FOREIGN EXCHANGE MANAGEMENT (EXPORT OF GOODS & SERVICES) REGULATIONS, 2015 – AN OVERVIEW

The Reserve Bank of India made ‘Foreign Exchange (Export of Goods & Services) Regulations, 2015 (‘Regulations’ for short) by virtue of the powers conferred by Section 7(3)(1)(a) and Section 47 (2) of the Foreign Exchange Management Act, 1999 (‘Act’ for short) and in supersession of its Notification No. FEMA.23/2000-RB, dated 03.05.2000 as amended from time to time, which came into effect from 12.01.2016.  The Regulations dealt with the exports, the declaration to be filed, the realization of export value etc.,

The Regulation 2(iv) defines the term ‘export’ as including the taking or sending out of goods by land, sea or air, on consignment or by way of sale, lease, hire purchase or under any other arrangement by whatever name called and in the case of software, also includes transmission through any electronic media.

Export with prior approval

Regulation 13 provides that certain exports require prior approval.   The following exports require prior approval-

• Export of goods under special arrangement between the Central Government and Government of a foreign state; or
• Export under rupee credits extended by the Central Government to Government of a foreign state

shall be governed by the terms and conditions set out in the relative public notices issued by the Trade Control Authority in India and the instructions by the Trade Control Authority in India and the instructions issued from time to time by RBI.

• An export under the line of credit extended to a  bank or a financial institution operating in a foreign state by the Exim Bank for financing exports from India,

shall be governed by the terms and conditions advised by RBI to the authorized dealers from time to time.

Declaration of Exports

In case of exports through Customs manual ports, every exporter of goods or software in physical form or through any other form, either directly or indirectly to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority a declaration in one of the forms EDR or SOFTEX.  The declaration shall be supported by such evidence as may be specified containing true and correct material particulars including the amount representing-

• The full export value (Regulation 2(v) defines the term ‘export value’ in relation to export by way of lease or hire purchase or under any other similar arrangement, includes the charges, by whatever name called, payable in respect of such lease or hire purchase or any other similar arrangement) of the goods or software; or
• If the full value is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods or the software in overseas market;
• Realization of export proceeds in respect of export of goods/software from third party should be duly declared;
• The Importer-Exporter Code number allotted by the Director General of Foreign Trade under Section 7 of theForeign Trade (Development & Regulation) Act, 1992.

Evidence

Regulation 7 provides that the Commissioner of Customs or the Postal Authority or the official of Department of Electronics to whom the declaration form is submitted may, in order to satisfy themselves of due compliance require such evidence in support of the declaration may establish that-

• The exporter is a person resident in Indi and has a place of business in India;
• The destination stated on the declaration is the final place of the destination of goods exported;
• The value stated in the declaration represents-

• The full export value of the goods or software; or
• Where the full export value of the goods or software is not ascertained at the time of export, the value of which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods in the overseas market.

Procedure

The declaration shall be executed in sets of such number as specified.  Regulation 6 provides that Declaration in Form EDF shall be submitted in duplicate to the Commissioner of Customs.  After duly verifying and authenticating the declaration form, the Commissioner of Customs shall forward the original declaration form/data to the nearest office of RBI and hand over the duplicate form to the exporter for being submitted to the authorized dealer.

The declaration in form SOFTEX in respect of export of computer software and audio/video/television software shall be submitted in triplicate to the designated official of Ministry of Information Technology, Government of India at the software Technology Parks of India or the Free Trade Zones or Special Economic Zones in India.  After certifying ll three copies of SOFTEX form, the designated official shall forward the original directly to the nearest office of RBI and return the duplicate to the exporter.  The triplicate copy shall be retained by the designated official for record.

Export with declaration

Regulation 3(3) clarifies that in respect of export of services to which none of the Forms specified apply, the exporter may export such services without furnishing any declaration.  It shall be liable to realize the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the Act and these regulations, a s also other rules and regulations made under the Act.

Exemptions

Regulation 4 gives the list of cases which are exempted from furnishing declaration-

• Trade samples of goods and publicity material supplied free of payment;
• Personal effects of travelers, whether accompanied or unaccompanied;
• Ship’s stores, trans-shipment cargo and goods supplied under the orders of the Central Government or of such officers as may be appointed by the Central Government in this behalf or of the military, naval or air force authorities in India for military, naval or air force requirements;
• By way of gift of goods accompanied by a declaration by the exporter that they are not more than ₹ 5 lakh in value;
• Aircrafts or aircraft engines and spare parts for overhauling and/or repairs abroad subject to their reimport into India after overhauling/repairs, within a period of six months from the date of export;
• Goods imported free of cost on re-export basis;
• The following goods which are permitted by the Development Commissioner of SEX, EHTP, STP or FTZ to be re-exported, namely:

• Imported goods found defective, for the purpose of their replacement by the foreign suppliers/collaborators;
• Goods imported from foreign suppliers/collaborators on loan basis;
• Goods imported from foreign suppliers/collaborators free of cost, found surplus after production operations.

• Replacement of goods exported free of charge in accordance with the provisions of Foreign Trade Policy in force, for the time being;
• Goods sent outside India for testing subject to re-import into India;
• Defective goods sent outside India for repair and re-import provided the goods are accompanied by a certificate from an authorized dealer in India that the export is for repair and re-import and that the export does not involve any transaction in foreign exchange;
• Exports permitted by RVI, on application made to it, subject to the terms and conditions, if any, as stipulated in the permission.

Documents to authorized dealer

The documents pertaining to export shall be submitted to the authorized dealer mentioned in the declaration form, within 21 days from the date of export, or from the date of    certification of the SOFTEX form.   The authorized dealer may accept the documents beyond the period of 21 days, subject to the directions issued by the RBI from time to time, for reasons beyond the control of the exporter.

The Authorized dealer may accept, for negotiation or collection, shipping documents including invoice and bill of exchange covering exports, from his constituent.  Before accepting such documents the authorized dealer shall-

• Where the value declared in the declaration form does not differ from the value shown in the documents being negotiated or sent for collection ; or
• Where the value declared in the declaration is less than the value shown in the documents being negotiated or sent for collection, require the constituent concerned also to sin such declaration and thereupon such constituent shall be bound to comply with such requisition and such constituent signing the declaration shall be considered to be the exporter for the purposes of these Regulations to the extent of the full value shown in the documents being negotiated or sent for collection and shall be governed by these Regulations accordingly.

Realization of export value

Regulation 9 provides that the amount representing the full export value of goods/software/services exported shall be realized and repatriated to India within 9 months from the date of export, provided that where the goods are exported to a warehouse established outside India with the permission of RBI, the full value shall be paid to the authorized dealer as it is realized and in any case within 15 months.  The RBI, for sufficient reasons may extend the time of 9 months or 15 months.

Where the export has been made by the units in SEZs/SHE/EOUs/EHTPs/STPs/BTS  the full export value of goods shall be realized and repatriated to India within 9 months from the date of export.  RBI may extend the said period for a sufficient and reasonable cause is shown.

Delay in receipt of payment

Regulation 14 provides that where in relation to goods or software export of which is required to be declared on the specified form and export of services, in respect of which no declaration forms has been made applicable, the specified period has expired and the payment therefor has not been made, the RBI may give to any person who had sold the goods or who is entitled to sell the goods or procure the sale thereof, such directions as appear to it to be expedient for the purpose of securing-

• The payment therefor if the  goods has been sold; and
• The sale of goods and payment thereof, if goods or software has not been sold or reimport thereof into India as the circumstances permit, within such period as the RBI may specify in this behalf;

  The omission of the RBI to give directions shall not have the effect of absolving the person committing the contravention from the consequences thereof.

Advance payment against exports

Regulation 15 provides that where an exporter receives advance payment from a buyer/third party named in the declaration made by the exporter, outside India, the exporter shall be under obligation to ensure that-

• The shipment of goods is made within 1 year from the date of receipt of advance payment;
• The rate of interest, if any, payable on the advance payment does not exceed the rate of interest LIBOR + 100 basis points; and
• The documents covering the shipment are routed through the authorized dealer through whom the advance payment is received.

In the event of the exporter’s inability to make the shipment, party or fully, within 1 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 period of one year without the prior approval of RBI.

The exporter may receive advance payment where the export agreement itself duly provides for shipment of goods extending beyond the period of 1 year from the date of receipt of advance payment.

Directions by RBI in certain cases

Notwithstanding everything is complied with the exporter shall, prior to export, shall comply with the conditions as may be specified in the order of RBI, namely,-

• That the payment of the goods or software is covered by an irrecoverable letter of credit or by such other arrangement or document as may be indicated in the order;
• That any declaration to be furnished to the specified authority shall be submitted to the authorized dealer for its prior approval, which may, having regard to the circumstances, be given or withheld or may be given subject to such conditions as may be specified by the RBI by directions issued from time to time;
• That a copy of the declaration to be furnished to the specified authority shall be submitted to such authority or organization as may be indicated in the order for certifying that the value of goods specified in the declaration represents the proper value.

No direction shall be given by RBI and no approval shall be withheld by the Authorized dealer unless the exporter has been given a reasonable opportunity to make a representation in that matter.

Project imports

Regulation 17 provides that where an export of goods or services is proposed to be made on deferred payments or in execution of a turnkey project or a civil construction contract, the exporter shall before entering into any such export arrangement, submit the proposal for prior approval of the approving authority, which shall consider the proposal in accordance with the guidelines issued by RBI from time to time.

In case a guarantee is required to be given prior to post award approval, the same may be issued to an authorized dealer bank/a person resident in India being an exporting company, for performance of a project outside India, or for availing of credit facilities, whether fund based or non fund based from a bank or a financial institution outside India in connection with the execution of such project, provided that the contract/Letter of Award stipulates such requirements.