Export Regulations 2015 PDF

PART-A General A.1 Introduction (i) Export trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices, functioning under the Ministry of Commerce and Industry, Department of Commerce, Government of India. Policies and procedures required to be followed for expor...

PART-A General A.1 Introduction (i) Export trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices, functioning under the Ministry of Commerce and Industry, Department of Commerce, Government of India. Policies and procedures required to be followed for exports from India are announced by the DGFT, from time to time. (ii) AD Category – I banks may conduct export transactions in conformity with the Foreign Trade Policy in vogue and the Rules framed by the Government of India and the Directions issued by Reserve Bank from time to time. In exercise of the powers conferred by clause (a) of sub-section (1) and sub-section (3) of Section 7 and sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank has notified the 2Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 relating to export of goods and services from India, hereinafter referred to as the ‘Export Regulations’. These Regulations have been notified vide Notification No. FEMA 23(R)/2015-RB dated January 12, 2016. (iii) The directions contained in this document should be read with the Foreign Exchange Management (Current Account Transactions) Rules, 2000, notified by the Government of India, Ministry of Finance, vide Notification No.G.S.R.381 (E) dated May 3, 2000, as also Regulations notified by Reserve Bank vide its 3Notification No. FEMA 23(R)/2015-RB dated January 12, 2016. (iv) In terms of Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000, notified vide 3Notification No. FEMA 8/2000-RB dated May 3, 2000, AD Category – I banks have been permitted to issue guarantees on behalf of exporter clients on account of exports out of India subject to specified conditions. (v) There is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy, 2023, 2 FEM (Export of Goods and Services) Regulations, 2000 was repealed and replaced by FEM (Export of Goods and Services) Regulations, 2015 with effect from January 12, 2016. 3 FEM (Export of Goods and Services) Regulations, 2000 was repealed and replaced by FEM (Export of Goods and Services) Regulations, 2015 with effect from January 12, 2016. (a) All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realised in freely convertible currency. (b) However, 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 situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan. Additionally, rupee payment through Vostro account must be against payment in free foreign currency by buyer in his non-resident bank account. Free foreign exchange remitted by buyer to his non-resident bank (after deducting bank service charges) on account of this transaction would be taken as export realization under export promotion schemes of FTP. (c) Contracts (for which payments are received through Asian Clearing Union (ACU) shall be denominated in ACU Dollar. However, participants in the ACU may settle their transactions in ACU Dollar or in ACU Euro as per RBI Notifications. Central Government may relax provisions of this paragraph in appropriate cases. Export contracts and invoices can be denominated in Indian rupees against EXIM Bank/Government of India line of credit. (d) Invoicing, payment and settlement of exports and imports is also permissible in INR subject to compliances as under RBI’s A.P. (DIR Series) Circular No.10 dated 11th July, 2022. Accordingly, settlement of trade transactions in INR shall take place through the Special Rupee Vostro Accounts opened by AD banks in India as permitted under Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016, in accordance to the following procedures: (i) Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier. (ii) Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country. (vi) Any reference to the Reserve Bank should first be made to the Regional Office of the Foreign Exchange Department situated in the jurisdiction where the applicant person resides, or the firm / company functions, unless otherwise indicated. If, for any particular reason, they desire to deal with a different office of the Foreign Exchange Department, they may approach the Regional Office of their jurisdiction for necessary approval. Such references should be routed through the Compliance Head of the AD bank. (vii) “Financial Year” (April to March) is reckoned as the time base for all transactions pertaining to trade related issues. A.2 Realization and repatriation of proceeds of export of goods / software / services It is obligatory on the part of the exporter to realise and repatriate the full value of goods / software / services to India within a stipulated period from the date of export, as under: (i) It has been decided in consultation with the Government of India that the period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further notice. 4(ii) Due to the outbreak of pandemic COVID-19, it was decided, in consultation with the Government of India, to increase the period of realization and repatriation to India of the amount representing the full export value of goods or software or services exported, from nine months to fifteen months from the date of export, for the exports made up to or on July 31, 2020. (iii) For goods exported to a warehouse established outside India, the proceeds shall be realised within fifteen months from the date of shipment of goods. A.3 Manner of receipt and payment (i) The amount representing the full export value of the goods exported shall be received through an AD Bank in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2023 notified vide Notification No. FEMA 14(R)/2023-RB dated December 21, 2023. (ii) When payment for goods sold to overseas buyers during their visits is received in this manner, EDF (duplicate) should be released by the AD Category – I banks only on receipt of funds in their Nostro account or if the AD Category – I bank concerned is not the Credit Card servicing bank, on production of a certificate by the exporter from the Credit Card servicing bank in India to the effect that it has received the equivalent amount in foreign exchange, AD Category – I banks may also receive payment for exports made out of India by debit to the credit card of an importer where the reimbursement from the card issuing bank/ organization will be received in foreign exchange. (iii) Processing of export related receipts through Online Payment Gateways Processing of export related receipts through online payment gateways shall be in terms of Notification No. CO.DPSS.POLC.No.S-786/02-14-008/2023-24 dated October 31, 2023. 4 Inserted by AP (DIR Series) Circular 27 dated April 01, 2020 5 (iv) Settlement System under ACU Mechanism 6a) In order to facilitate transactions / settlements, effective March 06, 2020, participants in the Asian Clearing Union will have the option to settle their transactions either in ACU Dollar or in ACU Euro or in ACU Japanese Yen. Accordingly, the Asian Monetary Unit (AMU) shall be denominated as ‘ACU Dollar’, ‘ACU Euro’ and ‘ACU Yen’ which shall be equivalent in value to one US Dollar, one Euro and one Japanese Yen, respectively. b) Further, AD Category – I banks are allowed to open and maintain ACU Dollar, ACU Euro and ACU Japanese Yen accounts with their correspondent banks in other participating countries. All eligible payments are required to be settled by the concerned banks through these accounts. c) Relaxation from ACU Mechanism- Indo-Myanmar Trade - Trade transactions with Myanmar can be settled in any freely convertible currency in addition to the ACU mechanism. d) In view of the difficulties being experienced by importers/exporters in payments to / receipts from Iran, it has been decided that with effect from December 27, 2010, all eligible current account transactions including trade transactions with Iran should be settled in any permitted currency outside the ACU mechanism, until further notice. e) 7All eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism with effect from July 08, 2022, until further notice. f) In view of the understanding reached among the members of the ACU during the 44th Meeting of the ACU Board in June, 2015, use of the Nostro accounts of the commercial banks of the ACU member countries, i.e., the ACU Dollar, ACU Euro and ACU Japanese Yen accounts, for settling the payments of both exports and imports of goods and services among the ACU countries is permitted. g) Notwithstanding the above, it may be noted that operations in ‘ACU Euro’ have been temporarily suspended with effect from July 01, 2016. 5 omitted 6 Inserted by AP (DIR Series) Circular 22 dated March 17, 2020 7 Inserted vide AP (DIR Series) Circular No.09 dated July 08, 2022 (v) Third party payments for export / import transactions Taking into account the evolving international trade practices, it has been decided to permit third party payments for export / import transactions subject to conditions as under: a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/ invoice has been produced subject to: (i) AD bank should be satisfied with the bona-fides of the transaction and export documents, such as, invoice / FIRC. (ii) AD bank should consider the FATF statements while handling such transaction. b) Third party payment should be routed through the banking channel only; c) The exporter should declare the third party remittance in the Export Declaration Form and it would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF; d) It would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF; e) Reporting of outstanding, if any, would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realise, the name of the declared third party should appear in the outstanding report. f) In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country; and g) In case of imports, the Invoice should contain a narration that the related payment has to be made to the (named) third party, the Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party and the importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods. (vi) 8Settlement of Export transactions in currencies not having a direct exchange rate To further liberalise the procedure and facilitate settlement of export transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of 8 Inserted by AP (DIR Series) Circular 42 dated February 4, 2016. the beneficiary, which though convertible, does not have a direct exchange rate, it has been decided that AD Category-I banks may permit settlement of such export transactions (excluding those put through the ACU mechanism), subject to conditions as under: a) Exporter shall be a customer of the AD Bank, b) Signed contract / invoice is in a freely convertible currency, c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible) currency of the invoice/ contract, Letter of Credit as full and final settlement, d) AD bank is satisfied with the bonafides of the transactions, and e) The counterparty to the exporter/ importer of the AD bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures. (vii) 9 International Trade Settlement in Indian Rupees (INR) a) In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place with effect from July 11, 2022 an additional arrangement for invoicing, payment, and settlement of exports / imports in INR. Before putting in place this mechanism, AD banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai. b) The broad framework for cross border trade transactions in INR under Foreign Exchange Management Act, 1999 (FEMA) is as delineated below: (i) All exports and imports under this arrangement may be denominated and invoiced in Rupee (INR). (ii) Exchange rate between the currencies of the two trading partner countries may be market determined. (iii) The settlement of trade transactions under this arrangement shall take place in INR in accordance with the procedure laid down in Para c. c) In terms of Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016, AD banks in India have been permitted to open Rupee Vostro Accounts. Accordingly, for settlement of trade transactions with any country, AD bank in India may open Special Rupee 9 Inserted vide AP (DIR Series) Circular No. 10 dated July 11, 2022 Vostro Accounts of correspondent bank/s of the partner trading country. In order to allow settlement of international trade transactions through this arrangement, it has been decided that: (i) Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier. (ii) Indian exporters undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country. d) The export / import undertaken and settled in this manner shall be subject to usual documentation and reporting requirements. Letter of Credit (LC) and other trade related documentation may be decided mutually between banks of the partner trading countries under the overall framework of Uniform Customs and Practice for Documentary Credits (UCPDC) and incoterms. Exchange of messages in safe, secure, and efficient way may be agreed mutually between the banks of partner countries. e) Indian exporters may receive advance payment against exports from overseas importers in Indian rupees through the above Rupee Payment Mechanism. Before allowing any such receipt of advance payment against exports, Indian Banks shall ensure that available funds in these accounts are first used towards payment obligations arising out of already executed export orders / export payments in the pipeline. The said permission would be in accordance with the conditions mentioned in para-C.2 on Receipt of advance against exports under Master Direction on Export of Goods and Services 2016 (as amended from time to time). In order to ensure that the advance is released only as per the instructions of the overseas importer, the Indian bank maintaining the Special Vostro account of its correspondent bank shall, apart from usual due diligence measures, verify the claim of the exporter with the advice received from the correspondent bank before releasing the advance. f) ‘Set-off’ of export receivables against import payables in respect of the same overseas buyer and supplier with facility to make/receive payment of the balance of export receivables/import payables, if any, through the Rupee Payment Mechanism may be allowed, subject to the conditions mentioned in para C.26 on Set-off of export receivables against import payables under Master Direction on Export of Goods and Services 2016 (as amended from time to time). g) Issue of Bank Guarantee for trade transactions, undertaken through this arrangement, is permitted subject to adherence to provisions of FEMA Notification No. 8, as amended from time to time and the provisions of Master Direction on Guarantees & Co-acceptances. h) The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in Special Vostro Accounts can be used for: (i) Payments for projects and investments. (ii) Export/Import advance flow management (iii) Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provision. i) Reporting of cross- border transactions need to be done in terms of the extant guidelines under FEMA 1999. j) The bank of a partner country may approach an AD bank in India for opening of Special INR VOSTRO account. The AD bank will seek approval from the Reserve Bank with details of the arrangement. AD bank maintaining the special Vostro Account shall ensure that the correspondent bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures. A.4 Foreign Currency Account (i) Participants in international exhibition/trade fair have been granted general permission vide 10Regulation 5(E)(5) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations dated January 21, 2016 for opening a temporary foreign currency account abroad. 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 that the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair and full details are submitted to the AD Category – I banks concerned. (ii) Reserve Bank may consider applications in Form EFC from exporters having good track record for opening a foreign currency account with AD banks in India and outside India subject to certain terms and conditions. Applications for opening the account with a branch of 10 Inserted by FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as “Regulation 7(7) of the Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2000 notified vide Notification No. FEMA 10/2000-RB dated May 3, 2000” an AD Category – I bank in India may be submitted through the branch at which the account is to be maintained. If the account is to be maintained abroad the application should be made by the exporter giving details of the bank with which the account will be maintained. (iii) An Indian entity can also open, hold and maintain a foreign currency account with a bank outside India, in the name of its overseas office/branch, by making remittance for the purpose of normal business operations of the said office/branch or representative subject to conditions stipulated in 11Regulation 5 (B) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations dated January 21, 2016. (iv) A unit located in a Special Economic Zone (SEZ) may open, hold and maintain a Foreign Currency Account with an AD Category – I bank in India subject to conditions stipulated in 12Regulation 4 (D) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations dated January 21, 2016. (v) A person resident in India being a project / service exporter may open, hold and maintain foreign currency account with a bank outside or in India, subject to the standard terms and conditions in the Memorandum PEM. A.5 Diamond Dollar Account (DDA) (i) Under the scheme of Government of India, firms and companies dealing in purchase / sale of rough or cut and polished diamonds / precious metal jewellery plain, minakari and / or studded with / without diamond and / or other stones, with a track record of at least 2 years in import / export of diamonds / colored gemstones / diamond and colored gemstones studded jewellery / plain gold jewellery and having an average annual turnover of Rs. 3 crores or above during the preceding three licensing years (licensing year is from April to March) are permitted to transact their business through Diamond Dollar Accounts. (ii) They may be allowed to open not more than five Diamond Dollar Accounts with their banks. (iii) Eligible firms and companies may apply for permission to their AD Category – I banks in the format prescribed. 13 11 Inserted by FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as “Regulation 7 of Notification No. FEMA 10/2000-RB dated May 3, 2000” 12 Inserted by FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as “Regulation 6 (A) of Notification No. FEMA 10/2000-RB dated May 3, 2000” 13 The submission of fortnightly and quarterly reports to RBI on balances of DDA accounts and opening/ closing of DDA accounts has since been done away with vide AP (DIR Series) Circular No. 54 dated March 23, 2016 and FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 with effect from January 21, 2016 (iv) Conditions mentioned at Para A.6 (iv) a) & b) shall also apply. A.6 Exchange Earners’ Foreign Currency Account (EEFC Account) (i) A person resident in India may open with, an AD Category – I bank in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account, in terms of 14Regulation 4 (D) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 dated January 21, 2016. (ii) Resident individuals are permitted to include resident close relative(s) as defined in the Companies Act 2013 as a joint holder(s) in their EEFC bank accounts on former or survivor basis. (iii) This account shall be maintained only in the form of non-interest bearing current account. No credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held in EEFC accounts by the AD Category – I banks. (iv) All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange earnings to their EEFC Accounts subject to the condition that a) The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. b) The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions. This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account. (v) The eligible credits represent – a) inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder. b) payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in Export Processing Zone, Software Technology Park or Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area and also payments 14 Inserted by FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as “Regulation 4 of the Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2000 notified vide Notification No. FEMA 10/2000-RB dated May 3, 2000” received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ); (vi) AD Category – I banks may permit their exporter constituents to extend trade related loans/ advances to overseas importers out of their EEFC balances without any ceiling subject to compliance with the provisions of Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (Notification No. FEMA.3(R)/2018-RB dated December 17, 2018). (vii) AD Category – I banks may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or Rupee resources to the extent exports have actually taken place. (viii) Where a part of the export proceeds are credited to an EEFC account, the export declaration (duplicate) form may be certified as: “Proceeds amounting to …… representing ….. percent of the export realization credited to the EEFC account maintained by the exporter with……” A.7 Counter-Trade Arrangement Counter trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in US Dollar will be considered by the Reserve Bank subject to following conditions: (i) All imports and exports under the arrangement should be at international prices in conformity with the Foreign Trade Policy and Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under. (ii) No interest will be payable on balances standing to the credit of the Escrow Account but the funds temporarily rendered surplus may be held in a short-term deposit up to a total period of three months in a year (i.e., in a block of 12 months) and the banks may pay interest at the applicable rate. (iii) No fund based/or non-fund based facilities would be permitted against the balances in the Escrow Account. (iv) Application for permission for opening an Escrow Account may be made by the overseas exporter / organization through his / their AD Category – I bank to the Regional Office concerned of the Reserve Bank. A.8 Exports to neighboring countries by road, rail or river