Reserve bank of India has issued a circular about export of goods and services and advance payment for goods involving shipment beyond one year. RBI has issued a circular no. 81 dated 21-02-2012 about export of goods and services. Full circular is as under.
A.P. (DIR Series) Circular No.81
All Category – I Authorised Dealer Banks
Madam / Sir,
Receipt of advance payment for export of goodsInvolving shipment (manufacture and ship) beyond one year
2. With a view to liberalizing the procedure, it has been decided to permit AD Category- I banks to 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:-
- the KYC and due diligence exercise has been done by the AD Category –I bank for the overseas buyer;
- compliance with the Anti Money Laundering standards has been ensured;
- the AD Category-I bank should ensure that export advance received by the exporter should be utilized to execute export and not for any other purpose i.e., the transaction is a bona-fide transaction;
- progress payment, if any, should be received directly from the overseas buyer strictly in terms of the contract;
- the rate of interest, if any, payable on the advance payment shall not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points;
- there should be no instance of refund exceeding 10% of the advance payment received in the last three years;
- the documents covering the shipment should be routed through the same authorised dealer bank; and
- in the event of the exporter's inability to make the shipment, partly or fully, no remittance towards refund of unutilized portion of advance payment or towards payment of interest should be made without the prior approval of the Reserve Bank.
4. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any law.