A to Z on Export of Goods under FEMA  Realizationi and write-off of export proceeds ,Export Advances
Channel: R V Seckar
Date: 04/05/2020

A to Z on Export of Goods under FEMA under FEMA, Realization of Export Proceeds , write-off of export proceeds , Rules relating Export Advances
What is an export under FEMA?
includes taking or sending goods by land, sea or air on consignment, sale, lease, hire-purchase or any other arrangement by whatever name called.
in case of software, export includes transmission through electronic media.
Denomination of export contracts and invoices either in freely convertible currency or INR but realization of  export proceeds in freely convertible currency.
Export proceeds against specific exports may be realized in INR, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of ACU or Nepal or Bhutan.
Realization & Repatriation of export proceeds 
Realisation and repatriation of export proceeds  within 9* months from the date of export for all exporters including Units in SEZ, Status Holder Exporters,, Export Oriented Units ,Units in Electronic Hardware Technology Parks ,Software Technology Parks & Bio-Technology Parks ;

Export proceeds of goods exported to a warehouse established outside India to be realized within 15 months from the date of shipment of goods.
* Due to ongoing COVID-19 situation, RBI has permitted export proceed to be realized within a period of 15 months instead of 9 months for exports made upto July 31, 2020 – RBI 2019-20/ 206 A.P. (DIR Series) Circular No. 27 dated April 1, 2020 

Extension of time

AD Banks are permitted to extend period of realization upto 6 months at a time, irrespective of invoice value, subject to following conditions:
Export transaction are not under investigation by DoE, CBI or other agencies;
AD bank is satisfied for non-realisation of export proceeds for reasons beyond exporter’s control;

Advance against exports

Timeline for Export

Goods to be shipped within 1 year from the date of receipt of advance payments (with or without interest); 

In case shipment is not made within 1 year, partly or fully, prior approval of RBI shall be obtained for refund of advance payment or payment of interest after the period of 1 year;

The rate of interest shall not exceed LIBOR + 100 basis points; and

Documents are routed through same AD bank through which advance payment has been received.
Declaration for realization of proceeds during extended period;
In case extension beyond 1 year, total outstanding exports not to exceed USD 1 million or 10% of avg. export realisation during 3 preceding financial years, whichever is lower
In case where suits filed abroad against buyer, extension to be granted irrespective of amount involved/outstanding.
Prior approval of RBI for cases not covered above
Reporting to be done EDPMS

Exemption
AD Bank may 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:- 
KYC and due diligence exercise by AD Bank for the overseas buyer; 
Compliance with the Anti-Money Laundering standards has been ensured; 
AD Bank should ensure that export advance received by the exporter should be utilized to execute export and not for any other purpose i.e., bonafide transaction; 
Progress payment, if any, should be received directly from the overseas buyer strictly as per the contract; 
The rate of interest, if any, payable shall not exceed LIBOR + 100 basis points; 
No instance of refund exceeding 10% of the advance payment received in the last three years; 
Documents covering the shipment should be routed through the same AD Bank ; and
In the event of the exporter's inability to make the shipment, prior approval of the Reserve Bank would be required.
AD  Bank can allow exporters having a minimum of three years’ satisfactory track record to receive long term export advance up to a maximum tenor of 10 years to be utilized for execution of long term supply contracts for export of goods subject to the conditions as under:
Firm irrevocable supply orders and contracts should be in place;
Company to have capacity, systems and processes to ensure execution of orders;
Eligible entities which are not under the adverse notice of ED or on caution list or another agency;
The rate of interest shall not exceed LIBOR + 200 basis points;
Documents to be routed through 1 AD Bank only;
AD Bank to ensure compliance of  AML/KYC guidelines;
Export advance shall not be used to liquidate rupee loans classified as NPA;
Receipt of advance of USD 100 million or more to be reported Trade Division, FED, RBI, CO, Mumbai; and 
Double financing for working capital for execution of export orders should be avoided. 

Courtesy :   Deloitte Haskins & Sells LLP