FEMA Regulations relating to EXPORTS, IMPORTS AND ... - …

1 fema Regulations relating to EXPORTS, IMPORTS , , CAIIB, MBA, of International FinanceDGM, RBI (Retd.), Chennai22 December export of Goods & Services RBI has notified fema ( export ofGoods and Services) Regulations , 2000(the ExportRegulations ) May 3, 2000 Has to comply with Trade Policy( foreign Trade Policy 2009-14) DGFT roleDeclaration EDF/SDF Exemption for certain categories Waiver from declaration AD s powerspowers ACU mechanism for ACU countries Third party payments for export / import transactions Invoicing & Realising Exp proceeds Invoicing: in freely convertible currencyor in Indian Rupees but Realisation:in freely convertible currency However,exportproceedsagainst However,exportproceedsagainstspecific exports may also be realised inRupees provided it is through a freelyconvertible Vostro account of a non-resident bankRealisation and Repatriation of proceeds Exporter to realise within a stipulatedperiod of 9 months (for all exportersincluding SEZ, EOUs, STP, EHTP & Statusholders)fromthedateofexport:holder s)fromthedateofexport: Within 15 months from the DoS in r/oGoodsexportedtoawarehouseestablished outside India ( As soon as itis realised).

2 Setting up of Offices Abroad and Acquisition of Immovable Property for Overseas Offices (i) initial expenses: up to 15% of the average or turnover during the last two financial years or up to25% of the NW, whichever is higher. (ii) Recurring expenses: up to 10% , may be sent for thepurposeofnormalbusinessoperationsofth eoffice(trading/purposeofnormalbusinesso perationsoftheoffice(trading/non-trading ) / branch or representative office outside India s/tconditions: is posted for conducting normal businessactivities of Indian entity; b. The overseas branch/office/representative shall not enterinto any contract or agreement in contravention of the Act,Rules or Regulations made there under;Offices Abroad It should not create any financial liabilities, contingentorotherwise, for the HO in India and also not invest surplus fundsabroad without prior approval of the Reserve Bank.)

3 Any fundsrendered surplus should be repatriated to India. (iii) The details of bank accounts opened in the overseas (iv) Such approved remittances can also be for acquisition ofimmovable property outside India for its business and forresidential purpose of its staff. (v) The overseas office / branch of software exportercompany/firm may repatriate to India 100 per cent of thecontract value of each off-site contract. (vi) In case of on site contracts, they should repatriate the profitsof on site contracts after the Payments against Exports the shipment of goods is made within one year from the date of receipt of advance payment; The RoI, if any, payable on the advance is not more than LIBOR + 100 bps; thedocumentsareroutedthroughtheADbank thedocumentsareroutedthroughtheADbankthr ough whom the advance is received.

4 No remittance towards refund of unutilized portion of advance payment or towards payment of interest, shall be made after the expiry of one year, without the prior approval of the RBI. Long term export advance Exporters having a 3 yrs satisfactory track record can receive long term export advance (up to 10 years max.) to be utilized for execution of long term supply contracts for export s/t conditions : (i) Firm irrevocable supply orders and contracts should be in place -@ prevailing international pricing . (ii) Company should have capacity, systems and processes -that the (ii) Company should have capacity, systems and processes -that the orders over the said tenure can actually be executed. (iii) only to those entities, who have not come under the adverse notice of ED or have not been caution listed. (iv) The RoI payable, should not exceed LlBOR plus 200 basis points.

5 (v) The documents should be routed through one AD bank only. AD should ensure compliance with AML / KYC guidelines . vi) Cannot be used to liquidate Rupee loans classified as NPA. export advance BG/SBLC for export Performance 2yrs at a time and rolled over for another 2 yrs not more than the value of reducing balance basis. No discounting of this L/C by balance basis. No discounting of this L/C by branch of Indian bank aborad. Advance Payment received for more than one year s/t certain conditions Bonafides, KYC/AML, not more than LIBOR +100 bps, no refund > 10%., no refund without RBI approval Trade Fairs Exhibitions abroad EDF/SDF to be approved by ADs, certain conditions to be complied with export for display, can sell abroad, can sell at discount and also could gift upto $5000 per exporter B/E for re- import within one month of import B/E for re- import within one month of import Repatriation of sale proceeds, report to AD EDF/SDF approval for export of Goods for re- IMPORTS re- import after repairs / maintenance / testing / calibration Certificate of destruction during testing in lieu of B/EPart Drawing/Undrawn balances due to differences in weight, quality, etc.

6 , to be ascertained after arrival and inspection, weighment or analysis. maximum of 10 % of the full export value. maximum of 10 % of the full export value. Undertake on EDF that he would realise within the prescribed period of realisation AD to ensure that atleast 90% or drawn amount is realised and one year has lapsedConsignment exports AD instructs correspondent bank to deliver shipping docs against Trust Receipt/undertaking that sale proceeds would be paid within the period for realisationperiod for realisation Consignee to Render account sales; Deductions should be supported by bills/receipts in original In case the goods are exported on consignment basis, freight and marine insurance must be arranged in India. Opening / Hiring of Ware houses abroad AD permits on application for one year, renewable s/t conditions Applicant s export outstanding does not exceed 5 per cent of exports made during the previous financial year.

7 Financial year. Applicant has a minimum export turnover of USD 100,000/- during the last financial year. All transactions should be routed through the designated branch of the AD Banks and realisedwithin the prescribed despatch by Exporter ADdespatchestooverseasbrs/correspondent Occasionallytoagents/consigneesprovidedt hereisILC,orfulladvanceprovidedthereisIL C,orfulladvancepayment and ag ment contains a clause Based on standing and track record ofexporterandBankissatisfiedthatarrangem entshavebeenmadeforrealisation. SHE/SEZ can directly despatch by Exporter The duplicate copy of the EDF/SDF form is submitted to the AD banks for monitoring purposes, by the exporters within 21 days from the date of shipment of export from the date of shipment of export The export proceeds are repatriated through the AD banks named in the EDF/SDF Form. Direct despatch by exporter AD may regularize cases of dispatch of shipping documents by the exporter direct to the consignee or his agent resident in the country of the final destination of goods, up to USD 1 mio, per export shipment, subject to the following conditions: The export proceeds have been realised in full.

8 The exporter is a regular customer of AD bank for a period of at The exporter is a regular customer of AD bank for a period of at least six months. The exporter s account with the AD bank is fully compliant with the Reserve Bank s extant KYC / AML guidelines. The AD bank is satisfied about the bona-fides of the transaction. In case of doubt, the AD bank may consider filing Suspicious Transaction Report (STR) with FIU_IND (Financial Intelligence Unit in India). Counter-Trade Arrangement = adjustment of value of goods imported into India against value of goods exportedfrom India, voluntarily entered into with overseas supplier through an Escrow Account opened in India in US Dollar will beconsidered by RBI All IMPORTS and exports under the arrangement should be at international prices inconformity with the foreign Trade Policy and foreign exchange management Act,1999 and the Rules and Regulations made there under.

9 Nointerestwillbepayableonbalancesstandin gtothecreditoftheEscrow Nointerestwillbepayableonbalancesstandin gtothecreditoftheEscrowAccount but the funds temporarily rendered surplus may be held in a short-termdeposit up to a total period of 3 m (in a block of 12 months) and the banks may payinterest at the applicable rate. No fund based/or non-fund based facilities would be permitted against thebalances in the Escrow Account. Application for permission for opening an Escrow Account may be made by theoverseas exporter / organisation through his / their AD bankto the Regional Office ,Reserve Bank. For Romania: Indian exporter should utilize the funds for import of goods fromRomania into India within six months from the date of credit to Escrow of Software Exports SOFTEX FORMS2. Short/Shut-out Shipments3. Project Exports and Service Exports RBI approval cases export of Goods on Lease, Hire, etc.

10 export on Elongated Credit Terms AD approval: export of goods by Special Economic Zones (SEZs) II. IMPORTS of goods & servicesImports General provisions import , regulated by FTP, DGFT, GOI, RBI. ADs need not obtain any document, includingForm A-1, except a simple letter from theapplicantcontainingthebasicinformatio n,asapplicantcontainingthebasicinformati on,aslong as the exchange being purchased is for acurrent account transaction (not in Sch I & II)when the amount does not exceed USD 5,000and the payment is made by a cheque drawn onthe applicant's bank or by a Demand A-1 for import remittances Applications by persons, firms and companies formaking payments, exceeding USD 5000 or itsequivalent, towards IMPORTS into India must bemade in Form A-1. ADsmayfreelyopenL/Csandallowremittances ADsmayfreelyopenL/Csandallowremittancesf or import .