‘Return of advance to foreign buyer after 12 months requires RBI nod’ | Business Standard News

Clipped from: https://www.business-standard.com/article/sme/return-of-advance-to-foreign-buyer-after-12-months-requires-rbi-nod-122032100820_1.html

Therefore, please send a suitable request to RBI, through your bank, explaining the reasons for the failure to export and the delay in sending back the advance within one year.

Imports

(Photo: Bloomberg)

We had received some advance from our buyer. Due to certain interpretations regarding the specifications of the goods that surfaced later and consequent disagreements regarding the price and protracted negotiations, we could not ship the goods within 12 months from the date of receipt of advance. Now, we have agreed to return the advance to the party. Our bank says that RBI approval is required. What is the correct position?

What the bank says is correct. Para C.2 of RBI master Direction no.16/2015-16 dated January 1, 2016 (as amended) says that in the event of the exporter’s inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of the unutilised portion of the advance payment or towards payment of interest, shall be made after the expiry of the period of one year, without the prior approval of the RBI. Therefore, please send a suitable request to RBI, through your bank, explaining the reasons for the failure to export and the delay in sending back the advance within one year.

We are an EOU importing our raw materials and components under notification no.52/2003-Cus dated March 31, 2003, and following the procedure prescribed under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. Rule 7 of the Rules says that the importer who has availed the benefit of an exemption notification shall use the goods imported in accordance with the conditions specified in the concerned exemption notification within six months from the date of import, and with respect to unutilised or defective goods so imported, the importer has an option to either re-export such goods, or clear them for home consumption within the said period. This constrains our ability to procure the goods in bulk and save on costs. Please advise.

Condition 3(d)(ii) of the said notification 52/2003-Cus allows you to utilise the imported goods anytime within the period of validity of the Letter of Permission. So, the six months’ time limit makes no sense for imports by EOU. I think the government should remove that time limit for EOUs and increase the time limit for others to at least one year, to enable them to procure the required materials in bulk and thus reduce their costs. I suggest you write to the CBIC to suitably amend the said Rule 7.

We had made some shipments against a LC. We had also sent some free samples and advertisement materials along with the goods, and to facilitate their customs clearance by the buyer, we mentioned their details also in the invoice in addition to the quantity and description of the goods, exactly in accordance with the LC terms. Can the banks treat the documents as discrepant?

Yes. Clause 62 of International Standard banking Practices (ICC Publication no. 681E) says that invoice must not show merchandise not called for in the credit, even if stated to be free of charge.

Business Standard invites readers’ SME queries related to GST, export and import matters.

You can write to us at smechat@bsmail.in

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