Submitting Documents to Bank for Purchase under Letter of Credit :
Documentary Collection of Export Bills - Legal Requirements
IT is obligatory for you that after shipping the goods, you must hand over the relative documents within 21 days of shipment to your bank for onward despatch to the overseas correspondent bank who will arrange payment of the same to your hanker. Thus, the legal requirement is that the payment against exports should be realised through an authorised dealer in foreign exchange within six months of date of shipment.
Payment for export in certain cases
Payment for export may also be received by the exporter as under namely :
(i) In the form of a bank draft / cheque / pay order / foreign currency notes / travelers cheque from a buyer provided the foreign currency so received is surrendered within the specified period of the authorised dealer of which the exporter is a customer
(ii) By debit to FCNR / NRE account maintained by the buyer with an authoriscd dealer or an authorised bank
(iii) In rupees from the credit card servicing bank against the charge slip signed by the buyer where such payment is made by the buyer through a credit card
(iv) From a rupee account held in the name of an Exchange House with an authorised dealer if the amount does not exceed two lakh rupees per export transaction ,
(v) In accordance with the directions issued by the Reserve Bank to authorised dealers where the export is covered by the arrangement between the Central Government and the Government of a foreign country or by the credit arrangement entered into by the Exim bank with a financial institution in a foreign state
It is, therefore, essential that once the goods are despatched to foreign destination whether by land, sea or post, the exporter should approach his hank (authorised dealer in foreign exchange) with a formal letter requesting the bank to realise the Export Bills from the overseas buyer.
The letter of request to the hank has to he in the aligned form called Letter to Bank.
Negotiation / Collection through Banks
It is pertinent to note that documents are handed over to the bank with a request either to negotiate the documents if the same are drawn under the letter of credit or to purchase the documents where the bank has granted pre-shipment facility to the exporter or has sanctioned post-shipment limit for purchase of export hills or to collect the bills with or without any advance
against the security of these bills. Besides, number of other instructions is required to be given to the banker handling the documents. These instructions have been standardised in aligned form.
Where the documents are drawn under a letter of credit, the letter to the bank should be enclosed with the documents as prescribed in the letter of credit, if any or stipulated in the export order or such documents which enable the buyer to take delivery of goods and the documents required by the exporter to claim export assistance, if any.
Following documents are generally required by bank to negotiate or collect necessary payment from abroad and by the exporter.
(i) Bills of exchange
(ii) Full set of Bill of Lading / Airway Bill (all negotiable copies plus one non-negotiable copy) / Post Parcel Receipt / Combined Transport Document as the case may be.
(iii) Commercial invoice including one copy duly certified by the Customs…..The number of copies should be the same as specified by the buyer plus two additional copies. Invoice not certified by the Customs may also be acceptable, in cases where the particulars furnished in the GR form agree with those indicated in the copy of invoice produced by the exporter and the value of the invoice agrees with the value of goods passed for shipment by Customs. However, Customs Certified invoice is necessary where the RBI has specifically stipulated such a requirement viz., for counter- signing GR form for export of precious stones and jewellery by
(iv) Original letter of credit, if any
(v) Customs invoice / Consular invoice
(vi) Certificate of origin, GSP/APR Certificate
(vii) Insurance policy / certificate with complete set (brokers cover note should not be sent).
(viii) Packing list
(ix) Foreign exchange declaration forms i.e. GRIPP Forms
(x) Bank certificate of export realisation in the prescribed form (in triplicate)
(xi) Other documents like certificate of analysis / inspection certificate, declaration to ECGC
Discrepancies in Documents - To be Avoided
As documentary credit operations cover only documents and not goods, it is of utmost importance that the beneficiary tenders documents in conformity with the terms of credit. Discrepancies, howsoever negligible, result in nullification of the opening bank's engagement to pay. Discrepant documents can be paid only if the buyer agrees to accept them, but the seller runs a great risk in time of recession when slight default in the documents can result in their total rejection by the buyer. Therefore, importance of complying with the terms of credit cannot be over-emphasised.
It is obligatory for the exporters to submit the shipping documents to an authorised dealer within 21 days of the date of shipment of goods. The authorised dealers may accept the documents after the prescribed period of 21 days, provided they are satisfied that the delay has been on account of reasons beyond the control of exporter.
Checklist for Exporters at the time of Submitting Documents to Authorised Dealers for Negotiation or Collection of Export Bills
It is obligatory that all shipping documents must be routed only through an authorised dealer except where Reserve Bank has allowed despatch of shipping documents direct to the consignees by authorised dealers / exporters provided advance remittance for the full value of the consignment has already been received or an irrevocable letter of credit covering the full export value has been received or the authorised dealer is satisfied on the basis of the standing and track record of the exporter and the arrangements made for realisation of export proceeds, that he could do so.
It should be ensured that the airway bill is drawn in favor of overseas bank for self (exporters) unless an advance payment has been received from the buyer or an irrevocable letter of credit has been opened.
Exporters cannot accept payments directly from their overseas buyers. However, exporters are permitted by the Reserve Bank to accept demand draft, banker's cheques and pay orders directly from their overseas buyers without any monetary limit.
Usance bills should not be drawn for payment 6 months after sight, since this will result in realisation of export proceeds beyond the prescribed period.
Amount for which bill is drawn should tally with the amount declared on GR forms.
Invoices should also be raised for the same amount as declared on GR forms. If any reduction, other than towards trade
discount is shown, Reserve Bank’s approval should be obtained.
For allowing trade discount from the invoice value, exporters should have declared the same on GR forms at the time of shipment and the Customs authorities should have accepted the same.
If the export has been made on FOB basis where the freight is to the account of overseas buyers and the exporters have paid the freight amount, the freight amount should be included in the invoice for recovery from overseas buyers.
In cases of bills involving part drawings i.e. where undrawn balances will be paid by overseas buyer only after arrival of goods and inspection, the exporter should furnish an undertaking on the duplicate of GRlSDF / PP that he will surrenders / account for the balance proceeds of the shipment within the prescribed period for realisation.
If the exporter wants to transfer the goods to some other buyer, the authorised dealers can themselves (i.e. without Reserve Bank approval) draw fresh bill of exchange on the new buyer provided the terms of export contract (i.e. outright or consignment sale) are the same, reduction in value, if any, involved does not exceed 10% and realisation of export proceeds is not delayed beyond the period of six months from the date of shipment.
In case of loss of the duplicate copy of the forms after they are approved by the Customs, fresh set of forms can be used provided the printed number on the fresh set of forms is scored oil and the number of lost form is prominently written on the duplicate copy of the fresh set. The original of fresh set can be destroyed.
Shipping documents should be presented to authorised dealer within 21 days from the date of shipment. If presented after 21 days authorised dealers will accept the documents if explanation given by exporter with supporting documentary evidence for the delay in submission of documents is satisfactory.
In case of reirnport of exported goods due to rejection by overseas buyer, exporter should arrange for the same on freight. If freight has to be paid in free foreign exchange, prior approval Reserve Bank should be obtained.
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