Follow-up of Overdue Bills

6C.12

(i)

Authorised dealers should closely watch realisation of bills through Bills Register and,

in cases where bills remain outstanding beyond the due date for payment, they should take

up the matter promptly with exporter concerned. If exporter fails to arrange for delivery of the proceeds on the due date, the matter should be reported to Reserve Bank by letter stating, where possible, the reason for the delay in realisation of proceeds of the exports unless exporter has sought permission for extension of time (see paragraph 6C.16). The duplicate copies of GR / PP forms should, however, continue to be held by authorised dealer until full proceeds are realised except in case of undrawn balances covered by Note under paragraph 6C.7. Authorised dealers should follow up export outstandings with exporters systematically and vigorously so that action against defaulting exporters does not get delayed. Any laxity noticed in the follow up of realisation of export proceeds by authorised dealers will be viewed seriously by Reserve Bank leading to the invocation of the provision in FERA 1973, authorising it to impose penalty on an authorised dealer.

(ii)

Authorised dealers should furnish to Reserve Bank a consolidated statement

in form XOS giving details of all export bills which remained unrealised beyond the period of 180 days from the date of shipment as at the end of June and December every year. The statements should be submitted in triplicate within fifteen days from the close of the relative half year. However, authorised dealers should ensure that export bills which remained unrealised and unpaid on the due date of payment are treated as outstanding export bills for all purposes.

Reduction in Invoice Value on account of

6C.13A

Occasionally, exporters may approach Authorised dealers for reduction in invoice value

on account of cash discount to overseas buyers for pre-payment of usance bills. In such

cases authorised dealers may agree to the exporter granting cash discount to the overseas buyer to the extent of amount of proportionate interest on the unexpired period of usance calculated at the rate of interest stipulated in the export contract or at the prime rate of the currency of invoice where rate of interest is not stipulated in the contract.

Reduction in Value

6C.13B

If after a bill has been negotiated or sent for collection, the amount thereof is desired to be

reduced for any reason, authorised dealer may approve such reduction, on submission of an

application by a letter with full particulars of shipment, an attested copy of invoice and documentary evidence in support of the reduction sought for, provided:

(a)

the reduction does not exceed 10% of invoice value

(b)

it does not relate to an export of

(i)

gold or silver jewellery or articles made out of cut and polished diamonds,

(ii)

commodities or subject to floor price stipulations, and

(iii)

the exporter is not on the exporters' caution list of Reserve Bank.

(c)

the exporter should be advised to surrender proportionate export incentives availed of, if any.

In the case of exporters who have been in the export business for more than

three years, reduction in invoice value may be allowed, without any percentage ceiling, subject to the above conditions as also subject to their track record being satisfactory i.e. the export outstandings do not exceed 5% of the average annual export realisations during the preceding three calendar years. For this purpose, the exporters' declaration, duly certified by his auditor or by a Chartered Accountant, indicating the total export realisations during each of the preceding three calendar years and the export bills outstanding beyond the prescribed period for realisation of export proceeds and average outstandings in absolute and percentage terms would be required to be furnished. For the purpose of reckoning the percentage of outstanding export bills to average export realisations during the preceding three calendar years, outstanding export bills in respect of exports made to countries facing externalisation problems may be ignored provided the payments have been made by the buyers in the local currency. Authorised dealers should obtain the above declaration duly certified, as on January and July every year.

Write off of unrealised Export Bills

6C.14

(i)

In cases where the exporter has not been able to realise the outstanding

export dues despite his best efforts, he may approach the authorised dealer, who had

handled the relevant shipping documents, with appropriate supporting documentary evidence with a request for write off of the unrealised portion. Authorised dealers may accede to such requests (the branch concerned should obtain the approval of its controlling office) subject to the undernoted conditions:

(a)

The relevant amount has remained outstanding for 360 days or more.

(b)

The aggregate amount of write off allowed by the authorised dealer (at all branches put together) during a calendar year should not exceed 10% of the total export proceeds realised by the exporter through the concerned authorised dealer during the previous calendar year.

(c)

Satisfactory documentary evidence has been furnished in support of the exporter having made all efforts to realise the dues but has been unsuccessful due to reasons beyond his control.

(d)

The case falls under any of the undernoted categories:

(i)

The overseas buyer has been declared insolvent and a certificate from the official liquidator indicating that there is no possibility of recovery of export proceeds has been produced. (Names, addresses and other relevant particulars of the overseas buyers who have been declared insolvent may be intimated to ECGC for updating their files on buyers).

(ii)

The overseas buyer has not been traceable over a reasonably long period of time and suitable supporting documentary evidence to that effect has been produced. (His name, original address and other relevant particulars may be reported to ECGC, for updating their files).

(iii)

The goods exported have been auctioned or destroyed by the Port/Customs/Health authorities in the importing country and a certificate issued by the said authorities or the Indian Mission or Chamber of Commerce in the country of destination indicating that the goods have been auctioned or destroyed has been produced.

(iv)

The unrealised amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organisation.

(v)

The unrealised amount represents the undrawn balance of an export bill (not exceeding 10 per cent of the invoice value) and has remained outstanding and turned out to be unrealisable despite all efforts made by the exporter. The authorised dealer should take into consideration the track record of the exporter, documentary evidence/correspondence showing that there is no possibility of recovery of the undrawn balance, frequency of similar cases considered in the past and the antecedents of the overseas buyer, if available, before allowing the closure.

(vi)

The cost of resorting to legal action would be disproportionate to the unrealised amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control and sufficient documentary evidence is produced to fully satisfy the authorised dealer.

(vii)

Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amount has remained unrealised consequent on dishonour of the bills by the overseas buyer and documentary evidence is produced to show that there are no prospects of realisation.

(e)

The case is not the subject matter of any civil or criminal suit which is pending.

(f)

The exporter has not come to the adverse notice of the Enforcement Directorate or the Central Bureau of Investigation or such other law enforcement agency.

(g)

The exporter has surrendered proportionate export incentives, if any, availed in respect of the relative shipments.

(ii)

The documentary evidence received by the authorised dealer should be kept

for a period of two years or till their verification by the Reserve Bank's Inspectors, whichever is earlier. A half yearly statement, as on June 30 and December 31, showing particulars of export bills allowed to be written off should be furnished to Reserve Bank in form EBW. The statement should be submitted within fifteen days from the close of the relative half year. Where there is no further amount to be realised against the GR / PP form covered by the write off, authorised dealer should submit the duplicate thereof to Reserve Bank along with 'R' return, duly certified, as under: