Export Finance & FEMA

Methods of Payment

Pre-shipment Finance
Packing Credit Advances against Duty Drawback Available to all exporters and even manufacturers provided letter is countersigned by exporter they will not avail the same The pre-shipment advance must be adjusted by submitting export documents within 360 days from date of advance to qualify for concessional rate of interest

Post Shipment Credit

Will cover needs from date of negotiation to due date of payment (not exceeding 180 days ) For capital goods and producer goods longperiod credit can be given against deferred payment terms at concessive rates as approved by Exim Bank

Documents under Letter of Credit

The operation of L/Cs are governed by the Uniform Customs and Practice for Documentary Credits (1993 revision) Or eUCP 2002 of International Chamber Commerce, Paris (Supplement to UCP 500 for electronic presentation ) If bills are not covered under Letters of Credit , at request of exporter the bank can purchase or discount the export bill to exporter under post shipment finance

Salient Features of FEMA 1999

Declaration of export of goods and services must have full value of true and correct material Exemptions to Declaration form is allowed for Trade samples, Personal effects of travellers, goods imported free of cost on re-export basis, goods not exceeding US$ 1000 exported to Myanmar under Barter Trade Agreement, Goods permitted by Development Commisioner of EPZ/FTZ for re-exports (defective imports and loaned goods or surplus after production operations) Goods sent for testing outside India subject to re-imports into India

Export Declaration Forms

GR is exchange control declaration form for exports to all countries other than by post Form SDF is given to specified Customs offices for specified categories of Shipping Bills under EDI systems PP Form is for exports by parcel post except when made on Value Payable or Cash on Delivery basis

Procedure for Disposal of Forms

After customs clearance the forms in duplicate are submitted to the authorized dealer within 21 days After negotiation the authorized dealer will report to RBI transaction Customs will send the Original to RBI and the duplicate copy will be sent by authorized dealer after full export proceeds are realized

Software Invoicing Payment Terms

In long duration contracts the exporter should bill clients periodically ( at least once a month ) and within 15 days from date of completion of contract Exporter can submit combined SOFTEX form for all invoices on a client including advances

Counter Trade Agreement

Adjustment of value of goods imported into India against exported goods can be voluntarily entered into by both parties by opening an Escrow account opened in India in US Dollar will be considered by RBI Authorized dealer and exporter will for permission to open the Escrow account Export of goods on lease, hire etc also require the sanction of RBI

Trade Fair Participation

For trade fairs temporary Foreign Currency account be opened abroad Deposit FE obtained by sale of goods and balance should be repatriated within one month from closure of fair and details submitted to authorized dealer Exports of exhibition goods is now allowed without prior approval of RBI and sales at discounted rates is allowed Unsold goods can be gifted up to $5000 per exhibition

Shut Out and Short Shipments

When part of shipment covered by a GR form is filed with Customs is short shipped exporter must give notice to Customs in form and manner required Where a shipment is entirely shut out and there is delay in making arrangements to re-ship exporter has to give notice in duplicate to Customs attaching th unused duplicate copy of GR and the Shipping Bill

Shipments Lost in Transit

When shipments from India for which payment has not been received are lost in transit , authorized dealer will ensure insurance claim is made as soon as loss is known Amount insured, Name and address of Insurance company and place where claim is payable are forwarded to RBI with duplicate copy of GR/PP/SDF

Consolidation of Air Cargo

When air cargo is shipped under consolidation, the airline companys Master Airway Bill is issued to the Cargo Agent who in turn issues his own House Airway Bills to each shipper Authorized dealers may also accept Forwarders cargo Receipt (FCB) by steamship companies or their agents (in lieu of IATA approved agents) instead of Bills of lading if the L/C so allows

Exports by Barges / Country Craft / Road

For exports to neighboring countries by road, rail, or river transport the GR/SDF form should be submitted to customs at the border For rail it will be processed by Customs at designated railway stations

Negotiation of Shipping Documents

After 21 days the banks will handle documents if they are satisfied that delay was because of reasons beyond the control of the exporter Trade discounts should be declared in GR/SDF before Customs clearance Consignment exports will need the shipping documents to be forwarded with instruction for delivery against trust receipt to deliver sale proceeds by specified date Documents can be sent direct to Consignees or their Agents where advance payment or Irrevocable L/C is available

Export Claims
Authorized dealers may remit export claims on application provided the relative proceeds have been realized , and the exporter is not on the caution list of RBI Exporter in such cases should be advised to surrender proportionate export incentive , if received

Change of Buyer / Consignee

Prior approval of RBI is not required if goods are to be transferred to a buyer other than original buyer, provided the reduction in value is less than 10%and proceeds are realized by not more than 6 months delay from date of export

Payment of Claims by ECGC

Authorized dealers shall on application received from exporters supported by documentary evidence from ECGC of claim settlement , write off relative export bills and delete them XOS statement. This will not be limited to 10% write off as is normally permissible .

Interest on Export Credit

This will be linked to the commercial rate of interest , but is lower by 35% for pre-shipment credit based on time of utilization 13% to 15% based on the credit duration

Inspection Agencies
Bureau of Indian Standards Bureau Veritas SGS India Private Limited Intertek Group PLC SASO (Saudi Arabian Standards Organization RWTUV