RBI/2011-12/403
A.P. (DIR Series) Circular No.81
February 21, 2012
To
All Category – I Authorised Dealer Banks
Madam / Sir,
Export of Goods and Services -
Receipt of advance payment for export of goods
Involving shipment (manufacture and ship) beyond one year
Attention of Authorised Dealer Category – I (AD Category I) banks is invited
to the sub-regulation (2) of Regulation 16 of the Foreign Exchange Management
(Export of Goods and Services) Regulations, 2000, notified vide
Notification No.FEMA.23/RB-2000, dated 3rd May 2000, as
amended from time to time, in terms of which prior approval of the Reserve Bank
is required to be obtained by an exporter for receipt of advance where the
export agreement provides for shipment of goods extending beyond the period of
one year from the date of receipt of advance payment.
2. With a view to liberalizing the procedure, it has been decided to permit
AD Category- I banks to 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:-
-
the KYC and due diligence exercise has been done by the AD Category –I
bank for the overseas buyer;
-
compliance with the Anti Money Laundering standards has been ensured;
-
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;
-
progress payment, if any, should be received directly from the overseas
buyer strictly in terms of the contract;
-
the rate of interest, if any, payable on the advance payment shall not
exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points;
-
there should be no instance of refund exceeding 10% of the advance
payment received in the last three years;
-
the documents covering the shipment should be routed through the same
authorised dealer bank; and
-
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. Necessary amendments to the Foreign Exchange Management (Export of Goods
and Services) Regulations, 2000, wherever necessary, are being issued
separately.
4. AD Category - I banks may bring the contents of this circular to the
notice of their constituents and customers concerned.
5. The directions contained in this circular have been issued under Sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager