Business

The basic Exchange Control Regulations relating to Exports from India

The facts on the exchange control regulations regarding remittance of agency commission on exports

What are the exchange control regulations regarding remittance of agency commission on exports, reduction in value of exports and exports made on consignment basis?

The most important exchange control regulation relating to exports is the requirement relating to export declaration forms. Some of the other important regulations are outlined below:

1. Importer-Exporter code number. Every exporter should have an Importer-Exporter code number allotted by Trade Control authorities. The exporter should cite the code number an all export declaration forms used by him. (Allotment of separate ‘Exporter’s Code Number’ by Reserve Bank has been dispensed with.)

2. Time limit for realization of proceeds. The full export value should be realized by the exporter within a period of six months from the date of shipment. In case of exports to Indian warehouses abroad, the period is 15 months.

3. Agency commission. Remittance by exporters to their selling agents abroad toward commission payable for business booked through them shall be permitted by banks subject to the following conditions: (a) Application by a letter in duplicate should be submitted; (b) Attested copy of the invoice and documentary evidence in support of amount to be remitted should be submitted; and (c) Commission is declared on export declaration form and accepted by customs, does not exceed 12.5% of invoice value, is not on a canalized item and is not paid in convertible currency in respect of exports to a country in Bilateral Group. In case the commission is not declared on export declaration form, remittance of commission may be permitted if no objection certificate is produced from Customs authorities.

4. Trade discount. Where trade discount is allowed by the exporter to the overseas buyer, the bill drawn will be for amounts less than the value declared on the relative export declaration form. In respect of shipments other than by post, the trade discount can be allowed by the bank if the same has been declared by the exporter in the relative GR form and accepted by Customs. In respect of postal exports, the discount may be allowed if declared in PP form and is in conformity with the normal level of discount in the particular line of export, subject to a maximum of 40% in the case of books and periodicals, 25% in the case of drugs and medicines and 5% in other cases.

5. Reduction in value. If after a bill has been negotiated or sent for collection, the amount thereof is desired to be reduced, an application by a letter (in duplicate) with full particulars of the shipment, and attested copy of the invoice and documentary evidence in support of the reduction sought for should be submitted to the bank. The bank may permit, if the reduction from invoice value does not exceed 10%. However, no reduction in value can be permitted in respect of gold and silver jewelry and articles made out of cut and polished diamonds, and commodities regulated by system of allocation of export quotas by Government of India or subject to floor price stipulation.

The reduction in invoice value can be allowed by banks without any percentage caviling in respect of exporters who have been in the export business for more than three years and whose export outstanding beyond the prescribed period for realization of export proceeds do not exceed 5% of the average annual export realizations during the preceding three calendar years. For computing the outstanding, outstanding export bills in respect of exports made to countries facing externalization problems may be ignored provided the payments have been made by the buyers in the local currency.

The exporter should be advised to surrender export incentives proportionate to the reduction in invoice value agreed to by him, in all cases where certificates have been issued by the authorized dealers for the purposes of claiming incentives from Trade Control authorities. A copy of such advice should be sent to Trade Control authorities for necessary action. The relative case papers should be forwarded to the Reserve Bank for post facto scrutiny.

6. Undrawn balance. Sometimes the bills may be drawn for the invoke value less a small margin for payment after adjustments due to differences in weight, quality, etc., ascertained after arrival and inspection abroad. The undrawn balance should not exceed 10% of full export value and should be realized within six months or fifteen months as the case may be.

7. Consignment exports. When goods are exported on consignment basis, the bank should forward the shipping documents to its overseas branch/correspondent along with instructions to deliver them only against trust receipt/undertaking to deliver sale proceeds by a specific date which should be within six months generally and fifteen months in case of consignments to Indian owned warehouses abroad.

The agent/consignees may deduct from the sale proceeds of the goods expenses normally incurred towards receipt, storage and sale of the goods, such as landing charges, warehouse rent, handling charge, etc., and remit the net proceeds to the exporter. Freight and marine insurance must be arranged in India.

Tags
Show More

Related Articles

Close

Adblock Detected

Please consider supporting us by disabling your ad blocker