April 2012
A.P. (DIR Series) Circular No. 81, dated 21- 2-2012 — Export of goods and services — Receipt of advance payment for export of goods involving shipment (manufacture and ship) beyond one year.
By Gaurang Gandhi, Chartered Accountant
Reading Time 2 mins
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Presently, an exporter is required to obtain prior
approval of RBI for receiving advance from the foreign buyer where the
export agreement permits shipment of goods beyond one year from the date
of receipt of advance.
This Circular has granted powers to
banks to permit exporters to receive advance from the foreign buyer
where the export agreement permits shipment of goods beyond one year
from the date of receipt of advance, subject to the following
conditions:
(i) KYC and due diligence exercise has been done by the bank for the overseas buyer.
(ii) Compliance with the Anti-Money Laundering Standards has been ensured.
(iii)
Export advance received by the exporter must be utilised to execute
export and not for any other purpose i.e., the transaction is a bona
fide transaction.
(iv) Progress payment, if any, must be directly received from the overseas buyer strictly in terms of the contract.
(v) Rate of interest, if any, payable on the advance payment must not exceed LIBOR + 100 basis points.
(vi) Exporter should not have refund of amount exceeding 10% of the advance payment received in the last three years.
(vii) Documents covering the shipment must be routed through the same bank.
(viii)
If the exporter is unable to make the shipment, partly or fully, he
will have to obtain prior approval of RBI before remittance towards
refund of unutilised portion of advance or towards interest payment is
made to the foreign buyer.
