 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’.
exporters offering deferred payment terms to overseas buyers and undertaking turnkey/civil construction contracts abroad are required to obtain the approval of the AD Banks/ Exim Bank/Working Group at post-award stage before ndertaking execution as per Memorandum on Project Exports October 2003 and A.P.(DIR Series) No.26 dated January 8,2007
Exporters may use the machinery / equipment for performing any other contract secured by them in any country subject to the satisfaction of the sponsoring AD
Exporters may open, maintain and operate one or more foreign currency account/s in a currency/currencies of their choice with inter-project transferability of funds in any currency or country.
Project / Service exporters may deploy their temporary cash surpluses, generated outside India, in investments in short-term paper abroad including treasury bills and other monetary instruments rated at least A-1/AAA
by S&P with a maturity or remaining maturity of one year or less, or deposits with branches / subsidiaries outside India of an AD
Software exporter repatriate the profits on-site contract after completion of the contract as per AP DIR Circular No.33 dated February 28, 2007

Export of Currency
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 RBI permission as per Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 notified vide Notification No. FEMA 6/RB-2000 dated 3rd May 2000

Forfaiting
Exim Bank and ADs have been permitted to undertake forfaiting, for financing of export receivables. Remittance of commitment fee / service charges, etc., payable by the exporter may be done in advance in one lump sum or at monthly intervals

Exports to neighboring countries by Road, Rail or River
Procedure filing original copies of GR/SDF forms where exports are by road, rail or river transport:
In case of exports by barges/country craft/road transport, 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 should present the form. Customs staff has been posted at certain designated railway stations 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. Or exporters must arrange to present GR/SDF forms to the Customs Officer at the Border Land Customs Station

Border Trade with Myanmar
As per 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 or in in freely convertible currency AP.DIR (Series) Circular No.17 dated October 16, 2000.

Repayment of State Credits
Export of goods and services against repayment of state credits granted by erstwhile USSR will continue to be governed by the extant directions issued by Reserve Bank, as amended from time to time.
Counter trade proposals Romania involving adjustment of value of exports from India against value of imports made into India require RBI approval

GR/SDF/PP/SOFTEX procedure
Regulation 6 of Foreign Exchange Management (Export of Goods and Services)
Regulations, 2000 notified vide Notification No. FEMA.23/2000-RB dated 3rd May 2000
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 the number having ten numerals denoting the code number of the port of shipment, the calendar year and a six digit running number and certify the value declared by the exporter on both the copies of the GR form and will also record the assessed value and return the duplicate copy of the form to the exporter and retain the original for transmission to RBI . Exporters should submit the duplicate copy of the GR form again to Customs along with the cargo to be shipped, After examination of the goods and certifying the quantity passed , Customs will return it to the exporter for submission to the AD
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 AD Banks named in the GR form.
After the documents have been negotiated / sent for collection, the AD Banks should report the transaction to Reserve Bank in statement ENC under cover of appropriate R-Supplementary Return
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.
Where Duplicate copy of GR form is misplaced or lost, AD Banks may accept another copy of duplicate GR form duly certified by Customs.

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 AD. Banks will countersign the forms after
ensuring that the parcel is being addressed to their branch or correspondent bank in the country of import.

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 AD Banks, date of negotiation, bill number, invoice value and the amount actually received by ECGC.

Random verification
AD Banks should ensure, by random check of the relevant duplicate GR /SDF /PP 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.

Certification for EEFC Credits
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 ….. per cent of the export realisation credited to the EEFC account maintained by the exporter with ….. "

Consolidation of Air Cargo
Airline company’s Master Airway Bill will be issued to the Consolidating Cargo Agent. The Cargo agent in turn will issue his own House Airway Bills (HAWBs) to individual shippers. 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. Banks 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, only if the relative letter of credit specifically provides for negotiation of this document, in lieu of bill of lading.

Delay in submission of shipping documents by exporters
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.

Check-list for Scrutiny of Forms Banks to ensure :
The number on the duplicate copy of a GR form is the same as that recorded on the Bill of Lading/Shipping Bill and the duplicate has been duly verified and authenticated by appropriate Customs authorities.
Shipping Bill No. on the SDF form should be the same as on the Bill of Lading
In the case of CIF /CFR 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.
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.
Documents submitted do not reveal any material inter se discrepancies in regard to description of goods exported, export value or country of destination.
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.
Negotiate the documents, if presented by a person other than the exporter who has signed GR/PP/SDF /SOFTEX Form for the export consignment concerned, after ensuring compliance with Regulation 12 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000
To accept the variations in the value declared to the customs authorities and that is reflected on the export documents which stem from the terms of contract, on production of documentary evidence after verifying the arithmetical accuracy of the calculations and on conforming the terms of underlying contracts due to freight increase, quality analysis of samples, penalty for late shipment,
To accept for negotiation or collection the bills for exports by sea or air, which fall short of the value, declared on GR/SDF forms on account of trade discount, only if it has been declared on relative GR/SDF form and accepted by Customs.

Return of Documents to Exporters
The duplicate copies of GR/SDF/PP forms and shipping documents, once submitted to the AD Banks for negotiation, collection, etc., should not ordinarily be returned to exporters, except for rectification of errors and resubmission.

Handing Over Negotiable Copy of Bill of Lading to Master of Vessel/Trade
Representative
AD 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.

Export Bills Register
Banks should maintain for all types of export Transactions, Export Bills Register, in physical or electronic form, and are given bill numbers on a financial
year basis. 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.



Follow-up of Overdue Bills
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 realize or within six months or seek extension 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.
Banks should follow up export outstandings with exporters systematically and vigorously so that action against defaulting exporters does not get delayed. Any laxity will be viewed seriously by RBI leading to the invocation of the penal provision under FEMA
Exporters who have been certified as `Status Holder' in terms of Foreign Trade Policy , 100 per cent Export Oriented Units (EOUs) and units set up under Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Biotechnology Parks (BTPs) are permitted to realise and repatriate the full value of export proceeds within a period of 12 months from the date of shipment
Twelve months or extended period thereof for realisation of export proceeds is no longer applicable for units located in Special Economic Zones
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. submitted in triplicate within fifteen days from the close of the relative half-year.

Reduction in Value
Reduction in Invoice Value on Account of Prepayment of Usance Bills- Occasionally, exporters may approach AD Banks for reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills. 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
If, after a bill has been negotiated or sent for collection, its amount is to be reduced for any reason, AD Banks may approve such reduction, if satisfied about genuineness of the request, provided: reduction does not exceed 25 per cent
of invoice, does not relate to export of commodities subject to floor price stipulations, exporter is not on the exporters’ caution list of Reserve Bank, exporter is advised to surrender proportionate export incentives availed of, if any.
If customer is in export business for more than three years, reduction in invoice value may be allowed, without any percentage ceiling if the export outstandings do not exceed 5 per cent of the average annual export realization during the preceding three financial years

Export Claims
AD 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 and the exporter should be advised to surrender proportionate export incentive

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 25 per cent and the realisation of export proceeds is not delayed beyond the period of six months

Extension of time and Self write-off by the exporters
For export proceeds due within the prescribed period during a financial year all exporters (other than Status Holder exporters) have been allowed to write off
(including reduction in invoice value) outstanding export dues and extend the prescribed period of realisation beyond 180 days or further period as applicable, provided aggregate value of such export bills written-off (including reduction in invoice value) and bills extended for realization does not exceed 10 per cent of the export proceeds due during the financial year and not a subject of investigation by Regulatory / Investigating Agencies. Within a month from the lose of the financial year, exporters should submit a statement (Annex 3), giving details of export proceeds due, realised and not realised to the AD Banks concerned.

Banks will be required to verify and satisfy 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 financial year, failing which, the AD 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.

Extension of Time by AD Bank
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 AD Banks with appropriate documentary evidence

ADs permited to extend the period of realisation of export proceeds beyond 6 months from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions.
Export transactions covered by the invoices are not under investigation, AD is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control, exporter submits a declaration that the export proceeds will be realised during the extended period, While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realizations during the preceding three financial years,
All the export bills outstanding beyond six months from the date of export may be reported in XOS statement. date up to which extension has been granted may be indicated in the 'Remarks' column.

Write off by AD Banks
If not been able to realise the outstanding export dues despite best efforts, may
approach the AD Banks, who had handled the relevant shipping documents, with appropriate supporting documentary evidence with a request for write off of the
unrealised portion, provided, relevant amount has remained outstanding for one year or more; aggregate amount of write off allowed by the AD Banks during a financial year does not exceed 10 per cent of the total export proceeds realized by the concerned exporter through the concerned AD, Satisfactory documentary evidence is furnished by exporter having made all efforts to realize, case is not the subject matter of any pending civil or criminal suit. exporter has not come to the adverse notice of the Enforcement Directorate, exporter has surrendered proportionate export incentives,
OR overseas buyer has been declared insolvent and a certificate from the official liquidator or buyer is not traceable over a reasonably long period or goods exported have been auctioned or destroyed by the Port/Customs/Health authorities Or unrealised amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organisation. Or represents the undrawn balance of an export bill (not exceeding 10 per cent of the invoice value) remained outstanding and turned out to be unrealizable or cost of resorting to legal action would be disproportionate to the unrealised amount or 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 have remained unrealised consequent on dishonour of the bills by the overseas buyer

“In terms of A. P. (DIR Series) Circular No.30 dated April 4, 2001." Banks should certify the duplicate form as under: "Write off of ……… (Amount in words and figures) permitted in terms of extant Directions to AD Banks." Date , Stamp & Signature of AD Banks Where there is no further amount to be realized against the GR/SDF/PP form

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 dues, cumulatively , to the extent of 5 per cent of their average annual realisation during the preceding three financial years or 10 per cent of the export proceeds due during the financial year, whichever is higher
The exporter should submit Chartered Accountant’s certificate indicating, export realisation in the preceding three financial years and also the amount of "write off" already availed of during the year, if any. relevant GR/SDF Nos. to be written off, Bill No., invoice value, commodity exported, country of Export, export benefits, if any, availed of by the exporter have been surrendered.

The following do not qualify for the "write off" facility:
Exports made to countries with externalization 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 GR/SDF forms which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc.

Banks may forward a statement in form EBW to the Regional Office of Reserve Bank every half year indicating details of write offs etc.
Banks are to put in place a system under which their internal inspectors or auditors carryout random sample check of outstanding export bills written off.

Write off in cases of Payment of Claims by ECGC
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, not be restricted to the limit of 10 per cent, but claims settled in rupees by ECGC should not be construed as export realisation

Write off in other cases
Cases which are not covered by the above instructions will require prior approval from RBI

Shipments Lost in Transit
When shipments from India for which payment has not been received either by negotiation of bills under letters of credit or otherwise are lost in transit, the AD Banks 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.
Where the claim is payable abroad, the AD Banks 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 certificate for the amount of claim received should be furnished on the reverse of the duplicate copy.
Banks should ensure that amounts of claims on shipments lost in transit which are partially settled directly by shipping companies/airlines under carrier’s liability abroad are also repatriated to India by exporters.

'Netting off' of export receivables against import payments - Units in Special Economic Zones (SEZs)
Banks may allow requests received from exporters for 'netting off' of export receivables against import payments for SEZ units
The 'netting off' of export receivables against import payments is in respect of the same Indian entity and the overseas buyer / supplier (bilateral netting) and the netting may be done as on the date of balance sheet of the unit in SEZ.
The details of export of goods are documented in GR (O) forms / DTR as the case may be while details of import of goods / services are recorded through A1 / A2 form as the case may be.
Both the transactions of sale and purchase in 'R' Returns under FET-ERS are reported separately
The relative GR / SDF forms will be treated as complete by the designated AD Banks only after the entire proceeds are adjusted / received.
The export / import transactions with ACU countries are kept outside the arrangement.
All the relevant documents are submitted to the concerned AD Banks who should comply with all the regulatory requirements relating to the transactions.

Agency Commission on Exports
Banks may allow payment of commission, either by remittance or by deduction from invoice value subject to 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. and after satisfying the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement / written understanding between the exporters and/or beneficiary for payment of commission exists. And relative shipment has already been made.

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 , commission is not payable to Escrow. Account holders themselves and commission should not be allowed by deduction from the invoice value.

Payment of commission is prohibited on exports made by Indian Partners towards equity participation in an overseas joint venture / wholly owned subsidiary as also exports under Rupee Credit Route except commission up to 10 per cent of invoice value of exports of tea & tobacco.

Refund of Export Proceeds
Banks may allow refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality.

Banks are required to : i. exercise due diligence regarding the track record of the exporter; ii. verify the bonafides of the transactions iii. obtain from the exporter a certificate issued by DGFT / Custom authorities that no incentives have been availed / have been surrendered , undertaking from the exporter that the goods will be re-imported within three months, procedures as applicable to normal imports are adhered

Exporters’ Caution List
Banks will also be advised whenever exporters are cautioned in terms of provisions contained in Regulation 17 of "Export Regulations". Notification No.FEMA 23 /2000-RB dated 3rd May 2000
Exporters concerned to 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 only then banks may approve GR/SDF/PP forms and 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.
Banks should obtain prior approval of the Reserve Bank for issuing guarantees for caution-listed exporters.