C.10 Direct dispatch of documents by the exporter in India

As per Master Direction No. 16/2015-16 (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 received under purpose code P0103 or 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 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 realization of export proceeds.

  • As per RBI guidelines, AD Category – I banks 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. 
  • RBI permit AD Bank to 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.

Earlier Guidelines:

1.1 In terms of Paragraph 2 of A. P. (DIR Series) Circular No. 6 dated August 13, 2008, AD banks have been allowed to 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.

Revised Guidelines Dated 4th December 2020:

1.2 With a view to simplify the procedure, it has been decided to do away with the limit of USD 1 million per export shipment. 

1.3 Accordingly, AD banks may regularize such direct dispatch of shipping documents irrespective of the value of export shipment, subject to following conditions: 
a) The export proceeds have been realized in full except for the amount written off, if any, in accordance with the extant provisions for write off. 
b) The exporter is a regular customer of AD bank for a period of at least six months. 
c) The exporter’s account with the AD bank is fully compliant with Reserve Bank’s extant KYC / AML guidelines. 
d) The AD bank is satisfied about the bonafides of the transaction


C.23 WRITE-OFF OF UNREALIZED EXPORT BILLS

Category

Limit in%

Self “write-off” by an exporter (Other than Status Holder Exporter)*

5%

Self “write-off” by Status Holder Exporters*

10%

Write-off” by AD Bank- 10%*

10%

*of the total export proceeds realized during the previous calendar year.


a) The relevant amount has remained outstanding for more than one year;
b) Satisfactory documentary evidence is furnished indicating that the exporter had made all efforts to realise the export proceeds; 
c) The exporter is a regular customer of the bank for a period of at least 6 months, is fully compliant with KYC/AML guidelines and AD Bank is satisfied with the bonafides of the transaction.
 
Revised Guidelines [A.P. (DIR Series) Circular No. 08 December 04, 2020]

1. The AD bank may, on request of the exporter, write-off unrealised export bills without any limit in respect of cases falling under any of the categories specified below above provided AD bank is satisfied with the documentary evidence produced:

i) The overseas buyer has been declared insolvent and a certificate from the official liquidator, indicating that there is no possibility of recovery of export proceeds, has been produced.
ii) The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization; 
iii) The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country;


2. AD banks may also permit write-off of outstanding amount of export bills up to the specified ceilings mentioned above, where the documents have been directly dispatched by the exporter to the consignee or his agent resident in the country of final destination of goods if the case falls under any of the categories mentioned above in Point number 1

3. The AD bank shall ensure that the exporter seeking write-off has submitted documentary evidence towards surrendering of proportionate export incentives, if any, availed of in respect of the relative export bill. 

4. AD banks shall report write-off of export bills in Export Data Processing and Monitoring System (EDPMS). 

5.AD banks shall put in place a system to carry out random check / percentage check of the export bills so written-off by their internal Inspectors/Auditors (including external Auditors).



Set-off of Export receivables against Import payables

Presently, AD banks are allowing exporters/importers to set-off their outstanding export receivables against outstanding import payables from/to the same overseas buyer/supplier.

Revised guidelineA.P. (DIR Series) Circular No. 08 December 04, 2020

The Bank has been receiving requests from AD banks, on behalf of their Importer/Exporter constituents, for allowing such set-off with their overseas group/associate companies either on net basis or gross basis, through an in-house or outsourced centralised settlement arrangement. 

New points have been added:
A. In case of settlement within the group/associates companies, the arrangement shall be backed by a written, legally enforceable agreement/contract. AD bank shall ensure that the terms of agreement are strictly adhered to; 
B. Set-off shall not result in tax evasion/avoidance by any of the entities involved in such arrangement. 
C. Third party guidelines shall be adhered to by the concerned entities, wherever applicable;
D. AD bank may seek Auditors/CA certificate wherever felt necessary.

PARA 3.1 Presently, AD banks are allowing exporters/importers to set-off their outstanding export receivables against outstanding import payables from/to the same overseas buyer/supplier. The Bank has been receiving requests from AD banks, on behalf of their Importer/Exporter constituents, for allowing such set-off with their overseas group/associate companies either on net basis or gross basis, through an in-house or outsourced centralised settlement arrangement. 

PARA 3.2 Accordingly, it has been decided to delegate powers to AD banks to also consider such requests of set-off, and the revised guidelines, in supersession of the instructions contained in circular A.P. (DIR Series) Circular No 47 dated November 17, 2011, are issued as under: The AD bank may allow set-off of outstanding export receivables against outstanding import payables, subject to the following conditions: 

a) The arrangement shall be operationalized/supervised through/by one AD bank only 
b) AD bank is satisfied with the bonafides of the transactions and ensures that there are no KYC/AML/CFT concerns; 
c) The invoices under the transaction are not under investigation by Directorate of Enforcement/Central Bureau of Investigation or any other investigative agency; d) Import/export of goods/services has been undertaken as per the extant Foreign Trade policy 
e) The export / import transactions with ACU countries are kept outside the arrangement; 
f) Set-off of export receivables against goods shall not be allowed against import payables for services and vice versa. 
g) AD bank shall ensure that import payables/export receivables are outstanding at the time of allowing set-off. Further, set-off shall be allowed between the export and import legs taking place during the same calendar year. 
h) In case of bilateral settlement, the set-off shall be in respect of same overseas buyer/supplier subject to it being supported by verifiable agreement/mutual consent.
i) In case of settlement within the group/associates companies, the arrangement shall be backed by a written, legally enforceable agreement/contract. AD bank shall ensure that the terms of agreement are strictly adhered to; 
j) Set-off shall not result in tax evasion/avoidance by any of the entities involved in such arrangement. 
k) Third party guidelines shall be adhered to by the concerned entities, wherever applicable; 
l) AD bank shall ensure compliance with all the regulatory requirement relating to the transactions; 
m) AD bank may seek Auditors/CA certificate wherever felt necessary. 
n) Each of the export and import transaction shall be reported separately (gross basis) in FETERS/EDPMS/IDPMS, as applicable 
o) AD bank to settle the transaction in E/IDPMS by utilizing the ‘set-off indicator’ and mentioning the details of shipping bills/bill of entry/invoice details being settled in the remark column (including details of entities involved)

Refund of Export Proceeds
New points have been added:
There have been instances when re-importing of goods has not been possible as the exported goods had reportedly been auctioned or destroyed in the importing country. 
The instructions have been reviewed and henceforth AD banks, while permitting refund of export proceeds of goods exported from India, shall: 
(i) Exercise due diligence on the track record of the exporter;
(ii) Verify the bona-fides of the transaction/s; 
(iii) Obtain from the exporter a certificate issued by DGFT / Custom authorities that no export incentive has been availed of by the exporter against the relevant export or the proportionate export incentives availed, if any, have been surrendered;
(iv) Not insist on the requirement of re-import of goods, where exported goods have been auctioned or destroyed by the Port / Customs / Health authorities/ any other accredited agency in the importing country subject to submission of satisfactory documentary evidence.