Export of goods and services

1. Export of goods and services Ashit Hegde

2. Definitions as per FEMA – “Export” means, I. the taking out of India to a place outside India any goods • provision of services from India to any person outside India “Import” means, - Bringing into India any goods or services Ashit Hegde

3. “Foreign Exchange“ means foreign currency and includes I. Deposits, credits and balances payable in any Foreign Currency II. Drafts, B/E drawn by banks, institutions or persons outside India but payable in Indian currency. “Capital Account Transaction” means, • A transaction which alters the assets or liabilities, including contingent liabilities outside India of persons resident in India OR assets or liabilities in India of persons resident outside India. Ashit Hegde

4. Deemed Exports Deemed Exports refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Rupees or in free foreign exchange. In terms of foreign Trade Policy 2009 -2014, some of the deemed exports are, I. Supply of goods to EOUs, EPZs, SEZs, STPs, EHTPs, II. Supply of Capital Goods to holders of licences under EPCG scheme. III. Supply of Goods to projects financed by multilateral or bilateral agencies or funded by UN agencies Ashit Hegde

5. Export of Goods and Services Realisation of export proceeds It is obligatory on the part of the exporter to realize full value of the export and bring into India within the specified period. • 100% EOUs, SEZs, STPs and status Holder Exporters - Within twelve months from date of export • Other Exporters - Within nine months. If the exporter does not ensure realisation within 12 months or does not seek extension, matter should be reported to RBI. • Payment by third Parties - Allowed subject to A.D. Bank being satisfied with bonafides of the transaction. Ashit Hegde

6. Advance Payment against Exports Advance payment from buyer abroad may be received. I. Shipment should be made within one year. II. Interest payable, if any, should not exceed LIBOR + 100 basis points. III. Export Documents should be submitted to the same A.D. Bank through whom advance payment was received. IV. Prior approval of RBI required for refund to be made after one year. Ashit Hegde

7. Direct Dispatch of documents by exporter Permitted subject to Bank being satisfied with the track record of the exporter. Software Exports For long duration contracts exporters should bill the clients periodically i.e. at least once in a month. Export of Goods on Lease, hire, and on elongated terms will need prior approval by RBI. Ashit Hegde

8. Submission of documents Export documents should be submitted to A.D. Banks within 21 days from the date of shipment. Export Bills Register This should be maintained either in electronic or physical form and full details of all type of Export bills should be entered. Reduction in invoice value Up to 25% permitted. Above this, Bank has discretion. Ashit Hegde

9. Self-Write Off by Exporters Up to 10% of export proceeds due in the F.Y. (Please note this concession is from FEMA angle and not from credit perspective) Agency Commission for Exports I. Permitted either by reduction in invoice value or by separate remittance. II. Should have declared in SDF or a separate agreement should be there. Ashit Hegde

10. Consolidation of Air Cargo/Sea Cargo In respect of negotiation of documents containing HAWB (House Airway Bills) and FCRs (Forwarders Cargo Receipt), care should be exercised as these are not documents of title to goods. Sanction letters must authorize such purchase/discount/negotiation. Reporting by exporter to A.D. bank Exporter should submit an annual statement within one month to A.D. bank who should review the operations to ensure compliance. Extension of time for realisation A.D. banks are authorized to permit extension. Ashit Hegde

11. Merchanting Trade (Intermediary Trade) Merchanting transactions are those which involve import and export but the goods do not enter or leave the shores of India. Thus, there will be no Bill of Entry or Export Declaration form (EDF) in these transactions. RBI Guidelines - • Both the legs of the transaction should be routed thro’ same A.D. Bank. • The entire transaction should be completed in 9 months and outlay of Forex should not be for more than 4 months. • If advance is demanded by overseas seller, the same should be paid against guarantee by a bank abroad. Ashit Hegde

12. Setting up Offices Abroad A.D. Banks may remit funds as under for this purpose. For Initial Expenses, 15% of average turnover of last 2 years OR 25% of Net worth, whichever is higher. For recurring expenses, 10% of average turnover of last 2 years Immovable property for Office use may also be acquired out of the above funds. FCY accounts can be opened with a bank abroad in the name of office (Form EFC). Reporting to RBI Discontinued from Sept 13. (Erstwhile Form ORA –HLY) Ashit Hegde

13. Export Declaration Forms ( SOFTEX, SDF AND EDF) Ashit Hegde

14. All the declaration forms will contain – • Full details of shipment. • Declaration that value declared is correct. • That they will repatriate the proceeds to India within the prescribed period. SDF (meant for EDI Ports) 1. To be submitted in duplicate to the customs dept. (annexed to the shipping bill). 2. Exchange control copy will be handed over to the exporter after certification. 3. Exporter has to submit this within 21 days of shipment. Ashit Hegde

15. SOFTEX 1. To be submitted by the exporter of software in triplicate to STP, FTZ, EPZ, or SEZ. 2. After certifying all the three copies, one will be sent to nearest RBI by the authority and the other copy will be handed over to the exporter. The third will be retained by the authority. 3. The exporter will submit this Exchange Control Copy to the A.D. Bank along with invoice etc. (as a part of the export bill) 4. On realization of export proceeds the Bank will certify the E.C. Copy to this effect and will retain this form with them. Ashit Hegde

16. EDF (Erstwhile GR & PP forms) This form is used at Non-EDI Ports. • To be submitted in duplicate to the customs dept. • After certification E.C. copy will be handed over to the exporter. • The other copy will be submitted to RBI by the customs dept. • Exporter has to submit the E.C. copy to the bank within 21 days. Ashit Hegde

17. Project Exports (PEM dt 28/10/2003) Project exports include, 1. Supply contracts on deferred payment terms. 2. Turn key/civil construction contracts abroad. A working group (consisting of representatives from RBI, ECGC,. Exim Bank, GOI and the concerned bank) is authorized to give approval for project exports Exporters’ caution list – • A.D.s can approve SDF of caution listed exporters provided an advance payment or LC for full value has been received. • Guarantees to such exporters need prior approval of RBI. Ashit Hegde

18. Reporting to RBI A. R Returns (fortnightly) - Banks will negotiate/send the documents for collection and report the details in ENC statement under cover of fortnightly R. return. B. XOS (half yearly – June & December) - All bills which are outstanding for more than 6 months from the date of export as on 30th June and 31st Dec are to be reported. From half year ending Dec 13, banks have to report online for bank as a whole through a nodal branch. Ashit Hegde

19. C. Self-write off (Annexure 4)- Exporter has to submit to A.D. Bank within one month of close of F.Y, st. of a/c of export performance giving details of proceeds due, realised, not realised etc. Banks have to review the performance and take up follow up action. Note: The RBI will shortly introduce a new comprehensive IT based system called Export Data Processing and Monitoring System (EDPMS). All returns in future will be submitted through this single platform. Ashit Hegde