Presentation covering FEMA Act, Regulations framed there under, Master Circular

Export trade: Regulated by Directorate General of Foreign Trade (DGFT) EXIM Policy and Procedures are announced by DGFT specifying prohibited commodities, Licence, minimum export/floor price etc. AD bank can conduct export transactions in conformity with Foreign Trade Policy and Rules framed by GoI and Directions issued by RBI.

Export of Goods & Services - Basics

Export includes 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 case of software, also includes transmission through any electronic media Service means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, medical assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service. Section 7(1)(a) of FEMA Act deals with Export of Goods; and Section 7(3) deals with Export of Services. Export of Goods: Section 7(1)(a) specifies obligations on exporter to file declaration, and other information for purpose of realisation of export proceeds Export of Services: Section 7(3) specifies obligations on exporter to file declaration, and no provision for purpose of realisation of export proceeds

FEMA Regulations
RBI notified FEMA 23 (Export of Goods and Services) Regulations relating to export of goods and services; and FEMA (Current Account Transactions) Rules for Current Account Transactions
Consolidated instructions are contained in RBI Master Circular dated 1-7-2011 Regulation 4 of FEMA 8 (Guarantees) Regulations permits AD bank to issue guarantees on behalf of exporter clients on account of exports out of India: Any debt, obligation or other liability Give guarantee or standby Letter of Credit in respect of approved commodity hedging transaction etc. Manner of payment of export value of goods: FEMA 14 (Manner and Receipt and Payment) Regulations Foreign Currency Account: FEMA 10 (Foreign Currency Account by a Person Resident in India) Regulations

Invoicing in Rupees
No restriction on invoicing of export contracts in Indian Rupees
In terms of Para 2.40 of Foreign Trade Policy All export contracts and invoices shall be denominated either in freely convertible currency or in Indian Rupees but export proceeds shall be realised in freely convertible currency.

However, export proceeds against specific exports may also be realised in rupees provided it is through a freely convertible Vostro account of a nonresident bank situated in any country, other than a member country of the ACU (Bangladesh, Iran, Myanmar and Sri Lanka) or Nepal or Bhutan. Indian Rupee is not a freely convertible currency, as yet.
All references/dealing with Regional Office of Foreign Exchange Department of RBI situated in the jurisdiction where the applicant person resides, or the firm / company functions Financial Year means April to March

Exemption from Declaration

Export of services to which none of Forms apply Exemption from Declaration
Export such declaration services without furnishing any

But liable to realise foreign exchange which becomes due or accrues, and to repatriate to India in accordance with Act/Regulation. IEC Code allotted by DGFT indicated on all copies of declaration forms.

Export of goods or services without furnishing declaration

Trade samples of goods and publicity material supplied free of payment Personal effects of travellers Ships stores, trans-shipment cargo and goods supplied under the orders of Central Government or of the military, naval or air force authorities in India for military, naval or air force requirements Goods or software not more than 25,000 US$ in value Gift of goods not more than 5 lakh rupees in value Aircrafts or aircraft engines and spare parts for overhauling and/or repairs abroad subject to their re-import into India after overhauling/ repairs, within a period of six months from the date of their export Goods imported free of cost on re-export basis Goods not exceeding US$ 1000 per transaction exported to Myanmar under Barter Trade Agreement Replacement goods exported free of charge as per Exim Policy

Period within which export value of goods/software to be realised

Goods or software realised and repatriated to India within twelve months from date of export (till September 30, 2011). By Status Holder Exporter as per EXIM Policy: Twelve months from the date of export

Exported by units in Special Economic Zones: No specific time period stipulated

100 % Export Oriented Units (EOUs) and units set up under Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Biotechnology Parks (BTPs) schemes: Twelve months from the date of export Exported to a warehouse established outside India: As soon as it is realised and within fifteen months from the date of shipment of goods Reserve Bank: Can extend such period @

Extension of Time
RBI has permitted AD Bank to extend the period of realization of export proceeds beyond 12 months from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions:
a) b) c) d)

The export transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies, The AD Bank is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control, The exporter submits a declaration that the export proceeds will be realised during the extended period, While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realizations during the preceding three financial years, whichever is higher.

Extension of time and Self write-off by the exporters

The write off is permitted if * overseas buyer has been

declared insolvent * overseas buyer is untraceable for long period * Goods have been auctioned or destroyed by port or customs authorities abroad * matter has been settled through intervention of foreign chamber of commerce or Indian Embassy etc. * Less than 25% of the invoice value is remaining outstanding despite all efforts for recovery by the exporter * cost of legal action would be very high compared to the amount of export bill or where even if the exporter wins the case, chances of obtaining money are less * differential bills were drawn for difference in actual freight and freight charged in the Invoice of exporter and foreign buyer not paying the amount. In all such cases, documentary evidence has to be produced by exporter to the authorised dealer.

Import of Goods & Services

Import of Goods and Services is also a Current Account Transaction and is freely permitted however few procedures are required to be followed as
Obtaining of Import License if required Opening of Letter of Credit CA Certificate for deduction of TDS for payment made outside Gold may be imported by nominated agencies/banks on consignment

basis

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Export of Goods & Services

Exporter should make proper Declaration in prescribed

forms to Authorised Dealers

Declaration is not required in case Trade Samples, Baggage,

Gifts less than 5 lacs etc.

Export of Goods on following requires prior approval
Lease/hire
Counter Trade Export on Elongated Credit Terms

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