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Export procedure in India

The Export procedure in India involves the following;

i. licence requirement,

ii. custom formalities,

iii. submission of declaration form related to exports

iv. permitted method of payment etc .

Definition of is export:

Export means selling goods or services by a person or a company of one country to a buyer in another country. The supplies made to IBRD/IDA/ADB aided projects are termed as Deemed Exports. Specified sales viz., sales to foreign tourists during their stay in India is also termed as deemed export.  

Exporter of good track record:

Export and import trade in India is regulated by Director General of Foreign Trade (DGFT). To become an exporter the intended person  must hold Import Export Code No.(I.E. Code No.) issued by DGFT. Exports are allowed freely in India subject to the condition that the item under export should not be in the   Negative list of exports. The negative list consists of goods, the imports or exports of which are prohibited or restricted through licensing or otherwise or canalized. However it is obligatory on the part of the exporter that he/she must ensure that the amount representing full export value of the goods exported must be realized through an authorized dealer of foreign exchange. An exporter is called as exporter of good track record, whose export outstanding does not exceed 5% of the average export realization during preceding three calendar years.

Period of submission of documents to the bank :

Every  exporter from India is required  to submit shipping documents to AD bank along with relevant export declaration form (GR, SDF,PP SOFTEX etc.,) within twenty one days of shipment. Export declaration forms are used according to form of export and  type of exports. For acceptable reasons AD can condone the delay.

Permitted period of realization for export proceeds:

The entire export proceeds should be realized and received at exporter’s bank within six months of shipment. Time period is relaxed to status holder up to 12 months. Where export is to a warehouse with the permission of RBI, the export proceeds should be received within 15 months. In case of Exports of books on consignment basis, 360 days can be allowed.

Permitted methods of payment of export- proceed:

The following mode of payments is permitted for payment of export proceeds.

  1. Demand Draft/ TT/SWIFT/Personal cheques, TC or foreign currency during buyer’s visit to India
  2. Payment from NRE or FCNR account of the buyer.
  3. Payment can be made through International Credit Cards. The amount should be received through NOSTRO account of exporter’s account. If some other bank is making payment they have to certify that the receipt is through their NOSTRO account.
  4. Transactions between India and Nepal normally in Indian Rupees only. However if Nepal Rastriya Bank permits it can be settled in foreign currency.

Limit for reduction in value:

Reduction should not to exceed 25% of the invoice value. Invoice should not relate to export of commodities subject to floor price stipulations. Exporter is not in the caution list of Reserve Bank. Exporter should be advised to surrender proportionate export incentive, if availed.

Normal Transit period: Normal transit period means the average period normally involved from the date of negotiation/purchase/discount till the receipt of bill proceeds in the Nostro account of the bank concerned.  Foreign Exchange Dealers Association of India (FEDAI) prescribes the NTP from time to time. The details are as under.

Foreign Currency bill : 25 days

Reimbursement by TT/SWIFT: 5 days (if notice period is prescribed, it should be added)

For Rupee bills:

Reimbursement at the centre of negotiation     …………………  : 3days.

Bills under LC with reimbursement at other centers ……………..: 7days

Reimbursement outside India and bills not under collection …..  : 20 days

Export to Russia under LC for which Reimbursement is by RBI.  : 20 days.

Condition for receipt of Advance payment:

Where an advance payment is received, by the exporter, he has to complete the .export within one year from the date of receipt of documents. The responsibility of ensuring the export is vested with the Authorized Dealer who processed the advance receipt. Interest payment if any, should not exceed LIBOR+100bps.

Ceiling for partial drawing:

The undrawn portion of shipment proceeds should not exceed 10%  of full value of export.The exporter should give suitable undertaking on duplicate GR/PP/SDF that he will surrender or account for the balance proceeds of shipment within the period of prescribed for realization.

Whether AD can send the documents directly to the buyer?

AD should normally send the documents to its overseas branch or its correspondent. Exporter can also send the documents directly to buyer where the track record and standing of the exporter is good. Where submission of export declaration is exempted, the documents valued not more than Rupees Twenty Five thousand; AD can send the documents directly to the consignee. Where 100% advance payment is received, exporter can directly send the documents to the consignee. Status holder and units in SEZ can send the documents directly to the buyer subject to the condition that the payments will be received through the AD.

Conditions for self-write-off by exporter:

i. Where all exporters including Status holders, Aggregate of bills written off and extended should not exceed 10% of export proceeds due during the calendar year.

ii.  Bills should not be subject to investigation by enforcement directorate.

Is there any provisions for extension of export realization period by AD:

AD can permit extension on the following instances; where the invoice does not exceed USD 1,000,000 subject to the following conditions:

  1. Reasons for non-realization are beyond the control of exporter and the Exporter should submit a declaration that he will realize the proceeds during the extended period.
  2. Extension can be granted up to a period of 3 months at a time.  While considering extension beyond one year, the total export outstanding of the exporter should not be more than 10% of the average of export realization during the preceding 3 financial years.
  3. If suit has been filed by the exporter on his buyer, the ceiling would not apply.
  4. For all other cases, especially when the subject bill is under investigation and where the amount is more than USD 1,000,000 RBI permission is necessary. 

What is the Ceiling for Agency-Commission?

There is no ceiling limit for agency commission.  AD can allow payment of commission provided it is declared in GR/PP/SOFTEX and the relative shipment is already made. Even in cases where it is not declared in GR/PP/SOFTEX, agency commission may be made. This is subject to a valid agreement/written understanding between the exporter and beneficiary for payment of commission exists. 

What is Short shipment and shut out shipment:

The part shipment is one which was already declared to custom, and later short shipped. Then it is called short shipment. The exporter should file a notice of short shipment to Customs and copy of notice to be handed over to Authorized Dealer. Whereas there is a delay in making arrangements to re-ship or shipment is entirely shutout it is called Short shipment. In cases of shutout shipment, the exporter shall give notice to Customs in the prescribed format and attach the unused duplicate copy of GR form and the shipping bill. After verifying the documents submitted by the exporter, Customs certify it and forward the same to Reserve Bank. The Custom will cancel the originals If the exporter makes shipment subsequently, he has to prepare a fresh set of GR form and complete the formalities.

Indian Owned warehouse:

In case of exports made to Indian owned warehouse abroad established with the permission of RBI, the export proceeds must be realized maximum within a period of fifteen months.

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