CHAPTER 7 POST - SHIPMENT FINANCE

1 1 CHAPTER 7 post - SHIPMENT FINANCE 2 CHAPTER 7 post - SHIPMENT FINANCE INDEX Para No TOPIC Page No 7 Introduction 5 7 1 Types of Pots- SHIPMENT FINANCE 5 7 1 1 Purpose 5 7 1 2 Period 6 7 1 3 Period & Notional Due Date 6 7 1 4 Rate of Interest 7 7 1 4 1 Interest on post -ship Credit Adjusted from Rupee Resources 8 7 1 5 Normal Transit Period 9 7 1 6 Usance Bills 10 7 2 Export Documents 10 7 3 Scrutiny of Documents 10 7 3 1 Examination of Draft or Bill of Exchange (B/E) 11 7 3 2 Examination of Invoice 11 7 3 3 Examination of Transport Documents Bill of Lading 13 7 3 4 Airway Bill (AWB) / Air Consignment Note 15 7 3 5 post Parcel Receipt (PPR)

2 17 7 3 6 Forwarder s Cargo Receipt 18 7 3 7 Examination of Insurance Documents 19 7 3 8 Other Documents 20 7 3 9 Direct Despatch of Shipping documents 20 3 7 4 Bills under LC Negotiation under Restricted LC 21 7 4 1 Negotiation under Restricted LC 26 7 4 2 Negotiation under Clause LC 27 7 4 3 Negotiation under Revolving LC 28 7 5 Checkpoints while preparing Forwarding Schedule 28 7 6 Handling of Export Documents negotiated/Purchased by C Category Branches, Procedure to be followed by C and B category Branch 30 7 7 Realisation of Export Bills Negotiated 32 7 8 Purchase/Discount of Export Bills under Contract Lodgment / Realisation 35 7 9 Follow up of Export Bills Purchased / Negotiated 38 7 10 Crystallisation 39 7 10 1 Relisation on or after Notional Due Date/Actual Due Date but before Crystallsiation 41 7 10 2 Realisation of Bill after crystallization 41 7 10 3 Recovery of Advance in cash before crystallization on dishonor of Documents 42 7 10 4 Recovery of Advance in cash after crystallization 42 7 11 Export Documentary Bills for Collection 43 7 12 Export Bills outstandings beyond the time limit for realization Procedures 46 7 13 Reduction in Value.

3 Exchange Control Regulations 49 7 14 Export of Goods on Consignment Basis 52 7 15 Advance against Foreign Bills sent for Coll (AFDBC) 55 7 16 Advance against undrawn Balance 58 7 17 Advance against Duty Drawback 60 4 7 18 Remittance of Agency Commission 62 7 19 Export Claims 64 7 20 Other Points 65 7 20 1 Change of Tenor 65 7 20 2 Change of Buyer 66 7 20 3 Change of Buyer and Country 67 7 20 4 Return of Documents 68 7 20 5 Protesting/Noting 69 7 20 6 Legal Action for Recovery in Importer s country 70 7 20 7 Advance payment against Exports 70 7 20 8 Payment for Export from NRE/FCNR Accounts 71 7 20 9 Payment for Exports in the form of FC/TC/DD etc. 72 7 20 10 Delay in Releasing proceeds of Collection Bills 72 7 20 11 Present Handling Charges / Comm on Export Bills 73 7 20 12 Guarantee for Discrepant Documents 73 7 20 13 Reimbursement under LC 74 7 20 14 Bills drawn in a curr.

4 Bank don t maintain a position 75 7 20 15 Write off of unrealized Export Bills 75 7 20 16 Gift Parcels 76 7 20 17 Shipments lost in Transit 76 7 20 18 Set-off of export receivable against import payables 77 7 20 19 Balancing 77 7 21 Addendum Period 78 5 Annex No Annexure Page No 1 SPECIMEN of undertaking to be obtained from export customers 79 2 PROCESS NOTE for EXPORT BILLS 81 3 Indemnity for discrepant EXPORT BILLS drawn under LC 83 4 Covering letter to EXPORTER'S BANKER in the case of LC restricted to our bank for negotiation 86 5 Seeking permission to negotiate discrepant EXPORT BILL 88 6 Regarding NON PAYMENT of EXPORT BILL by LC opening bank 90 7 Letter to the bank to whom the EXPORT LC is restricted 92 8 Bill of Exchange for lodging REIMB.

5 CLAIM under LC 94 9 Forwarding Letter for negotiation 96 10 Request for sending the documents by Courier Service 98 11 Letter regarding bill status 99 12 Covering letter cum processing schedule 100 13 Intimation to A CAT Branch of early realisation 103 14 Follow up letter for unpaid export bill 104 15 Request for reduction in value of our Invoice 105 16 Specimen Appl. Form for Remit of Agency Commission 108 17 Letter to 'A' CAT BR for details of debit to EEFC A/C 110 18 Specimen Application for Remittance of Export Claims 111 19 Request letter to make a Rupee Advance against a bill drawn In 'Non-Position' Currency 114 20 Request for Write Off of Export Bills 115 6 7. INTRODUCTION post - SHIPMENT FINANCE is an advance normally granted to an exporter of goods and services after SHIPMENT from India, till the date of repatriation of the export proceeds.

6 The advance may be against shipping documents or on the security of duty drawback or export related receivables from Government of India. post - SHIPMENT FINANCE is generally a short term working capital FINANCE . However, depending upon the credit terms deferred export, it can also be granted for longer periods. As a general rule in case of physical exports, post - SHIPMENT FINANCE is extended to the actual exporter who has exported the goods or to an exporter in whose name the export documents are transferred subject to conditions mentioned as per Article 38 of UCP600. post - SHIPMENT FINANCE is also granted for deemed exports in which the goods do not leave the country and the proceeds for deemed exports are received by the supplier in India itself.

7 TYPES OF post - SHIPMENT FINANCE post - SHIPMENT FINANCE can be granted as follows: a. Negotiation/payment of export documents under LC. b. Purchase/discount of export documents under confirmed export contracts/orders. c. Advance against Foreign Documentary Bills sent on Collection basis (AFDBC). d. Advance against export on consignment basis e. Advance against undrawn balances on exports/retention money relating to export/ incentives receivable from Govt. of India. f. Exports on elongated credit terms. g. Advance against deemed exports. h. Exports on deferred payment terms(project/service exports) For details of g) and h) refer CHAPTER and 15 PURPOSE post - SHIPMENT credit is a FINANCE against export receivables granted after the SHIPMENT of goods / services till the date of repatriation of the export proceeds.

8 7 PERIOD (Please refer Addendum ) In case of cash exports, the maximum period allowed for realisation of export proceeds is the due date or six months from the date of SHIPMENT whichever is earlier. Status holder in terms of EXIM policy are allowed to realise the exports within 12 months from the SHIPMENT date for SHIPMENT . In case of exports through Indian owned warehouses established abroad with prior approval of AD / RBI, maximum period of realisation of export proceeds is 15 months. In case of exports on consignment basis maximum period of realisation is 180 days except exports to CIS & East European countries. In case of exports denominated in permitted currencies to CIS & East European countries, elongated period of realisation will be upto 12 months, subject to prior approval of Reserve Bank of India.

9 In case of exports to Russian Federation on consignment basis against repayment of State Credit in Rupees, Status Holders are allowed elongated period of realisation of 360 days from the date of SHIPMENT for export of permitted goods (announced by RBI from time to time) with prior approval of RBI. In case of deferred payment exports period of realisation can be extended beyond 180 days, subject to RBI approval. In case of deemed exports, realisation period from the date of supply till the date of receipt of payment should not exceed 30 days. In case of cash exports, the maximum period allowed for realisation of export proceeds is the due date or six months from the date of SHIPMENT whichever is earlier. PERIOD AND NOTIONAL DUE DATE As per FEDAI guidelines if export bills drawn in foreign currency are at sight or on demand the Normal Transit Period (NTP).

10 Presently 25 days. 8 In case of usance bills, rate of interest as directed by the RBI on export bills is applicable for the normal transit period plus usance period. A foreign currency bill payable at 60 days after sight will attract interest for 60 days usance plus the normal transit period of 25 days a total number of 85 days. FIXED DUE DATE In case of export usance bills (foreign currency and rupee bills) where due dates are reckoned from date of SHIPMENT or date of bill of exchange etc. no Normal Transit Period shall be applicable, since the actual due date is known. RATE OF INTEREST The Base Rate System is applicable with effect from July 1, 2010. Accordingly, interest rates applicable for all tenors of rupee export credit advances sanctioned on or after July 01, 2010 are at or above Base Rate.