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Facilities for Exporters and Importers
Highlights of the Foreign Trade Policy 2015-20:
Increase exports to $900 billion by 2019-20, from $466 billion in 2013-14
Raise India's share in world exports from 2% to 3.5%.
Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) launched.
Higher level of rewards under MEIS for export items with High domestic content and value addition.
Chapter-3 incentives extended to units located in SEZs.
Export obligation under EPCG scheme reduced to 75% to Promote domestic capital goods manufacturing.
FTP to be aligned to Make in India, Digital India and Skills India initiatives.
Duty credit scrips made freely transferable and usable For payment of custom duty, excise duty and service tax.
Export promotion mission to take on board state Governments
Unlike annual reviews, FTP will be reviewed after two-and-Half years.
Higher level of support for export of defence, farm Produce and eco-friendly products.
You can go through the full details here http://dgft.gov.in/exim/2000/ftp2015-20E.pdf
RBI controls Foreign Exchange
DGFT (Directorate General of Foreign Trade) controls Foreign Trade.
Exim Policy as framed in accordance with FEMA is implemented by DGFT.
DGFT functions under direct control of Ministry of Commerce and Industry.
It regulates Imports and Exports through EXIM Policy.
RBI keeps Forex Reserves, Finances Export trade and Regulates exchange control.
Receipts and Payments of Forex are also handled by RBI.
IEC – Importer Exporter Code
One has to apply for IEC to become eligible for Imports and Exports.
DGFT allots IEC to Exporters and Importers in accordance with RBI guidelines and FEMA regulations. EXIM Policy is also considered before allotting IEC.
Export Declaration Form
All exports (physically or otherwise) shall be declared in the following Form.
GR form--- meant for exports made otherwise than by post.
PP Form---meant for exports by post parcel.
Softex form---meant for export of software.
SDF (Statutory Declaration Form)----replaced GR form in order to submit declaration electronically.
SDF is submitted in duplicate with Custom Commissioned who puts its stamp and hands over the same to exporter marked “Exchange Control Copy” for submission thereof to AD.
Exceptions
Trade Samples, Personal effects and Central Govt. goods.
Up to USD 25000 (value) – Goods or services as declared by exporter.
Gift items having value up to Rs. 5.00 lac.
Goods with value not exceeding USD 1000 value to Mynmar.
Goods imported free of cost for re-export.
Goods sent for testing.
The time norms for export trade are as under:
Submission of documents with “Exchange Control Copy” to AD within 21 days from date of shipment.
Time period for realisation of Export proceeds is 12 M or 365 days from date of shipment.
No time limit for SEZ (Special economic zones) and SHE(Status Holder Exporters) and 100 EOUs.
After expiry of time lime limit, extension is sought by Exporter on ETX Form.
The AD can extend the period by 6M. However, reporting will be made to RBI on XOS Form on half yearly basis in respect of all overdue bills.
Direct Dispatch of Shipping Documents
AD banks may handle direct dispatch of shipping documents provided export proceeds are up to USD 1 Million and the exporter is regular customer of at least 6 months.
Prescribed Method of payment and Reduction in export proceeds
Exporter will receive payment though any of the following mode:
Bank Drafts, TC, Currency, FCNR/NRE deposits, International Credit Card. But the proceeds can be in Indian Rupees from Nepal.
Export proceeds from ACU countries (Bangladesh, Burma, Mynmar, Iran, Pak, Srilanka, Nepal and Maldivis can be settled in ACUEURO or USD. A separate Dollar/Euro account is maintained.
Exports may be allowed to reduce the export proceeds with the following:
Reduction in Invoice value on account of discount for pre-payment of Usance bills (maximum 25%)
Agency commission on exports.
Claims against exports.
Write off the unrecoverable export dues up to maximum limit of 10% of export value.
The proceeds of exports can be got deposited by exporter in any of the following account:
Overseas Foreign Currency account.
Diamond Dollar account.
EEFC (Exchange Earners Foreign Currency account)
DDA - Diamond Dollar Accounts
Diamond Dollar account can be opened by traders dealing in Rough and Polished diamond or Diamond studded Jewellary with the following conditions:
With track record of 2 years.
Average Export turnover of 3 crore or above during preceding 3 licensing years.
DDA account can be opened by the exporter for transacting business in Foreign Exchange. An exporter can have maximum 5 Diamond Dollar accounts.
EEFC Exchange Earners Foreign Currency accounts can be opened by exporters. 100% export proceeds can be credited in the account which do not earn interest but this amount is repatriable outside India for imports (Current Account transactions).
Pre-shipment Finance or Packing Credit
Packing credit has the following features:
Calculation of FOB value of order/LC amount or Domestic cost of production (whichever is lower).
IEC allotted by DGFT.
Exporter should not be on the “Caution List” of RBI.
He should not be under “Specific Approval list” of ECGC.
There must be valid Export order or LC.
Account should be KYC compliance.
Liquidation of Pre-shipment credit
Out of proceeds of the bill.
Out of negotiation of export documents.
Out of balances held in EEFC account
Out of proceeds of Post Shipment credit.
Concessional rate of interest is allowed on Packing Credit up to 270 days. Previously, the period was 180 days. Running facility can also be allowed to good customers.
Post Shipment Finance
Post shipment finance is made available to exporters on the following conditions:
IEC accompanied by prescribed declaration on GR/PP/Softex/SDF form must be submitted.
Documents must be submitted by exporter within 21 days of shipment.
Payment must be made in approved manner within 6 months.
Normal Transit Period is 25 days.
The margin is NIL normally. But in any case, it should not exceed 10% if LC is there otherwise it can be up to 25%.
Types of Post Shipment Finance:
Export Bills Purchased for sights bills and Discounting for Usance bills.
Export bills negotiation.
Pre-shipment & Post-shipment Finance
Q. 1. Received order of USD 50000(CIF) to Australia on 1.1.2015 when USD/INR Bill Buying Rate is 63.50. How much preshipment finance will be released considering profit margin of 10% and Insurance and freight cost@ 12%.
Solution
FOB Value = CIF – Insurance and Freight – Profit (Calculation at Bill Buying Rate on 1.1.2015)
= 50000X63.5 = 3175000 – 381000(12%) – 279400(10% of 2794000) = 2514600
Pre-shipment Finance = FOB value -25%(Margin) = 2514600-628650=1885950.
Q. 2. What will be amount of Post-shipment Finance under Foreign Bill Purchased for USD 45000 when Bill Buying rate on 31.3.2015 (date of submission of Export documents) is 63.50
Solution
45000X63. 05 = 2857500 Ans.
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