RBI Notification

Facilitation of External Trade – Export of Goods and Services

Facilitation of External Trade - Export of Goods and Services

The government’s announcement of the RBI providing facilitation of external trade for the export of goods and services helps in providing big support to the exports in the industry.

The RBI announcement, which has reduced the monetary ceiling for overseas buyers regarding the direct dispatch of shipping documents and regularizing cases where export proceeds have been realized, ultimately provides a great relief to the exporters whose bills are pending with the EDPMS (Export Data Processing and Monitoring System), irrespective of the value of the export shipment. The primary aim of the announcement has affected those exporters who were pressured by the buyers to send the documents as the courier services failed in India during the lockdown in Covid. The RBI’s liberalization of rules in the Covid times, by writing off unrealized export bills has brought great relief to the export house.

Reserve Bank of India, plan through this notification of December 8, 2020, is to bring relief to the investors/exporters that have made a huge investment in the consignments and by simplifying the procedure of writing off unrealized export bills, in the current scenario is a great step.

RBI Notification-RBI/2020-21/77- Facilitation of External Trade

RBI Notification - Facilitation of External Trade

The notification deals with ease of doing business and has improved the procedural steps; it has delegated more powers to the Authorized Dealers Category-I banks, AD.

Dispatching of shipping documents directly in facilitation of external trade

  • According to the notification, it means that AD Banks are permitted up to 1 Million USD or its equivalent per export shipment to control and regularize dispatch of shipping documents and by the Exporter directly to the consignee or to his agent who is resident of that particular country where the final destination of goods has been made.
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It can be explained that the dispatch of documents by the Exporter to the consignee of the resident or agent located in that other country can be done directly by them.

  • RBI decided to do let to with the limit of USD 1Million per export assignment
  • The Authorised Banks have been asked to administer the dispatch of shipping documents irrespective of their value
  • The direct of shipping documents are subject to following conditions such as:
  • Export proceeds realised in full except the amount written off.
  • An exporter must be regular client of AD Bank for 6 months.
  • The Exporter’s account aligns with the RBI KYC conditions.
  • AD Bank must is in satisfaction of genuinity of the transaction, that the trade is bonafide.

Unrealized Export Bills Must Be Written Off In Facilitation Of External Trade

The RBI notification[1] has a positive point that is, clearing the export bills, or the outstanding amount be called off with the AD Bank.

Sl. NOParticularsLimitLimit%
1.Self write off by the Exporter5%The net export proceeds which are realized during the calendar year preceding the year in which the write-off is being done
2.Self write off by status export holder10%Same as above
3.Write off by AD. Category Bank10%Same as above

The above writing off the unrealized export bills is subject to following conditions:

  1. The concerned amount is outstanding for the year
  2. Documents supporting that the Exporter has made all the efforts to realize the export proceeds.
  3. Exporter is the regular client of the AD Bank, for 6 months.
  4. The Exporter has complied with the KYC Conditions.
  5. The AD Bank has complied that the transaction is bonafide.
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The above-cited conditions fall under the non-working categories:

  1. The overseas buyer has been declared insolvent by the liquidator, and there is no possibility of recovery.
  2. The unrealized amount represents that the balance due in a case settled through the intervention of the Indian Embassy/FCC.
  3. Goods destroyed by the exporting country Port/ Customs.
  4. The unrealized amount represents the balance which is undrawn, and the remaining balance means to be unrealized despite of efforts by the Exporter.
  5. Where the Exporter, after winning the court case, is unable to execute the court decree beyond his control.
  6. The cost of legal action is disproportionate to the amount not realized.
  7. Consequent dishonour of bills by the overseas buyer with no prospect of realization, the accounts which are the bills was drawn for the difference between the letter of credit value and export value or between the provisional and actual freight charges.

In the above-mentioned points, the Exporter can ask to write off unrealized bill amount entirely/totally for points, 1, 2, and 3. This is possible only when the AD Bank is satisfied with the documentary evidence submitted by the Exporter concerning surrendering the export incentives proportionately if taken/availed for the respective bill which is unrealized.

Self Write Off

In case of self write off, the Exporter has to submit to AD Bank a certificate from the CA, indicating the amounts which have been write off by him in the particular calendar year.

Where write off is not available?

  1. Where exports are made to the countries of Exports with externalization problem
  2. the EDF/Softex which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also outstanding bills which are the subject matter of civil / criminal suit.
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Set-off of Outstanding Export Receivables in facilitation of external trade

The AD bank may subject to the following conditions, allow set-off of outstanding export receivables against outstanding import payables:

  1. The arrangement shall be operationalized through one AD bank.
  2. AD bank has to be satisfied transactions that it being bonafide. It ensures that there are no KYC concerns left.
  3. The transactions detailed in the invoice is not under the investigation is by the Directorate of Enforcement (ED)/Central Bureau of Investigation (CBI) or any other investigative agency.
  4. As per Foreign Trade policy, Import/export of goods/services has been undertaken.
  5. With ACU countries, export / import transactions are kept outside the scheme.
  6. The Set-off of export receivables against goods is not permitted against import payables for services and vice versa.
  7. There has to be outstanding at the time of allowing set-off, with AD bank. This shall ensure that import payables/export receivables are allowed set-off. Further, it’s set off shall be allowed set off between the export and import which has taken in the same calendar year.
  8. The set-off shall be with respect to the same overseas buyer/supplier in case of bilateral settlement, which is subject to it being, supported by verifiable agreement/mutual consent.
  9. The legally enforceable agreement/contract the arrangement which shall be backed by a written. AD bank shall make sure that the terms of agreement are strictly followed.
  10. There has to be set-off, which shall not result in tax evasion/avoidance by any of the entities involved in such arrangement.
  11. Wherever applicable third party guidelines shall be adhered to by the concerned entities.
  12. There has to be compliance which has to be ensured by the AD Bank, with all the regulatory requirement relating to the transactions.
  13. The bank has to seek, Auditors/CA certificate wherever necessary.

Conclusion

It can be concluded that ease of doing business has been increased in the difficult times of COVID, where the exemptions to the Exporter has been given. The exemptions in the form of set-off against payments unrealized export bill, dispatching of documents directly, set off outstanding export receivables and various rebates. It is an excellent step for the exporters that is facilitation of external trade.

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