QA Series 2025 - 7 - Exports Part 4

 

The Banking Tutor

Question Answer Series 2025

S No 07                                                                    13-06-2025

Exports – Part 04 

Receipt of advance against exports

76. What are the guidelines related to Advance Payments received in case of Exports ? 

Where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that the shipment of goods is made within one year from the date of receipt of advance payment. 

77. What is the Rate of Interest payable on Advances  in case of Exports ?

The rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR)/ any other widely accepted / Alternative reference rate + 100 basis points; and the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received.

78. Can the Exporter refund the Advanced received in Exports ?

In the event of the exporter’s inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilized portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one year, without the prior approval of the Reserve Bank.

79. How the data related to Advance amount in case of Exports will escalate to RBI ?

EDPMS will capture the details of advance remittances received for exports in EDPMS. AD banks will have to report all the inward remittances including advance as well as old outstanding inward remittances received for export of goods/ software to EDPMS.

80. What is the Reporting system in case of AD Bank issue Electronic FIRC ?

AD banks need to report the electronic FIRC to EDPMS wherever such FIRCs are issued against inward remittances.

81. Whether AD to submit Quarterly Return for delay in utilisation of Advance received for Exports ?

The quarterly return being submitted for delay in utilization of advances received for export stands discontinued.

Long Term Export Advance

82. What are the guidelines related to Long Term Export Advance?

AD banks can  allow exporters having a minimum of three years’ satisfactory track record to receive long term export advance up to a maximum tenor of 10 years to be utilized for execution of long term supply contracts for export of goods subject to the conditions as under:

(a) Firm irrevocable supply orders and contracts should be in place.

(b) Company should have capacity, systems and processes.

(c) The facility is to be provided only to those entities, which have not come under the  adverse notice of Enforcement Directorate

(d) Such advances should be adjusted through future exports.

(e) The rate of interest payable, if any, should not exceed LlBOR/any other widely accepted / Alternative reference rate plus 200 basis points.

(f) The documents should be routed through one Authorized Dealer bank only.

(g) Such export advances shall not be permitted to be used to liquidate Rupee loans classified as NPA.

(h) Receipt of such advance of USD 100 million or more should be immediately reported to RBI.

83. What are the guidelines related to issue of Bank Guarantee (BG) / Stand by Letter of Credit (SBLC) for export performance ?

a) BG / SBLC may be issued for a term not exceeding two years at a time and further rollover of not more than two years at a time may be allowed subject to satisfaction with relative export performance as per the contract.

b) BG / SBLC should cover only the advance on reducing balance basis.

c) BG / SBLC issued from India in favor of overseas buyer should not be discounted by the overseas branch / subsidiary of bank in India.

84. Can AD Bank purchase of foreign exchange from the Market for refund of Advance Payment credited to EEFC Account ?

AD Category – I banks may allow the purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilizing the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks.

85. Can AD Bank allow Exporters to receive advance payment if the export of goods take more than one year ?

AD Category- I banks may allow exporters to receive 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 subject to the following conditions:-

(a) The KYC and due diligence exercise has been done by the AD Category – I bank for the overseas buyer;

(b) Compliance with the Anti-Money Laundering standards has been ensured

(c) The AD Category-I bank should ensure that export advance received by the exporter should be utilized to execute export and not for any other purpose i.e., the transaction is a bonafide transaction;

(d) Progress payment, if any, should be received directly from the overseas buyer strictly in terms of the contract;

(e) The rate of interest, if any, payable on the advance payment shall not exceed London Inter-Bank Offered Rate (LIBOR)/ 19any other widely accepted / Alternative reference rate + 100 basis points;

(f) There should be no instance of refund exceeding 10% of the advance payment received in the last three years;

(g) The documents covering the shipment should be routed through the same authorised dealer bank; and

(h ) In the event of the exporter's inability to make the shipment, partly or fully, no remittance  towards refund of unutilized portion of advance payment or towards payment of interest should be made without the prior approval of the Reserve Bank.

86. Whether any Approval is required take/export goods for exhibition and sale outside India ?

Firms / Companies and other organizations participating in Trade Fair/Exhibition abroad can take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank.

87. What are the guidelines related to EDF approval for unsold exhibit items (in Trade fairs abroad) ?

Unsold exhibit items may be sold outside the exhibition/trade fair in the same country or in a third country. Such sales at discounted value are also permissible.

It would also be permissible to 'gift’ unsold goods up to the value of USD 5000 per exporter, per exhibition/trade fair.

AD banks may approve EDF of export items for display or display-cum-sale in trade fairs/exhibitions outside India subject to the following:

(a) The exporter shall produce relative Bill of Entry within one month of re-import into India of the unsold items.

(b) The exporter shall report to the AD banks the method of disposal of all items exported, as well as the repatriation of proceeds to India.

(c) Such transactions approved by the AD  banks will be subject to 100 per cent audit by their internal inspectors/auditors.

88. What are the guidelines related to EDF approval for export of goods for re-imports ?

AD banks may grant  EDF approval in cases where goods are being exported for re-import after repairs / maintenance / testing /calibration, etc., subject to the condition that the exporter shall produce relative Bill of Entry within one month of re-import of the exported item from India.

89. What are guidelines related to goods being exported for testing are destroyed during the testing ?

Where the goods being exported for testing are destroyed during testing, AD  banks may obtain a certificate issued by the testing agency that the goods have been destroyed during testing, in lieu of Bill of Entry for import.

90. What are the EDF formalities related to Re-export of unsold diamonds from SNZ of Customs ?

Re-export of unsold rough diamonds from Special Notified Zone of Customs without Export Declaration Form (EDF) formality

(a) When re-exported from the SNZ (being an area within the Customs) without entering the Domestic Tariff Area (DTA), do not require any EDF formality.

(b) Entry of consignment containing different lots of rough diamonds into the SNZ should be accompanied by a declaration of notional value by way of an invoice and a packing list indicating the free cost nature of the consignment.

Under no circumstance, entry of such rough diamonds is permitted into DTA.

Foreign Currency Accounts of Overseas branches/office, representatives of Indian entities

91. How much can be remitted by AD towards initial expenses while opening Branch/Office abroad by its customers ?

At the time of setting up of the office, AD Category – I banks may allow remittances towards initial expenses up to 15% of the average annual sales/income or turnover during the last two financial years or up to 25% of the net worth, whichever is higher.

92. How much can be remitted by AD towards recurring  expenses for  Branch/Office abroad by its customers ?

For recurring expenses, remittances up to 10% of the average annual sales/income or turnover during the last two financial years may be sent for the purpose of normal business operations of the office (trading/non-trading)/branch or representative office outside India.

93. If there is delay in submission of shipping documents by exporter to AD Bank, what is to be done by AD Bank ?

In cases where exporters’ present documents pertaining to exports after the prescribed period of 21 days from date of export, AD banks may handle them without prior approval of the RBI  provided they are satisfied with the reasons for the delay.

94. Can the AD Bank return of duplicate  documents to exporters?

The duplicate copies of EDF and shipping documents, once submitted to the AD  banks for negotiation, collection, etc., should not ordinarily be returned to exporters, except for rectification of errors and resubmission.

95. Can AD Bank deliver one negotiable copy of Bill of Lading to one ?

AD banks may deliver one negotiable copy of the Bill of Lading to the Master of the carrying vessel or trade representative for exports to certain landlocked countries if the shipment is covered by an irrevocable letter of credit and the documents conform strictly to the terms of the Letter of Credit which, inter alia, provides for such delivery.

96. What are the guidelines related to Direct dispatch of documents by the exporter ?

AD Category – I banks should normally dispatch shipping documents to their overseas branches/correspondents expeditiously. However, they may dispatch shipping documents direct to the consignees or their agents resident in the country of final destination of goods in cases where:

a) Advance payment or an irrevocable letter of credit has been received for the full value of the export shipment and the underlying sale contract/letter of credit provides for dispatch of documents direct to the consignee or his agent resident in the country of final destination of goods.

b) The AD Category – I banks may also accede to the request of the exporter provided the exporter is a regular customer and the AD  bank is satisfied, on the basis of standing and track record of the exporter and arrangements have been made for realization of export proceeds.

97. What are the guidelines related to Direct dispatch of documents by the exporters in SEZ and Status Holder Exporters ?

AD  banks may permit 'Status Holder Exporters’ and units in Special Economic Zones (SEZ) to dispatch the export documents to the consignees outside India subject to the terms and conditions that:

a) The export proceeds are repatriated through the AD banks named in the EDF.

b) The duplicate copy of the EDF is submitted to the AD banks for monitoring purposes, by the exporters within 21 days from the date of shipment of export.

98. Whether AD Bank Negotiate Part Drawings/Undrawn Balances ?

In certain lines of export trade, it is the practice to leave a small part of the invoice value undrawn for payment after adjustment due to differences in weight, quality, etc., to be ascertained after arrival and inspection, weighment or analysis of the goods. In such cases, AD  banks may negotiate the bills, provided:

a) The amount of undrawn balance is considered normal in the particular line of export trade, subject to a maximum of 10% of the full export value.

b) An undertaking is obtained from the exporter on the duplicate of EDF forms that he will surrender/account for the balance proceeds of the shipment within the period prescribed for realization.

99. What is the role of AD in case undrawn balance not received by exporter ?

In cases where the exporter has not been able to arrange for repatriation of the undrawn balance in spite of best efforts, AD banks, on being satisfied with the bona fides of the case, should ensure that the exporter has realised at least the value for which the bill was initially drawn (excluding undrawn balances) or 90 %  of the value declared on EDF form, whichever is more and a period of one year has elapsed from the date of shipment.

100. What are the guidelines in case of  Consignment Exports?

When goods have been exported on consignment basis, the AD  while forwarding shipping documents to his overseas branch/ correspondent, should instruct the latter to deliver them only against trust receipt/undertaking to deliver sale proceeds by a specified date within the period prescribed for realization of proceeds of the export.

The agents/consignees may deduct from sale proceeds of the goods expenses normally  incurred towards receipt, storage and sale of the goods, such as landing charges, warehouse rent, handling charges, etc. and remit the net proceeds to the exporter.

In case the goods are exported on consignment basis, freight and marine insurance must be arranged in India.

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(Source : RBI MD updated 23^rd April, 2025)

Next Issue  will be shared on 15^th  June 2025.                       

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