Foreign Exchange Management Act 1999 – Export of Goods and Services

FEMA – 012 – Dated:- 9-9-2000 – Foreign Exchange Management Act 1999 – Export of Goods and Services RESERVE BANK OF INDIAEXCHANGE CONTROL DEPARTMENTCENTRAL OFFICEMUMBAI-400 001 A.P. (DIR Series) Circular No.12 September 9, 2000 To All Authorised Dealers in Foreign Exchange Dear Sirs, Foreign Exchange Management Act 1999 – Export of Goods and Services Attention of authorised dealers is invited to the Notification No. FEMA 23/ 2000-RB dated 3rd May, 2000, issued by Reserve Bank 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), under which the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 have been made. Synopsis of these Regulations have already been advised vide Annexure III to A.D. (M.A. Series) Circular No 11 dated May 16, 2000. The Annexure attached to this circular contains detailed directions relating to dealin

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ted to issue guarantees on behalf of exporter clients on account of exports out of India. 5. 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. 6. It is further clarified that the Directions contained in the Annexureshould be read with the Regulations notified by the Reserve Bank vide its Notification No. FEMA 23/2000 -RB dated 3rd May 2000, referred to above. 7. Authorised dealers may bring the contents of this circular to the notice of their constituents, concerned. 8. The directions contained in this circular have been issued under Section 10(4)

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or functions unless otherwise indicated. If for any particular reason, a firm or company desires to deal with a different office of the Exchange Control Department, it may approach the office within whose jurisdiction it functions 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. The requirement of declaration also shall not apply to goods sent for testing abroad, subject to re-import. (ii) Gift of goods exceeding rupees one lakh in value require approval of the Reserve Bank. (iii) Export of goods not involving any foreign exchange transaction directly or indirectly, requires the waiver of GR/PP procedure from 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

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of funds in their Nostro account or 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, if the authorised dealer concerned is not the Credit Card servicing bank. A.5 Guarantees against Exports Prior approval of Reserve Bank should be obtained by authorised dealers for issue of guarantees in respect of caution-listed exporters. A.6 (i) Foreign Currency Accounts Reserve Bank may consider applications in form EFC from exporters having good track record for opening foreign currency accounts with banks subject to certain terms and conditions. Applications for opening such an account with a branch of an authorised dealer in India may be submitted through the branch at which the foreign currency account is to be maintained. If the foreign currency account is to be maintained abroad the application should be made by the exporter giving details of the bank with which the account

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s party through an Escrow Account opened in India in U.S. dollar will be considered by the Reserve Bank. All imports and exports under the arrangement should be at international prices in conformity with the Exim Policy and Foreign Exchange Management Act, 1999 and the Rules and Regulations made thereunder. 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. (ii) Application for permission for opening an Escrow Account may be made by the overseas exporter/organisation through the authorised dealer with whom the account is proposed to be opened, to the office of Reserve Bank under whose jurisdiction the authorised dealer is functioning. A.8

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ndia provided that the balance in the account is repatriated to India within a period of one month from the date of closure of the exhibition/trade fair and full details are submitted to the concerned authorised dealer. (ii) Firms/Companies and other organisations participating in Trade Fair/ Exhibition abroad should obtain approval on GR Form from the concerned office of Reserve Bank for export of exhibits and other items for display-cum-sale in the trade fair/exhibition. On closure of the fair/exhibition, they should re-import the exhibits or repatriate the value of goods sold within one month of the closure of the fair/ exhibition and submit necessary documentary evidence to the concerned Regional office of Reserve Bank in support of the re-import or repatriation. A.10 Project Exports and Service Exports (i) 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 .

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posals giving full particulars through their banks to the concerned Regional Office of Reserve Bank for consideration. A.12 Forfaiting Export-Import Bank of India (Exim Bank) and authorised dealers have been permitted to undertake forfaiting, for financing of export receivables. It would be in order for authorised dealers to allow remittance of commitment fee/ service charges, etc. payable by the exporter as approved by the Exim Bank/ the concerned authorised dealer. Such remittance may be permitted in advance in one lumpsum or at monthly intervals as approved by the concerned agency. PART B – GR/PP/SOFTEX PROCEDURE B.1 Disposal of Copies of Export Declaration Forms (i) Copies of export declaration forms should be disposed of as under: (a) 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 on both the copies after admitting the correspo

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the GR form. After the documents have been negotiated/sent for collection, the authorised dealer should report the transaction to Reserve Bank in statement ENC under cover of appropriate R-Supplementary Return. The duplicate copy of the form together with a copy of invoice will be retained by the authorised dealer till full export proceeds have been realised and thereafter submitted to Reserve Bank duly certified under cover of appropriate R-Supplementary Return. 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 may accept another copy of duplicate GR form duly certified by Customs. (c) On account of introduction of Electronic Data Interchange (

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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, date of negotiation, bill number, invoice value and the amount actually received by ECGC. It will be in order for authorised dealers to certify the duplicate GR form/ EC copy of shipping bill on the basis of the certificate issued by ECGC and submit them to Reserve Bank. The certificate issued by ECGC may also be attached to the duplicate GR/SDF/PP form while forwarding them to Reserve Bank. (e) Where a part of export proceeds are credited to EEFC acco

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ure on PP forms PP forms will be presented by the exporter to an authorised dealer for countersignature. Authorised dealers should countersign the PP forms after ensuring that the parcel is being addressed to their branch or correspondent bank in the country of import. The concerned overseas branch or correspondent should be instructed to deliver the parcel to consignee against payment or acceptance of relative bill. Authorised dealers 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 exporter and has been advised through authorised dealer concerned; or (b) the full value of the shipment has been received in advance by the exporter through an authorised dealer; or (c) the authorised dealer 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

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ne shot operation , the invoice/bill should be raised within 15 days from the date of transmission. (iii) The exporter should submit SOFTEX form to the concerned official of Government of India at STPI/EPZ 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. (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 of Government of India and consequent amendment made in the invoice value, if necessary. B.3.B. Disposal of SOFTEX forms As for disposal of SOFTEX forms the procedure indicated in Regulation 6 of Export Regulations is to be observed. The authorised dealers on receipt of the duplicate copy of the SOFTEX form from the exporter will after full realisation of value declared on the form or as certified by the designated officials (whichever is higher) submit it to Reserve Bank duly certified, u

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shut out, certify copy of the notice as correct and forward it to 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.5 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 who will in turn issue his own House Airway Bills (HAWBs) to individual shippers. Authorised dealers 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. B.6 Exports by Barges/Country Craft/Road Transport 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/co

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completed. c. In terms of an agreement on Border Trade between India and Myanmar, exchange of certain specified locally produced commodities, by people living along the India-Myanmar border on both sides under barter trade arrangement as also trade in freely convertible currency, has been permitted as per guidelines issued by Reserve Bank to authorised dealers from time to time. Authorised dealers should follow strictly the guidelines. PART C – Authorised Dealer s Obligation 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 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/exporter should verify the following : i. Authorised dealer should ensure that the number on the duplicate copy of a GR form presented to

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rough invoice and the bill. iii. The documents submitted do not reveal any material inter se discrepancies in regard to description of goods exported, export value or country of destination. NOTE: A. The export realisable value may be more than what was originally declared to/accepted by 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 in respect of the concerned consignment of export, authorised dealers may negotiate the documents after ensuring compliance with Regulation 12 of Export Regulations . C. In certain lines of export trade, final settlement of price may be dependen

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on account of trade discount may be accepted for negotiation or collection only if the discount has been declared by 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 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 v

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he bill was initially drawn (excluding undrawn balances) or 90% 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, 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 Sale

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hes/ correspondents expeditiously, they may despatch shipping documents direct to the consignees or their agents resident in the country of final destination of goods in cases 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 despatch of documents direct to the consignee or his agent resident in the country of final destination of goods. ii. In cases not covered by (i) above also, authorised dealers may accede to the request of the exporter, for despatch of documents for whatever reason, direct to the consignee/agent provided the exporter is a regular customer and the authorised dealer 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. iii. Documents in respect of goods or software which are accompanied with a declaration by the exporter tha

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od of R Supplementary Return with which ENC statement covering the transaction was sent to Reserve Bank and the period of R Supplementary Return with which the duplicate copy of GR/SDF/PP form is submitted to Reserve Bank should be available. ii. Authorised dealers 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 dealers should closely watch realisation of bills and in cases where bills remain outstanding, beyond the due date for payment or 6 months from the date of export, the matter should be promptly taken up with 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 Reserve Bank stating, wh

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on in Invoice Value on account ofPrepayment of Usance Bills Occasionally, exporters may approach authorised dealers for reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills. In such cases authorised dealers 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, the amount thereof is desired to be reduced for any reason, authorised dealer may approve such reduction, if satisfied about genuineness of the request, provided; a. the reduction does not exceed 10% of invoice value b. it does not relate to an export of i. gold or silver jewellery or articles made out of cut and polished diamonds, ii. commodities subject to f

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ceeds 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% 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%, all other relevant conditions stipulated in paragraph C.12 should also be satisfied. C.15 Extension of Time Limit In cases where an exporter has not been able to realise proceeds of a shipment made within the period prescribed (i.e within six months from the date of export), for reasons beyond his cont

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e company c. Place where claim is payable. In cases where claim is payable abroad, authorised dealer must arrange to collect the full amount of claim due on the lost shipment, through the medium of his overseas branch/correspondent and forward the duplicate copy of GR/SDF/PP form to Reserve Bank 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 carriers liability. Authorised dealers should ensure that amounts of such claims if settled abroad are also repatriated to India by exporters. C.17 Payment of Claims by ECGC Where export has been covered by a policy issued by ECGC, settlement of a claim by the Corporation does not absolve the exporter of the statutory obligation undertaken on the GR/SDF/PP form to realise proceeds of the export within prescribed period. In suc

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ar; 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 undernoted 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% 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 dis

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uld submit the duplicate thereof to Reserve Bank along with R return, duly certified, as under: Write off of …………………………………………… (Amount in words and figures) permitted in terms of paragraph C.18 of Directions to Authorised Dealers. Date Stamp & Signature of Authorised Dealer C.19 Return of Documents to Exporters The duplicate copies of GR/SDF/PP forms and shipping documents, once submitted to authorised dealers for negotiation, collection, etc, should not ordinarily be returned to exporters, except for rectification of errors and resubmission. C.20 Exporters Caution List Authorised dealers will also be advised whenever exporters are cautioned in terms of provisions contained in Regulation 17 of Export Regulations . Authorised dealers should not accept for negotiation/collection shipping documents covering exports declared on GR/SDF/PP forms completed by such exporters nor countersign PP forms completed by them unless the GR/SDF/PP forms bear approva

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rters, 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. D.2 Refund of Export Proceeds Refund of export proceeds may be allowed by authorised dealers 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, agai

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