FEMA Regulations relating to EXPORTS - SIRC of ICAI

1 fema Regulations relating fema Regulations relating to to EXPOR TS & IMPORTSEXPOR TS & IMPORTS Dr. Rajan, , MBA, CAIIB, Professor of International Finance Formerly , RBI, Hyderabad ICAI_SIRC 22 APRIL export of Goods & Services RBI Regulations RBI has notified fema ( export of Goods and Services) Regulations , 2000 viz. Notification No. fema 23/2000-RB dated May 3, 2000 This was repealed and replaced by FEM ( export of Goods and Services) Regulations , 2015 with effect from January 12, 2016 and notified vide Notification No. fema 23(R)/2015-RB dated January 12, 2016. EXPORTS /er has to comply with trade Policy (Foreign trade Policy EDF declaration SDF/EDF declaration Diff.)

2 Between EDI and non-EDI port EXPORTS EXPORTS thru Post AD to countersign Softex forms-single, bulk-excel, duplicate Now Generation of EDF no. online S/W-EDF_once a month/on milestone invoicing One-shot-within 15d from completion of SWD Exp. Of Services-no Form prescribed Third party realisation-declared in EDF/SDF to AD The duplicate copy of the EDF/SDF form is submitted to the bank for monitoring purposes, by the exporters within 21 days from the date of shipment The export proceeds are repatriated through the AD named in the EDF/SDF Form. Unrealised outstanding export proceeds are reported to RBI by AD in XOS stt. HYly Monitored now thru from EDFEDF not required to be furnished in cases of: a) trade samples of goods and publicity material supplied free of payment; (b) personal effects of travellers, whether accompanied or unaccompanied; c) ship's stores, trans-shipment cargo and goods supplied under the orders of GOI or of the military, naval or air force authorities d) by way of gift of goods if they are not more than lakh.

3 E) aircrafts or aircraft engines and spare parts for overhauling and/or repairs abroad subject to their re-import into India after overhauling /repairs, within a period of six months from the date of their export ; f) goods imported free of cost on re- export waiver AD to grant waiver-for export of goods free of cost, for export promotion up to 2 % of the average annual EXPORTS during the preceding three subject to a ceiling of lakhs. For SHE*s, this limit as per FTP is lakhs or 2 % of average annual export realization during preceding 3 Yrs (April-March), whichever is lower. * Status Holder Fairs, Exhibitions-EDF Approval EDF/SDF to be approved by ADs, certain conditions to be complied with export for display, can sell abroad, can sell at a discount and also could gift upto $5000 per exporter Repatriation of sale proceeds, report to AD B/E for re-import within one month of import EDF/SDF _AD s approval for export .

4 For re-imports re-import after repairs / maintenance / testing / calibration Certificate of destruction during testing in lieu of Currency A/c Exporters may deposit the foreign exchange obtained by sale of goods at the international exhibition/ trade fair and operate the account during their stay outside India provided Balance in the a/c is repatriated to India through normal banking channels within a month from the date of closure of the exhibition/ trade fair and full details are submitted to the AD & Realising Exp proceeds All export contracts and invoices shall be denominated either in freely convertible currency or in INR say, $1493 @ 67.

5 But if invoiced at Rs. 1 lakh; it comes to $ 1544 @ if then $ 1429. Who will bear the exchange risk? but export proceeds shall be realised in freely convertible currency. export proceeds against specific EXPORTS may also be realised in Rupees provided it is through a freely convertible Vostro account of a non-resident bank of proceeds to realise and repatriate the full value of goods / software / services within a stipulated period of 9 months (for all exporters including SEZ, EOUs, STP, EHTP & SHEs) from the date of export ; Within 15 months from the DoS in r/o goods exported to a warehouse established outside India ( As soon as it is realised).

6 Of time AD can extend upto 6m at a time from due date for realisation, against exporter s declaration that proceeds would be realised within extended time Extension beyond 1yr, provided total outstanding of the exporter is not > USD 1 mio or 10% of the average export realizations during the preceding 3 Financial years, whichever is higher. Shipments and Shut out Shipments (i) Short-shipped, (EDF already filed with Customs)- give notice of short-shipment to the Customs. Get certificate of short shipment. (ii) In Shut out shipment, give notice in duplicate to the Customs - attaching thereto the unused duplicate EDF and the shipping bill. Customs will forward it to the RBI together with unused duplicate EDF.

7 Of Documents AD despatches to overseas brs/correspondent; Occasionally to agents/consignees if there is ILC, or full advance payment and agreement contains such a clause Based on standing/track record of exporter and Bank is satisfied that arrangements have been made for realisation. SHE/SEZ Units can directly despatch s/to conditions. 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. The exporter is a regular customer of AD bank for a period of at least six months.

8 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). Drawing/Undrawn balances Due to differences in weight, quality, etc., to be ascertained after arrival and inspection, weighment or analysis of the goods. maximum of 10 per cent of the full export value. Undertake on EDF that Exporter would realise balance amount within the prescribed period of realisation AD to ensure that at-least 90% or drawn amount is realised and one year has EXPORTS AD instructs correspondent bank to deliver shipping docs against Trust Receipt/undertaking that sale proceeds would be paid within the period 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.

9 Of goods on lease, hire, and on elongated credit terms-apply to RBI Prior approval of RBI required for export of machinery, equipment, etc., on lease, hire basis against collection of lease rentals/hire charges and ultimate re-import. 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 Reserve Bank. of Currency Permission of RBI required for any export of Indian currency except to the extent as per general permission-- as under: (i) Any resident in India may take outside India (other than to Nepal and Bhutan) currency notes of GoI and RBI up to an amount not exceeding ,000 (ii) Any person resident outside India (not being a citizen of Pakistan and Bangladesh and also not a traveller coming from and going to Pakistan or Bangladesh) visiting India may take outside India currency notes up to an amount not exceeding Rs.

10 25,000 while exiting only through an airport. Payments against EXPORTS Shipment of goods to be made within one year from date of receipt of advance payment; The Rate of Interest, if any, payable on the advance is not more than LIBOR + 100 bps; Shipping Documents are routed through the same AD through whom the advance is received. No remittance towards refund of unutilized portion of of interest after one year, without the prior approval of Reserve Bank. Monitored now thru term export advance (up to 10 years max.) Exporters having a 3 yrs satisfactory track record can receive long term export advance to be utilized for execution of long term supply contracts for export subject to the conditions : (i) Firm irrevocable supply orders and contracts should be in place at prevailing international pricing.