When we talk about the FEMA Provisions on Exports, our deliberation is  based upon Master Direction No. 16/2015-16 dated 1st  January 2016 (Updated as on January 08, 2021) of Reserve Bank of India read along with Foreign Exchange Management (Export of Goods and Services from India) Regulations FEMA 23(R)/2000- RB dated January 12, 2016 (Amended up to January 11, 2021)

Export Policy

Export Policy is a part of  Foreign Trade Policy of India.

Just like imports, goods can be exported freely if they are not mentioned in the following classification of ITC (HS) Schedule II. Classification of goods for export is given below:

• Restricted - which require licence 
• Prohibited - which can not be exported or imported at all
• State Trading Enterprise - export / import is routed through a particular channel like MMTC, FCI etc.
• Restrictions on Countries of Export - list of such countries given in the Foreign Trade Policy of India. (Presently, there are restrictions of certain exports to Iraq, Iran, Democratic People’s Republic of Korea and Somalia.
  

Manner of Payment in Incoming and Outing Transaction:

For any export and import transaction, payment can be made/received through any of the following channels:-

• Rupee/ ACU Dollar/ ACU Euro/ ACU Yen / Any permitted Currency
  
• Bank Draft, Pay order, FCTC/FCN from a buyer    during    his visit to India
• TT / SWIFT
• NRE  /  FCNR Accounts
• International Credit Cards
• Gems & Jewellery units- Gold/Silver/Platinum – in equivalent value of jewellery exported, but should be mentioned in the sale contract (For SEZ and EOU)
• From a rupee account held in the name of an Exchange House with an authorized dealer, eg: VOSTRO Accoounts

In cases where export transactions occurs in currencies which do not have direct exchange rate, these transactions shall be  settled by Authorised Dealers subject to certain conditions:-

• Exporter should be a customer of the AD Bank, 
• Signed contract / invoice submitted is in a freely convertible currency, 
• Exporter is willing to receive payment in the currency of beneficiary,
• AD satisfied with the bona fides of the transactions, and 
• Counterparty is not from a jurisdiction in the updated FATF Statement.
  

In cases, the payment is routed through a third party  for export / import transactions, such transactions shall be settled by the Authorised Dealers subject to:-

• There must be Firm Irrevocable Order / tripartite agreement. (This condition may not be insisted upon where documentary evidence is produced).
  
• AD should be satisfied with the bona fides of the transaction.
• AD should verify the FATF statements. 
• Payment to be routed through banking channel only
• Third party to be declared in EDF form 

Foreign Currency Accounts

A resident Indian or Entity can open a foreign currency account under Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations dated January 21, 2016:- . 

1. Temporary Accounts opened abroad for participants in International Trade fairs 
   
2. Form EFC (for exporters having good track record) - RBI
3. An Indian Entity for maintaining Branch/office outside India
4. A  unit located in SEZ, etc
5. Diamond Dollar Account  - Where the entity having average annual turnover of Rs 3 cr in preceding three licensing years, subject to the total number of foreign currency accounts not being more than five. 
6. EEFC  Accounts

Counter Trade Arrangements

Counter trade means adjustment of value of goods imported into India against value of goods exported from India. Such adjustments to be made  through an Escrow Account opened in India in USD. RBI permission is required for opening of such Escrow Accounts. RBI grants permission with following stipulations:-

• All import and Export should be at international prices
  
• No interest on Escrow account.
• Surplus fund may be held in short term deposit of up to a total of 3 months in a year 
• No FB/NFB facility  against balances in Escrow account
• Application to be received from overseas exporter / organisation 

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’. 

Regulations are laid down in the revised Memorandum of Instructions on Project and Service Exports (PEM-July 2014)

Export of goods on Lease & hire

Prior approval of RBI through ADs for export of machinery, equipment on lease, hire basis against collection of lease rentals / hire charges and ultimate re-imports.

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 the Regional Office concerned of the RBI. 

Export of Currency

Any person resident in India may take outside India (other than to Nepal and Bhutan) currency notes not exceeding Rs.25,000/-

(Any person resident outside India, not being a citizen of Pakistan and Bangladesh may take outside India currency notes not exceeding Rs. 25,000 while exiting only through an airport.

Export Declaration Forms (EDF)

EXPORT OF GOODS THROUGH CUSTOMS PORT

• Two copies of EDF to be submitted at non-EDI port.
  
• “Exchange Control Copy” will be handed over to the exporter for submitting to the AD within 21 days from date of shipment/export.
• AD will report the transaction through  EDPMS to RBI

EXPORT OF GOODS THROUGH EDI PORT

• The Shipping Bill submitted in duplicate to the concerned Customs or SEZ.
• “Exchange Control Copy” will be handed over to the exporter for submitting to the AD within 21 days from date of shipment
• “Exchange Control Copy” will not be required if not printed (as per CBEC circular no. 55/2016-Customs dt. 23.11.2016)

EXPORT OF GOODS THROUGH POST

1. The EDF has to be countersigned by the AD
   
2. AD has to ensure that the parcel is addressed to their branch/correspondent
3. Exporters will submit relevant documents within 21days to AD.

Parcels may be addressed:

• • Direct to consignee provided there is an irrevocable LC
  • Advance payment has been received in full OR
  • Exporter has a good track record.

SOFTEX Forms

• Software exporters can file single as well as bulk SOFTEX forms in duplicate even for invoices less than USD 25000.
• For long duration contracts billing to be done at least once a month or on reaching the ‘milestone’ as per the contract
• Bill should be raised within 15 days from date  of  transmission
• SOFTEX form in quadruplicate to be submitted to the designated official of  GOI at STPI/EPZ/FTZ/SEZ not later than 30 days from date of invoice.
  

EDF Exemptions 

• Trade samples of goods; publicity material supplied free of cost payment;
  
• Personal effects of travelers, whether accompanied or not;
• Ship's stores, trans-shipment cargo and goods supplied under the orders of Central Government;
• Replacement goods exported free of charge 
• Goods sent for testing subject to re-import into India;
• Defective goods sent for repair and re-import
• Gift of goods accompanied by a declaration by the exporter that they are not more than five lac rupees in value;
  

EDF  Waiver

• AD Category – I banks may consider requests for grant of EDF waiver for export of goods free of cost, for export promotion  - up to 2 per cent of the average annual exports of the applicant during the preceding three financial years subject to a ceiling of Rs.5 lakhs. 
  
• For Status Holder exporters, this limit is Rs.10 lakhs or 2 per cent of the average annual export realization during the preceding three licensing years.  
  
• Other than above – RBI permission required
  
  

Obligations of Authorised 

Advance payments against Exports

Sometimes, the exporter gets advance payment from the overseas buyer, it may be with or without interest. In such cases, it is to be ensured that :-

• shipment should made within one year
• interest if any, not to exceed LIBOR+100 basis points

ADs  to monitor shipments

• No refund if shipment is not made within one year. 
• No interest allowed after one year. RBI permission required.
• Exporters having minimum 3 years  satisfactory track record - can receive long term export advance up to 10 years for execution of long term supply contracts.

Advance payment for export of goods which would take more than  one year to manufacture and ship and where the ‘export agreement’ provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment.

Important

All inward remittances including advance as well as old outstanding inward remittances received as advance for export of goods/software to be reported in EDPMS.

Participation in Trade Fairs Abroad

• Firms/ Cos. can take/ export goods for exhibition and sale outside India without prior approval from RBI.
• Unsold items may be sold outside the fair at  discounted value
• Such transactions subject to 100 percent audit by  internal inspectors
  

Part Drawings

• Undrawn balances  - not to exceed 10% of full export value
• Undertaking from exporter  - on the duplicate of EDF to surrender within period of realisation
• Non Realisation of Balance
  • ADs to be satisfied with the bonafides  
  • At least 90% of value declared on EDFs has been realised
  • a period of one year elapsed from the date of shipment.

Consignment Exports

• Documents delivered against Trust Receipts
• Account Sales – to be verified by ADs
• Freight & Insurance (to be arranged in India)
• Expenses may be deducted from sale proceeds

Setting up warehouses abroad (Opening or Hiring)

ADs may grant such permission subject to:

• Exp outstanding not to exceed 5% of Export made during the previous FY
• Min. Export Turnover – USD 100,000   (Last FY)
• Permission granted initially for one year.
• Renewal considered if satisfactory.
  

Other obligations of AD

• Delay in submission of export documents – No prior approval of RBI required
• Return of export documents – only for rectification of errors
• Reduction of Invoice value on prepayment of usance bills
• Reduction in Invoice value other than above.
• Change of Buyer or Consignee
• Export of goods by SEZ to DTA
  
  

Direct Despatch of Shipping documents

•  To Correspondent Banks/ Foreign Offices
•   Direct despatch by Bank to buyers only if:      

1.        LC so stipulates
2.         Advance Remittance has been received
3.        Good track record of the exporter
   

Extension of time for realization:

Allowed up to 6 months beyond stipulated period of realisation from the date of export subject to:

• ADs satisfied by the bona fides;
• transactions not under investigation by ED;
• declaration by the exporter to realise the proceeds within the extended period;
• Bank is satisfied with the reason for non-realization

   -   While considering extension beyond one year, total outstandings of the exporter:-

• does not exceed USD 1 mn OR
• 10% of the average export realisations during preceding 3 financial years, whichever is higher;

If a suit filed abroad, extension may be granted irrespective of the amount involved.

Reporting should be done in EDPMS

Write-off of Unrealized Export Bills

The limits are as below:

      Self  Write-off -5% 

      Status Holders – 10%

     Authorised Dealer Bank – 10%  ( of total export realisation in the previous calendar year.)

• Documentary evidence for all efforts made
  
• Overseas Buyer declared insolvent
• Overseas Buyer not traceable
• Goods exported have been auctioned or destroyed
• Unrealised amount is the undrawn balance
• Cost of legal action is disproportionate to the unrealised amount.