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Question
Explain procedure for Disposal of GR/SDF/PP forms?

Answer
Q.2
A. Explain procedure for Disposal of GR/SDF/PP forms?
Master Circular on Exports of Goods and Services
(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 Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 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 23/2000-RB dated May 3, 2000, as amended from time to time.
(iii)  The Directions contained in this Circular should be read with the Rules notified by the Government of India, Ministry of Finance, vide Notification No.G.S.R.381 (E) dated May 3, 2000, (Annex - 1) as also Regulations notified by Reserve Bank vide its Notification No. FEMA 23/2000-RB dated May 3, 2000, as amended from time to time (Annex - 2).
(iv)  In terms of Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000, notified vide Notification 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 2.40 of the Foreign Trade Policy (August 27, 2009 - March 31, 2014), “All export contracts and invoices shall be denominated either in freely convertible currency or in Indian Rupees but export proceeds shall be realised in freely convertible currency. 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 the ACU or Nepal or Bhutan”. Indian Rupee is not a freely convertible currency, as yet.
(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 its jurisdiction for necessary approval.
(vii) “Financial Year” (April to March) is reckoned as the time base for all transactions pertaining to trade related issues.
PART 2
B. General guidelines for Exports
B.1 Exemption from Declarations
GR Exemption
The requirement of declaration of export of goods and software in the prescribed form will not apply to the cases indicated in Regulation 4 of Notification No. FEMA 23/2000-RB dated May 3, 2000 (Annex 2). The exporters shall, however, be liable to realise and repatriate export proceeds as per FEMA Regulations.
Grant of GR waiver
(i) AD Category – I banks may consider requests for grant of GR waiver from exporters for export of goods free of cost, for export promotion up to 2 per cent of the average annual exports of the applicant during the preceding three financial years subject to a ceiling of Rs.5 lakhs. For status holder exporters, the limit as per the present Foreign Trade Policy is Rs.10 lakhs or 2 per cent of the average annual export realization during the preceding three licensing years (April-March), whichever is higher.
(ii) Export of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of GR/PP procedure from the Reserve Bank.
B.2 Manner of Receipt and Payment
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, 2000 notified vide Notification No. FEMA.14/2000-RB dated May 3, 2000 (Annex-3) in the following manner:
a. Bank draft, pay order, banker's or personal cheques.
b. Foreign currency notes/foreign currency travellers’ cheques from the buyer during his visit to India.
c. Payment out of funds held in the FCNR/NRE account maintained by the buyer
d. International Credit Cards of the buyer.
Note: When payment for goods sold to overseas buyers during their visits is received in this manner, GR/SDF (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/ organisation will be received in foreign exchange.
(ii) Trade transactions can also be settled in the following manner:
a. All transactions between a person resident in India and a person resident in Nepal or Bhutan may be settled in Indian Rupees. However, in case of export of goods to Nepal, where the importer has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange, such payments shall be routed through the ACU mechanism.
b. In precious metals i.e. Gold / Silver / Platinum by the Gem & Jewellery units in SEZs and EOUs, equivalent to value of jewellery exported on the condition that the sale contract provides for the same and the approximate value of the precious metals is indicated in the relevant GR / SDF / PP Forms.*
(iii) Processing of export related receipts through Online Payment Gateway Service Providers (OPGSPs)
Authorised Dealer Category – I (AD Category – I) banks have been allowed to offer the facility of repatriation of export related remittances by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSPs) subject to the following conditions –
a. The AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP.
b. This facility shall only be available for export of goods and services of value not exceeding USD 10,000 (US Dollar ten thousand). (effective from June 11, 2013)
[Ref:  A.P. (DIR Series) Circular No.109 dtd 11-06-2013]
c. AD Category-I banks providing such facilities shall open a NOSTRO collection account for receipt of the export related payments facilitated through such arrangements. Where the exporters availing of this facility are required to open notional accounts with the OPGSP, it shall be ensured that no funds are allowed to be retained in such accounts and all receipts should be automatically swept and pooled into the NOSTRO collection account opened by the AD Category-I bank.
d. A separate NOSTRO collection account may be maintained for each OPGSP or the bank should be able to delineate the transactions in the NOSTRO account of each OPGSP.
e. The following debits will only be permitted to the NOSTRO collection account opened under this arrangement:
I. Repatriation of funds representing export proceeds to India for credit to the exporters’ account;
II. Payment of fee/commission to the OPGSP as per the predetermined rates / frequency/ arrangement; and
III. Charge back to the importer where the exporter has failed in discharging his obligations under the sale contract.
f. The balances held in the NOSTRO collection account shall be repatriated and credited to the respective exporter's account with a bank in India immediately on receipt of the confirmation from the importer and, in no case, later than seven days from the date of credit to the NOSTRO collection account.
g. AD Category -I banks shall satisfy themselves as to the bonafides of the transactions and ensure that the purpose codes reported to the Reserve Bank in the online payment gateways are appropriate.
h. AD Category -I banks shall submit all the relevant information relating to any transaction under this arrangement to the Reserve Bank, as and when advised to do so.
i. Each NOSTRO collection account should be subject to reconciliation and audit on a quarterly basis.
j. Resolution of all payment related complaints of exporters in India shall remain the responsibility of the OPGSP concerned.
k. OPGSPs who are already providing such services as per the specific holding-on approvals issued by the Reserve Bank shall open a liaison office in India within three months from November 16, 2010, after duly finalizing their arrangement with the AD-Category-I banks and obtaining approval from the Reserve Bank for this purpose. In respect of all new arrangements, the OPGSP shall open a liaison office with the approval of the Reserve Bank before operationalising the arrangement. AD Category-I banks desirous of entering into such an arrangement/s should approach the Reserve Bank for obtaining one time permission in this regard and thereafter report the details of each such arrangement as and when entered into.
(iv) Settlement system under ACU Mechanism
a) In order to facilitate transactions / settlements, effective January 01, 2009, participants in the Asian Clearing Union will have the option to settle their transactions either in ACU Dollar or in ACU Euro. Accordingly, the Asian Monetary Unit (AMU) shall be denominated as 'ACU Dollar' and 'ACU Euro' which shall be equivalent in value to one US Dollar and one Euro, respectively.
b) Further, AD Category – I banks are allowed to open and maintain ACU Dollar and ACU Euro 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.
B.3 Realisation and Repatriation of export proceeds
It is obligatory on the part of the exporter to realise and repatriate the full value of goods or software to India within a stipulated period from the date of export, as under :
i. Units located in SEZs shall realize and repatriate, full value of goods / software / services, to India within a period of twelve months from the date of export. Any extension of time beyond the above stipulated period may be granted by Reserve Bank of India, on case to case basis.
 [Ref: A.P.(DIR Series) Circular No.108 dated 11-06-2013 ]
ii. By Status Holder Exporters as defined in the Foreign Trade Policy : Within a period of twelve months from the date of export;
iii. By 100 % Export Oriented Units (EOUs) and units set up under Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Biotechnology Parks (BTPs) schemes : Within a period of twelve months from the date of export on or after September 1, 2004;
iv. Goods exported to a warehouse established outside India : As soon as it is realised and in any case within fifteen months from the date of shipment of goods; and
v. . In all other cases: With effect from May 20, 2013 this period of realization and repatriation to India has been brought down to nine months from the date of export, till September 30, 2013.
[Ref: . A.P.(DIR Series) Circular No.105 dtd 20-05-2013]
B.4 Foreign Currency Account
(i) Participants in international exhibition/trade fair have been granted general permission vide Regulation 7(7) of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 notified vide Notification No. FEMA 10/2000-RB dated May 3, 2000 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 (Annex 6) from exporters having good track record for opening a foreign currency account with banks in India and outside India subject to certain terms and conditions. Applications for opening the account with a branch of 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 Regulation 7 of Notification No. FEMA 10/2000-RB dated May 3, 2000 and as amended from time to time.
(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 Regulation 6 (A) of Notification No. FEMA 10/2000-RB dated May 3, 2000 and as amended from time to time.
(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.
B.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 / coloured gemstones / diamond and coloured 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.
(iv) AD Category-I banks are required to submit quarterly reports to the Foreign Exchange Department, Reserve Bank of India, Central Office, Trade Division, Mumbai, giving details of name and address of the firm / company in whose name the Diamond Dollar Account is opened, along with the date of opening / closing the Diamond Dollar Account, by the 10th of the month following the quarter to which it relates.
(v) AD Category - I banks are required to submit a statement giving the data on the DDA balances maintained by them on a fortnightly basis within seven days of close of the fortnight to which it relates, to the Foreign Exchange Department, Reserve Bank of India, Central Office, Trade Division, Mumbai.
(vi) Condition mentioned at Para B.6 (iv) shall also apply.
B.6 Exchange Earners’ Foreign Currency (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 Regulation 4 of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 notified under Notification No. FEMA 10/2000-RB dated May 3, 2000 as amended from time to time.
Resident individuals are permitted to include resident close relative(s) as defined in the Companies Act 1956 as a joint holder(s) in their EEFC bank accounts on former or survivor basis. However, such resident Indian close relative, being made eligible to become joint account holder, shall not be eligible to operate the account during the life time of the resident account holder
(ii) 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.
(iii) 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.  Further, in case of requirements, EEFC account holders are permitted to access the forex market for purchasing foreign exchange.
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.
(iv) It may be noted that the provisions at paragraph (iii) a) and (iii) b) above will apply, mutatis mutandis, also to holder of either a Resident Foreign Currency Account (Domestic) or a Diamond Dollar Account (DDA).
[ Ref: A.P. (DIR Series) Circular No.12 dated 31-07-2012
A.P. (DIR Series) Circular No.79 dtd 22-01-2013]
(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 unit in Domestic Tariff Area (DTA) for supplying goods to a unit in Special Economic Zone out of its foreign currency account.
(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 of provisions of Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.
(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.
B.7 Setting up of Offices Abroad and Acquisition of Immovable Property for Overseas Offices
(i) At the time of setting up of the office, AD Category – I banks may allow remittances towards initial expenses up to fifteen per cent of the average annual sales/income or turnover during the last two financial years or up to twenty-five per cent of the net worth, whichever is higher.
(ii) For recurring expenses, remittances up to ten per cent 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 subject to the following terms and conditions:
a.   the overseas branch/office has been set up or representative is posted overseas for conducting normal business activities of the Indian entity;
b.   the overseas branch/office/representative shall not enter into any contract or agreement in contravention of the Act, Rules or Regulations made there under;
c.   the overseas office (trading / non-trading) / branch / representative should not create any financial liabilities, contingent or otherwise, for the head office in India and also not invest surplus funds abroad without prior approval of the Reserve Bank. Any funds rendered surplus should be repatriated to India.
(iii) The details of bank accounts opened in the overseas country should be promptly reported to the AD Bank.
(iv) AD Category – I banks may also allow remittances by a company incorporated in India having overseas offices, within the above limits for initial and recurring expenses, to acquire immovable property outside India for its business and for residential purpose of its staff.
(v)  The overseas office / branch of software exporter company/firm may repatriate to India 100 per cent of the contract value of each ‘off-site’ contract.
(vi)  In case of companies taking up ‘on site’ contracts, they should repatriate the profits of such ‘on site’ contracts after the completion of the said contracts.
(vii) An audited yearly statement showing receipts under ‘off-site’ and ‘on-site’ contracts undertaken by the overseas office, expenses and repatriation thereon may be sent to the AD Category – I banks.
B.8 Advance Payments against Exports
(1) In terms of Regulation 16 of Notification No. FEMA 23/2000-RB  dated May 3, 2000, 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 –
I.   the shipment of goods is made within one year from the date of receipt of advance payment;
II.   the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points; and
III.   the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received.
Provided that 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.
(2) ‘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:-
i. the KYC and due diligence exercise has been done by the AD Category –I bank for the overseas buyer;
ii. compliance with the Anti Money Laundering standards has been ensured;
iii. 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 bona-fide transaction;
iv. progress payment, if any, should be received directly from the overseas buyer strictly in terms of the contract;
v. the rate of interest, if any, payable on the advance payment shall not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points;
vi. there should be no instance of refund exceeding 10% of the advance payment received in the last three years;
vii. the documents covering the shipment should be routed through the same authorised dealer bank; and
viii. 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.’
(3) 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.
Note: AD Category – I banks may also be guided by the Master Circular on Guarantees and Co-acceptances issued by DBOD.
B.9 GR Approval for Trade Fair/Exhibitions abroad
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. 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 Category – I banks may approve GR Form of export items for display or display-cum-sale in trade fairs/exhibitions outside India subject to the following:
i.   The exporter shall produce relative Bill of Entry within one month of re-import into India of the unsold items.
ii.   The sale proceeds of the items sold are repatriated to India in accordance with the Foreign Exchange Management (Realisation, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000.
iii.   The exporter shall report to the AD Category – I banks the method of disposal of all items exported, as well as the repatriation of proceeds to India.
iv.   Such transactions approved by the AD Category – I banks will be subject to 100 per cent audit by their internal inspectors/auditors.
B.10 GR approval for Export of Goods for re-imports
(i) AD Category – I banks may consider request from exporters for granting GR 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.
(ii) Where the goods being exported for testing are destroyed during testing, AD Category – I 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.
B.11 Part Drawings /Undrawn Balances
(i) 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 Category – I 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 per cent of the full export value.
b.   An undertaking is obtained from the exporter on the duplicate of GR/SDF/PP forms that he will surrender/account for the balance proceeds of the shipment within the period prescribed for realization.
(ii) In cases where the exporter has not been able to arrange for repatriation of the undrawn balance in spite of best efforts, AD Category – I 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 per cent of the value declared on GR/PP/SDF form, whichever is more and a period of one year has elapsed from the date of shipment.
B.12 Consignment Exports
(i) When goods have been exported on consignment basis, the AD Category-I bank, 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. This procedure should be followed even if, according to the practice in certain trades, a bill for part of the estimated value is drawn in advance against the exports.
(ii) 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.
(iii) The account sales received from the Agent/Consignee should be verified by the AD Category – I banks. Deductions in Account Sales should be supported by bills/receipts in original except in case of petty items like postage/cable charges, stamp duty, etc.
(iv) In case of goods exported on consignment basis, freight and marine insurance must be arranged in India.
AD Category – I banks may allow the exporters to abandon the books, which remain unsold at the expiry of the period of the sale contract. Accordingly, the exporters may show the value of the unsold books as deduction from the export proceeds in the Account Sales.
B.13 Opening / Hiring of Ware houses abroad
AD Category – I banks may consider the applications received from exporters and grant permission for opening / hiring warehouses abroad subject to the following conditions:
i.   Applicant’s export outstanding does not exceed 5 per cent of exports made during the previous financial year.
ii.   Applicant has a minimum export turnover of USD 100,000/- during the last financial year.
iii.   Period of realisation should be as applicable.
iv.   All transactions should be routed through the designated branch of the AD Banks.
v.   The above permission may be granted to the exporters initially for a period of one year and renewal may be considered subject to the applicant satisfying the requirement above.
vi.   AD Category – I banks granting such permission/approvals should maintain a proper record of the approvals granted.
B.14 Direct dispatch of documents by the exporter
(i) 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 Category – I bank is satisfied, on the basis of standing and track record of the exporter and arrangements have been made for realisation of export proceeds.
c.   Documents in respect of goods or software are accompanied with a declaration by the exporter that they are not more than Rs. 25,000/- in value and not declared on GR/SDF/PP/SOFTEX form.
(ii) AD Category – I banks may also permit `Status Holder Exporters’ (as defined in the Foreign Trade Policy), 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 GR Form.
b.   The duplicate copy of the GR form is submitted to the AD banks for monitoring purposes, by the exporters within 21 days from the date of shipment of export.
(iii) AD Category – I banks  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 million or its equivalent, per export shipment, subject to the following conditions:
a) The export proceeds have been realised in full.
b) The exporter is a regular customer of AD Category – I bank for a period of at least six months.
c) The exporter’s account with the AD Category – I bank is fully compliant with the Reserve Bank’s extant KYC / AML guidelines.
d) The AD Category – I bank is satisfied about the bonafides of the transaction.
In case of doubt, the AD Category – I bank may consider filing Suspicious Transaction Report (STR) with FIU_IND (Financial Intelligence Unit in India).
B.15 Invoicing of Software Exports
(i) For long duration contracts involving series of transmissions, the exporters should bill their overseas clients periodically, i.e., at least once a month or on reaching the ‘milestone’ as provided in the contract entered into with the overseas client and the last invoice / bill should be raised not later than 15 days from the date of completion of the contract. It would be in order for the exporters to submit a combined SOFTEX form for all the invoices raised on a particular overseas client, including advance remittances received in a month.
(ii) Contracts involving only ‘one-shot operation’, the invoice/bill should be raised within 15 days from the date of transmission.
(iii) The exporter should submit declaration in Form SOFTEX in quadruplicate in respect of export of computer software and audio / video / television software to the designated official concerned of the Government of India at STPI / EPZ /FTZ /SEZ for valuation / certification not later than 30 days from the date of invoice / the date of last invoice raised in a month, as indicated above. The designated officials may also certify the SOFTEX Forms of EOUs, which are registered with them.
(iv) The invoices raised on overseas clients as at (i) and (ii) above will be subject to valuation of export declared on SOFTEX form by the designated official concerned of the Government of India and consequent amendment made in the invoice value, if necessary.
B.16 Short Shipments and Shut out Shipments
(i) When part of a shipment covered by a GR form already filed with Customs is short-shipped, the exporter must give notice of short-shipment to the Customs in the form and manner prescribed. In case of delay in obtaining certified short-shipment notice from the Customs, the exporter should give an undertaking to the AD banks to the effect that he has filed the short-shipment notice with the Customs and that he will furnish it as soon as it is obtained.
(ii) Where a shipment has been entirely shut out and there is delay in making arrangements to re-ship, the exporter will give notice in duplicate to the Customs in the form and manner prescribed, attaching thereto the unused duplicate copy of GR form and the shipping bill. The Customs will verify that the shipment was actually shut out, certify the copy of the notice as correct and forward it to the Reserve Bank together with unused duplicate copy of the GR form. In this case, the original GR form received earlier from Customs will be cancelled. If the shipment is made subsequently, a fresh set of GR form should be completed
B.17 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 / organisation through his / their AD Category – I bank to the Regional Office concerned of the Reserve Bank.
B.18 Export of Goods on Lease, Hire, etc.
Prior approval of the Reserve Bank is required for export of machinery, equipment, etc., on lease, hire basis under agreement with the overseas lessee against collection of lease rentals/hire charges and ultimate re-import. Exporters should apply for necessary permission, through an AD Category – I banks, to the Regional Office concerned of the Reserve Bank, giving full particulars of the goods to be exported.
B.19 Export on Elongated Credit Terms
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.
B.20 Export of goods by Special Economic Zones (SEZs)
(A) Units in SEZs are permitted to undertake job work abroad and export goods from that country itself subject to the conditions that:
i. Processing / manufacturing charges are suitably loaded in the export price and are borne by the ultimate buyer.
ii. The exporter has made satisfactory arrangements for realisation of full export proceeds subject to the usual GR procedure.
AD Category – I banks may permit units in DTAs to purchase foreign exchange for making payment for goods supplied to them by units in SEZs.
(B) Export of Services by Special Economic Zones (SEZs) to DTA Unit
Authorised Dealer Banks are permitted to sell foreign exchange to a unit in the DTA for making payment in foreign exchange to a unit in the SEZ for the services rendered by it (i.e. a unit in SEZ) to a DTA unit. It must be ensured that in the Letter of Approval (LoA) issued to the SEZ unit by the Development Commissioner(DC) of the SEZ, the provisions pertaining to the goods / services supplied by the SEZ unit to the DTA unit and for payment in foreign exchange for the same should be mentioned.
[Ref: A. P. (DIR Series) Circular No.46 dated 23-10-2012]
B.21 Project Exports and Service Exports
Export of engineering goods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are collectively referred to as ‘Project Exports’. Indian exporters offering deferred payment terms to overseas buyers and those participating in global tenders for undertaking turnkey/civil construction contracts abroad are required to obtain the approval of the AD Category – I banks/ EXIM Bank/ Working Group at post-award stage before undertaking execution of such contracts. Regulations relating to ‘ Project Exports’ and  ‘Service Exports’ are laid down in the revised Memorandum of Instructions on Project and Service Exports (PEM- October 2003 as amended from time to time).
In order to provide greater flexibility to project exporters and exporters of services in conducting their overseas transactions, the guidelines stipulated vide paragraphs B.10 (i) (f),C 1(ii), D.1 (i), D.3 and D.4(iv) of the PEM  have been modified as set out below. Project/Service exporters have also been extended the facility of deployment of temporary cash balance as set out here under;
(i) Inter-Project Transfer of Machinery [B 10 (i) (f)  & D 4 (iv)]
The stipulation regarding recovery of market value (not less than book value) of the machinery, etc., from the transferee project has been withdrawn. Further, exporters may use the machinery / equipment for performing any other contract secured by them in any country subject to the satisfaction of the sponsoring AD Category – I bank(s) / EXIM Bank / Working Group and also subject to the reporting requirement and would be monitored by the AD Category – I bank(s) / EXIM Bank / Working Group.
(ii) Inter-Project Transfer of Funds [D 1 (i) &  D 3]
AD Category – I bank(s) / EXIM Bank / Working Group may permit exporters to open, maintain and operate one or more foreign currency account/s in a currency(ies) of their choice with inter-project transferability of funds in any currency or country. The Inter-project transfer of funds will be monitored by the AD Category – I bank(s) / EXIM Bank / Working Group.
(iii) Deployment of Temporary Cash Surpluses
Project / Service exporters may deploy their temporary cash surpluses, generated outside India, in the following instruments / products, subject to monitoring by the AD Category – I bank(s) / EXIM Bank / Working Group :
a.   investments in short-term paper abroad including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less and the rating of which should be at least A-1/AAA by Standard & Poor or P-1/Aaa by Moody’s or F1/AAA by Fitch IBCA etc. ,
b.   deposits with branches / subsidiaries outside India of AD Category – I banks in India.
(iv) Repatriation of Funds in case of On-site Software Contracts [C 1 (ii)]
The requirement of repatriation of 30 per cent of contract value in respect of on-site contracts by software exporter company / firm has been dispensed with. They should, however, repatriate the profits of on-site contracts after completion of the contracts as per para B.7 (vii), ibid.
B.22 Export of Currency
In terms of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 notified vide Notification No. FEMA 6/ 2000-RB dated 3rd May 2000, as amended from time to time, any export of Indian currency of value exceeding Rs.7,500/- except to the extent permitted under any general permission granted under the Regulations, will require prior permission of the Reserve Bank.

(ii) Exporters dealing with more than one AD Category – I banks can avail of this facility through each AD Category – I bank, i.e., the limit of 10 per cent for self write-off (including reduction in invoice value) and extension of time for realization of export proceeds would be applicable for export bills lodged for realization with that AD Category – I banks.
(iii) Exporters operating under a consortium of banks or with multiple banks will also have the option of computing the 10 per cent limit on an aggregate basis with all the banks, provided the lead bank of the consortium or in case of multiple banking, a nodal bank, undertakes to verify the exporters’ annual performance on behalf of all the banks.
(iv)  Within a month from the close of the financial year, exporters should submit a statement (Annex 4), giving details of export proceeds due, realised and not realised  to the AD Category – I banks concerned.
(v) The AD Category – I banks will be required to verify the statement with their records and review the export performance of the exporter during the financial year to ascertain that in cases where the 10 per cent limit of self extension, write-off (including reduction in invoice value) and non-realization has been breached, the exporter has sought necessary approval for write-off, reduction in invoice value or extension of time, as the case may be, for the excess over the 10 per cent limit before the end of the financial year. Export bills due in the  financial year for which the exporter has extended the period of realization on his own (within the 10 per cent limit) or sought extension of time from the AD Category – I banks but unrealised as at the end of financial year will be computed for export proceeds due in the following  financial year.
(vi) In cases where exporters have failed to comply with the above requirement, AD Category – I banks may promptly advise the exporter concerned to seek extension of time/reduction in invoice value/write-off in respect of non-realization in excess of the 10 per cent limit, failing which, the AD Category – I banks may inform the exporter about the withdrawal of this facility of self write-off / extension of time, within a month, under advice to the Regional Office concerned of the Reserve Bank.
Economic Zones (SEZs)
AD Category - I banks may allow requests received from exporters for ‘netting off’ of export receivables against import payments for units located in Special Economic Zones subject to the following:
(i) The ‘netting off’ of export receivables against import payments is in respect of the same Indian entity and the overseas buyer / supplier (bilateral netting) and the netting may be done as on the date of balance sheet of the unit in SEZ.
(ii) The details of export of goods are documented in GR (O) forms / DTR as the case may be while details of import of goods / services are recorded through A1 / A2 form as the case may be. The relative GR / SDF forms will be treated as complete by the designated AD Category – I banks only after the entire proceeds are adjusted / received.
(iii) Both the transactions of sale and purchase in ‘R’ - Returns under FET-ERS are reported separately.
(iv) The export / import transactions with ACU countries are kept outside the arrangement.
(v) All the relevant documents are submitted to the concerned AD Category – I banks who should comply with all the regulatory requirements relating to the transactions.
C.27 (B) – Set-off of export receivables against import payables : (effective from November 17, 2011).
AD category –I  banks may deal with the cases of set-off of export receivables against import payables, subject to following terms and conditions:
a.   The import is as per the Foreign Trade Policy in force.
b.   Invoices/Bills of Lading/Airway Bills and Exchange Control copies of Bills of Entry for home consumption have been submitted by the importer to the Authorized Dealer bank.
c.   Payment for the import is still outstanding in the books of the importer.
d.   Both the transactions of sale and purchase may be reported separately in ‘R’ Returns.
e.   The relative GR forms will be released by the AD bank only after the entire export proceeds are adjusted / received.
f.   The ” set-off” of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for ”set-off” has been obtained from him.
g.   The export / import transactions with ACU countries should be  kept outside the arrangement.
h.   All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions.
C.28 Agency Commission on Exports
(i) AD Category – I banks may allow payment of commission, either by remittance or by deduction from invoice value, on application submitted by the exporter. The remittance on agency commission may be allowed subject to the following conditions:
a.   Amount of commission has been declared on GR/SDF/PP/SOFTEX form and accepted by the Customs authorities or Ministry of Information Technology, Government of India / EPZ authorities as the case may be. In cases where the commission has not been declared on GR/SDF/PP/SOFTEX form, remittance may be allowed after satisfying the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement/written understanding between the exporters and/or beneficiary for payment of commission exists.
b.   The relative shipment has already been made.
(ii) AD Category – I banks may allow payment of commission by Indian exporters, in respect of their exports covered under counter trade arrangement through Escrow Accounts designated in US Dollar, subject to the following conditions:
(a) The payment of commission satisfies the conditions as at (a) and (b) stipulated in paragraph (i) above.
(b) The commission is not payable to Escrow Account holders themselves.
(c) The commission should not be allowed by deduction from the invoice value.
(iii) Payment of commission is prohibited on exports made by Indian Partners towards equity participation in an overseas joint venture / wholly owned subsidiary as also exports under Rupee Credit Route except commission up to 10 per cent of invoice value of exports of tea & tobacco.
C.29 Refund of Export Proceeds
AD Category – I banks, through whom the export proceeds were originally realised  may consider requests for refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality.  While permitting such transactions, AD Category – I banks are required to :
(i) exercise due diligence regarding the track record of the exporter
(ii) verify the bonafides of the transactions
(iii) obtain from the exporter a certificate issued by DGFT / Custom authorities that no incentives have been availed by the exporter against the relevant export or the proportionate incentives availed, if any, for the relevant export have been surrendered
(iv) obtain an undertaking from the exporter that the goods will be re-imported within three months from the date of remittance and
(v) ensure that all procedures as applicable to normal imports are adhered to.
C.30 Exporters’ Caution List
(i) AD Category – I banks will also be advised whenever exporters are cautioned in terms of provisions contained in Regulation 17 of “Export Regulations” (Annex 2). They may approve GR/SDF/PP forms of exporters who have been placed on caution list if the exporters concerned produce evidence of having received an advance payment or an irrevocable letter of credit in their favour covering the full value of the proposed exports.
(ii) Such approval may be given even in cases where usance bills are to be drawn for the shipment provided the relative letter of credit covers the full export value and also permits such drawings and the usance bill mature within twelve months from the date of shipment.
(iii) AD Category – I banks should obtain prior approval of the Reserve Bank for issuing guarantees for caution-listed exporters.
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