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Meeting with the Commerce Secretary

Ref No. : ES/ 64/2017-18                                                                                                    June 01, 2017

To : Members of the Council

Sub :  Meeting with the Commerce Secretary

Dear Sir,

We wish to inform our members that a meeting was called by the Commerce Secretary on April 13, 2017 wherein Officials from RBI, IBA, EEPC, FIEO and FICCI were present to discuss various issues faced by exporters. The following issues were discussed during the Meeting:

1.         Caution Listing of Exporters by RBI for non-closure of Export Realization

As you are aware, the EDPMS (Export Data Processing and Monitoring system) system was launched by RBI in March 2014 to monitor payments against Export Bill, and all banks were required to report in this system by submitting details of the export proceeds realization pertaining to the shipping bills. As most of the bank / authorized dealers did not pay attention to the EDPMS work flow, there has been considerable mismatch in the actual exports and exports realization being shown on the EDPMS. Consequently, RBI started issuing caution list of exporters for non-closure for export realization, even through full export proceeds have been received.

The Commerce Secretary has now directed the following –

  • Members of the respective EPCs should provide to their EPCs details of the banks along with the respective branch that have not updated their information in the EDPMS so that the concerned EPCs can provide the information to the DGFT to take it up with the RBI and concerned banks.

IEC                                          __________________
Name of the Company            ___________________             
                                                 (for Council’s purpose)
Shipping Bill No.                      __________________
Shipping Bill Date                    __________________
Port Code                                __________________
Name of the Bank                   __________________
Branch Name                          __________________
Buyer's Country                       __________________
Invoice No.                               __________________
Invoice Value                          __________________
Realization Value                   __________________
Outstanding in US$                 __________________
Remarks                                 __________________

RBI has informed and instructed the following –

  • RBI has informed that in large number of cases there is little mismatch in the realization reported under e-BRC and the foreign exchange indicated in the shipping bill. In such cases, exporters may avail the self-write off facility provided in the RBI manual by surrendering the proportionate exports benefits. Alternatively, exporters may apply for extension in realization period to ADs so that the mismatch in the e-BRC foreign exchange value and shipping bill foreign exchange value can be accounted for closure of such shipping bills.
  • RBI informed that they are updating the EPDMS on daily basis and therefore, if a shipping bill is subsequently cancelled, the same is reflected in EPDMS. With regard to Shipping Bill which may have been sent by Customs/NSDL in the recent past, the same would be updated in the EPDMS.
  • RBI informed that Member-exporters can view the status of remittance against shipping bill at the ICEGATE of Customs so that they can monitor the position of their export remittance.
  • As regards free of cost shipping bills with EDF waiver, it was informed by RBI and Customs that since such transactions for reporting purpose are given some notional value for transmission of data, exporters should approach the ADs for closure of such shipping bills. The same procedure may be followed for re-import of export goods or in cases where the payment is realized through insurance cover from ECGC/Insurance Agencies.
  • RBI stated that in 92% of the cases of export proceeds have been realized and non-realization is only in respect of 8% of the cases. RBI further stated that Banks have informed that they have furnished reports that they have updated the information in the EPDMS.

2.         Dispensing with requirement of Shipping Bill for negotiation of Export Documents

As per instructions issued by RBI, an exporter is required to submit shipping documents to bank for negotiation. While the detailed shipping documents are not mentioned, as per practice, the shipping bill was all along being submitted to bankers for negotiation. However, the customs have decided to dispense with the hard copy of the shipping bill for EDI shipments. With the result, hard copy of shipping bill is not being issued, but bankers are insisting for the same.

RBI has informed the following –

  • RBI is in the process of issuing suitable instructions dispensing with the need of shipping bill for negotiation of export documents.

Customs has informed the following –

  • Exporters have an option to obtain physical copy of Shipping Bills on demand.

3.         Third Party/Third Country payments for Exports

Most of our exporters are facing problem of realization from a third party or a third country. In few cases, where the exporters are aware that the payments will come from a third party or a third country, the same is mentioned by them in the shipping documents. However, in large number of cases, exporter himself is not aware about the third party and hence, not in position to declare it at the time of shipment. Many of the exporters exporting to Africa get the payment from Dubai/Singapore. Similarly, large departmental stores, takes supply in various countries and make payment from one office in Singapore, Hong Kong, London, etc.

In such cases, exporters are willing to provide such details at the time of realization, clearly providing the trail of money and relationship between remitter and the buyer. RBI was requested to look into such cases, as their numbers are increasing and will increase the liquidity crunch in the global market.

RBI has informed the following –

  • RBI has issued instructions, as contained in the Master Circular on Exports and they are very clear on the subject. Banks can rely on other export documents, if tripartite (made between or involving three parties) agreement is not there.
  • It was also informed that Special Investigation Team (SIT) has made observations on such transactions in the past.

The Commerce Secretary has suggested the following –

  • Commerce Secretary suggested that DGFT should take up the matter with SIT so that Indian exports do not suffer on account of the genuine problem raised by the exporters.

4.         Banks refusal to handle documents for Transit Shipments through Iran

During the meeting it was informed that the Government of India was keen to push the new INSTC (International North–South Transport Corridor) route for exports to Central Asian countries. It was further informed that, whenever any exports consignment is transited through Iran, Indian banks are not willing to issue BRC in such cases, though the goods are destined to Afghanistan, Russia or Central Asia.

The Commerce Secretary & RBI took note of the following and suggested as under –

  • RBI said that in case, exporters furnishes the composite documents showing transit of goods through Iran for destination to a third country, banks should not have any problem in negotiating such documents or issuing e-BRC.
  • Commerce Secretary asked all trade organizations to communicate the same to their members and in case, any bank is not negotiating such documents or not issuing e-BRC in such cases (having composite documents), the same may be informed to DGFT for taking up with RBI.
  • As regards Iran, Commerce Secretary highlighted the opportunities of trade & investment in Iran, which needs to be exploited particularly as India worked out Rupee Payment Mechanism to stand with Iran during the difficult time. Indian exports after touching a high of USD 5 billion suffered a setback due to absence of banking arrangement for dealing in free foreign exchange (other than USD).

5.         Non-handling of export documents by Indian banks with regard to Sudan and other OFAC 
            Sanctioned countries

It was informed that some of the Indian banks are not handling the export documents with regard to Sudan and other OFAC (Office of Foreign Assets Control) sanctioned countries. You may be aware that OFAC is the  department of the U.S.Treasury that enforces economic and trade sanctions against countries and groups of individuals involved in terrorism, narcotics and other disreputable activities.

Basically, through these sanctions and trade policies, the OFAC tries to pressure a country to conform to certain laws or regulations, or to discontinue disreputable activity.

Banks in India have quoted OFAC regulation of the US as a reason for the same. Though RBI has not issued any instructions to bank for not handling export documents pertaining to Sudan, the exporters to Sudan are unable to receive payment for export made by them. Some of them have been caution listed by RBI as Indian banks are not issuing eBRC for the same.

The Commerce Secretary & RBI took note of the following and suggested as under –

  • RBI informed that many banks have commercial presence in US and other countries. Therefore, such banks are reluctant to deal with export documents or issue eBRC pertaining to sanctioned countries.
  • RBI stated that they are not following OFAC, but have to comply with FATF - Financial Action Task Force (on Money Laundering) guidelines.
  • Commerce Secretary suggested that we have to work on some mechanism to while dealing with OFAC sanctioned countries in trade so that India does not miss out the opportunity.
  • Commerce Secretary suggested to IBA to impress upon Indian banks to look into the opportunity in Iran as well as other countries under OFAC to which many sectors are opened and work out corresponding bank arrangement for facilitating exports in free foreign currency.
  • Commerce Secretary also suggested IBA should organize workshop updating officers dealing in foreign exchange with the RBI guidelines so as to update themselves for supporting the export sector.

6.         Capitalization should be equated at par with Export Realization and consequent benefits

RBI allows capitalizing the payments from Wholly Owned Subsidiary (WOS) towards the exports made, provided such bills are not overdue beyond the prescribed time, the detailed procedure for the same is not clear to banks. Bankers are also not aware how to settle the realization in such cases to issue eBRC. A provision may also be made in the Foreign Trade Policy to provide exports benefit where exports bill are settled through capitalization.

RBI informed the following –

  • RBI informed that the detailed guidelines are already available permitting such transactions and the exporters were requested to take up with their bankers.

This is for your information.

Thanking You,



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