Export of goods is regulated by DGFT under Foreign Trade Policy, Rules of Govt of India, and Directions of RBI. The actual export transactions are conducted through AD Banks, Exporter and Custom Ports. In this article, we will explore the legal and compliance aspects of export of goods and will scan the provisions of EEMA Act, FEM (Export of Goods and Services) Regulations, 2015 and FEMA Master directions:
A) FEMA Act, 1999:
1. Prescribed Declaration: Section 7:
- Every exporter of goods shall furnish to RBI
- the prescribed declaration with material particulars, full export value or expected market value outside India
- Other required information for realization of export proceeds
- Comply with other requirements as per RBI
2. Realization and Repatriation of full export value: Section 8:
Every exporter shall take all reasonable steps to realize and repatriate foreign exchange within prescribed period.
B) FEM (Export of Goods and Services) Regulations, 2015:
Reg. 3 & 4: Export from Customs Manual Ports:
- Exporter to submit declaration in Form EDF in duplicate to Commissioner of Customs.
- Declaration to contain full export value of goods or expected receivable on sale on overseas market.
- Realization of proceeds to be separately declared.
- Declaration is not required in the following cases:
- Trade samples, baggage, stores/transhipment cargo, military supply
- Gifts less than 5 lakhs per annum
- Aircraft for overhauling
- Goods imported for re-export
- Re-export of leased aircraft
- Re-export of unsold rough diamond from Special Notified Zones
- Goods imported by STP/EHTP/SEZ for re-export
- Replacement goods exported free of charge
- Goods sent for testing and re-import
- Defective goods sent abroad for repair and re-import
- Export as specific permission of RBI
Please note that no declaration is required when the proceeds of exports are not to be realized.
Reg. 5: IEC Code is a mandatory of exporter of goods. It must be mentioned on all documents and correspondence in the entire chain of export.
Reg. 6 : Declaration in EDF is required to be submitted in 2 copies with Commissioner of Customs. After verification and authentication, he will send the original to RBI and the duplicate to the exporter for further submission to the AD Bank.
Reg. 7: Commissioner of Customs will verify:
- Residency and place of business of the exporter
- Final destination of goods
- Value in declaration is the correct full value of export.
- Reg. 8: Full export value is to be routed through AB Bank as per the FEM( Manner of Receipt and Payment) Reg, 2000.
Reg 9: Full export value is to be realized and repatriated to India within 9 months or in case of goods exported to a warehouse established outside India, within 15 months.
- RBI or AD Bank under directions may extend the period in specific cases.
- Reg. 10 : The exporter will submit all export documents within 21 days from the date of export to the AD Bank. Extension can be granted by RBI or AD Bank in case of any reasons beyond the control of the exporter.
- Reg 11: Transfer of documents to third party after export is allowed and AD Bank may accept the shipping documents for negotiation or collection. AD Bank shall ask the transferee to sign or submit fresh declaration.
Reg 14 : Delay in receipt of payment: RBI may give directions to the exporter to take all actions for realization of export proceeds or re-import the unsold goods.
Reg. 15: Advance Payment: In case of receipt of advance payment, the exporter shall ensure the following:
- Goods must be shipping within one year of receipt of advance payment, except where the export agreement provides otherwise.
- Rate of interest shall not exceed LIBOR plus 100 basis point.
- The shipping documents shall be routed only through the AD Bank in which advance was originally received.
- In case of non-shipment within 1 year, the export shall obtain permission of RBI towards refund or payment of interest.
C) FEMA Master Directions:
- Third party payment for export transactions are permitted subject to
- Firm irrevocable order backed by tripartite agreement
- Payment is to be routed only though banking channel
- The exporter must declare the name of third party in Export Declaration Form but he will be ultimately liable for all compliance.
- Settlement of export transactions in currencies not having direct exchange rate may be permitted by AD Bank, subject to
- Exporter is a existing customer of AD Bank
- Signed invoice /contract is in freely convertible currency
- Counterparty to the exporter is not from FATF non-compliant jurisdictions.
- Export of goods through EDI Ports:
- Shipping bill is to be submitted in duplicate to the Commissioner of Customs/SEZ.
- Exchange Control copy of the shipping bill is to submitted to the AD Bank within 21 days
- Issue of Electronic BRC: AD Bank will update the EDPMS with data of export proceeds on “as and when realized basis”.
The above is the macroscopic view of the legal and compliance provisions from FEMA perspective. Besides, there are other laws like GST, Customs law and domain specific requirements for export of goods.
In case you have any concern and queries or need any support in compliance/FEMA you may like to contact us.
Abhinarayan Mishra, FCA, FCS; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi; 9910744992, firstname.lastname@example.org