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REGULATORY FRAMEWORK

CHAPTER 5.1 REGULATORY FRAMEWORK

• Rules and regulations are necessities for standardization and

smooth flow of transactions.
• Policies and regulations are subject to change.
Major policy/regulatory frameworks in International Trade in India
are laid down by:

DIRECTOR GENERAL OF FOREIGN TRADE (DGFT)

• Operates under the Ministry of Commerce.
• Lays down policies and regulations concerning the physical
movement of goods into India.
• Requires companies involved in imports or exports to register
with DGFT and obtain an Importer Exporter Code (IEC) for
international transactions.

RESERVE BANK OF INDIA (RBI)

• Oversees exchange control, monitoring payments and receipts
between residents and non-residents.
• Sets credit norms for parties involved in extending credit.
• Enforces various regulations through the Foreign Exchange
Management Act (FEMA), governing foreign currency transactions
in India.

INTERNATIONAL CHAMBER OF COMMERCE (ICC)

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• Apex international body providing guidelines for global trade and

forex transactions.
• Establishes Uniform Customs and Practices for Documentary
Credits (UCPDC), with UCP 600 being a key set of rules used
worldwide.
• The Indian National Chapter (INC) represents India's interests in
ICC regulations.

FOREIGN EXCHANGE DEALERS' ASSOCIATION OF INDIA (FEDAI)

• Apex forum for banks authorized to deal in forex.
• Acts as a Self-Regulated Organization (SRO).
• Engages in activities such as framing rules for inter-bank forex
business, training bank personnel, accrediting forex brokers, and
representing member banks in various capacities.
• Announcing daily and periodical rates to member banks

CHAPTER 5.2 DGFT REGULATIONS

Key Provisions Regarding Imports and Exports - DGFT Trade Policy

2015-2020
1. Free Imports and Exports
• Unless regulated, exports and imports are deemed 'free.'
• Regulation may occur through prohibition, restriction, or
exclusive trading via State Trading Enterprises (STEs).
• The item wise export and import policy is published to guide
traders

2. Compliance with laws

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• Exporters and importers must comply with the provisions of the

Foreign Trade (Development and Regulation) Act and other
prevailing laws.
• Imported goods are subject to domestic laws, regulations, and
safety norms unless exempted.
• Domestic standard might be exempted on items to be used in
manufacture of export products.

3. Interpretation If any question or doubt of Policy

Any doubts about policy interpretation or classification are referred
to the DGFT for a final decision.

4. Procedure
DGFT may specify procedures for implementation, published in the
Handbook of Procedures, Schedule of DEPB Rate, and ITC (HS).

5. Exemptions from Policy/ Procedure

Requests for relaxation based on adverse trade impact may be made
to the DGFT, who can grant exemptions in the public interest.

6. Restricted Goods
Goods with export or import restrictions require authorization or
compliance with specified procedures.

7. State Trading Enterprise(s)

• Goods under special permissions granted to STE(s) can be
imported/exported by them, subject to conditions.
• Others may receive licenses/certificates/permissions.

8. Importer-Exporter Code Number

No export or import shall be without an IEC number, unless
exempted.
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9. Transit Policy
Transit of goods through India follows bilateral treaties and specified
restrictions.

10. Actual User Condition – Restricted Goods

Actual users may import goods subject to conditions; exceptions may
be granted by DGFT.

11. Second Hand goods

Second-hand goods, except certain capital goods, are restricted for
imports and require adherence to specified policies.

12. Import of Samples

Governed by provisions in the Handbook of Procedures

13. Import of Gifts

'Free' for freely importable goods; otherwise, an authorization is
required.

14. Passenger Baggage

Household goods, personal effects and free importable items may be
imported as part of baggage, subject to limits and conditions.

15. Import for export

Goods (including capital goods) may be imported for export without
authorization, subject to conditions:
• Not restricted for import or export
• Goods are cleared under Customs Bond
• Export is against freely Convertible currency

16. Re-import of Capital goods, equipment, goods repaired abroad

Can be re-imported without a license.

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17.Import of goods used in Projects abroad

Contractors can import goods used in completed projects abroad
without authorization, provided they were used at least for 1 year.

18. Sales on High Sale of goods on high seas

Sale of goods on high seas for import into India is subject to relevant
laws.

19. Import under Lease Financing

No specific RA (Regional Authority) permission is needed for lease-
financed capital goods.

20. Clearance of Goods from Customs

Goods not cleared in advance may be cleared subsequently, except
for restricted items.

21. Execution of BG/LUT

Importers must execute a Legal Undertaking (LUT)/Bank Guarantee
(BG)/Bond with Customs Authority.

22. Private/ Public Bonded warehouses for Imports

• Private/public bonded warehouses may be set up in Domestic
Tariff Area (DTA) as per specified conditions.
• Used for storing imported goods except prohibited/ arms and
ammunition, hazardous waste and chemicals
• Goods cleared after payment of custom duty
• If not cleared in one year or extended time – Re-export the goods

23. Export Without Restrictions

Most goods can be exported without restrictions; additional
conditions may be specified by DGFT.

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24. Export of Samples

Governed by provisions in the Handbook of Procedures.

25. Export of Passenger Baggage

Personal baggage can be exported along with passengers, subject to
limits and conditions:
• If unaccompanied – within one year after or before passenger’s
departure
• GOI officials permitted to carry food items
(free/restricted/prohibited) only for personal consumption
• Samples of freely exportable items under FTP can also be
exported as part of passenger baggage.

26. Export of Gifts

Unrestricted Goods (Including edible items) valued up to
Rs.5,00,000/- can be exported as gifts, subject to conditions.

27. Export of Spares

Warranty spares may be exported along with main equipment or
subsequently within the warranty period.

28. Export of Imported goods

• Goods imported in compliance with the Foreign Trade Policy can
be re-exported without a license.
• Goods restricted for import but free for export can be imported
for purpose of export without any permissions.

29. Export of Defective/Damaged Goods

Defective or damaged goods being replaced by the exporter can be
allowed clearance, provided replacement goods are not restricted.

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30. Export of Repaired Goods

Goods or parts thereof, except those restricted, may be exported
after repair.

31. Private bonded warehouses for Exports

Private bonded warehouses for exports may be set up in Domestic
Tariff Area (DTA) as per specified conditions.

32. Denominations of Export Contracts

• Export contracts and invoices must be denominated in freely
convertible currency or Indian rupees, with export proceeds
realized in freely convertible currency.
• Export proceeds against specific exports may be realized in
rupees, provided it occurs through a freely convertible Vostro
account of a non-resident bank.
• This non-resident bank must be situated in any country other than
a member country of ACU (Asian Clearing Union), Nepal, or
Bhutan.
• The free foreign exchange remitted by the buyer to his
nonresident bank (after deducting the bank service charges) on
account of this transaction is considered as export realization
under the export promotion schemes of the Policy.
• Contracts for which payments are received through the Asian
Clearing Union (ACU) shall be denominated in ACU Dollar.

33. Non-realization of Export Proceeds

Failure to realize export proceeds within specified time may lead to
the return of benefits/incentives availed.

34. Exemption from Service Tax

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Units in Domestic Tariff Area (DTA) are exempt from service tax
related to exports.
35. Exemption For units in EOU/EHTP/ STP/BTP
Exemption/remission of service tax related to exports for units in
EOU/EHTP/STP/BTP, as per prescribed procedures.

INCENTIVES TO EXPORTERS

1. Duty Exemption Schemes

• Allows duty-free import of inputs required for export production
through Advance License.
• Includes inputs incorporated in the export product and
consumables like fuel, oil, energy, catalysts, etc.

2. Duty Remission Schemes

DFRC (Duty Free Replenishment Certificate): Allows duty-free
replenishment of inputs used in the export product.
DEPB (Duty Entitlement Passbook Scheme): Provides duty credit
against the export product to neutralize the Customs duty on import
content

3. Duty Drawback Scheme

• Provides relief of Customs and Central Excise Duties paid on
inputs used in the manufacture of export products.
• Simplified procedures for claiming duty drawback.

4. Export Promotion Capital Goods (EPCG)

• Facilitates the import of capital goods to enhance export
competitiveness.
• Specific export obligation for domestic procurement of capital
goods reduced from 90% to 75%.

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5. Gems and Jewellery Scheme:

• Enables duty-free import/procurement of inputs for
manufacturing gems and jewellery items.
• Exporters can obtain Replenishment (REP) Licences for duty-free
inputs.

6. Schemes for Export Oriented Units (EOU)/EHTP/STP/BTP:

• Warehouses near the port of export for EOUs.
• Sharing of infrastructural facilities among EOUs.
• Duty-free equipment for training purposes in STP units.
• Supply of spares/components for after-sale services.
• Extension of block period for achieving positive net foreign
exchange (NFE).
• Liberalized validity of Letter of Permit (LOP).

7. Foreign Exchange Regulations:

Substantially liberalized for exporters.

8. Business Travel Abroad

Liberal release of foreign exchange for business travel abroad.

9. Transport Subsidy
Provided for export by air and rail transport.

10. No Export Restrictions

All goods may be exported without any restriction, except as
regulated by ITC (HS) or other applicable laws.

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CHAPTER 5.3
FOREIGN TRADE POLICY (EXIM POLICY)

HIGHLIGHTS OF EXIM POLICY 2015-2020

1. Status Holders
• The earlier nomenclature of Status Holder exporters as Export
House, Star Export House, Trading House, Star Trading House,
Premier Trading House certificate has been changed to One, Two,
Three, fours, Five Star Export House.
• Recognition criteria shifted from Rupees to USD earnings.
• Export performance thresholds revised for different categories.

The new categories are as under:

Status Holder Category Export performance FOB/FOR (as
con-verted) value in USD million
during current and previous two
years
One Star Export House 3
Two Star Export House 25
Three Star Export House 100
Four Star Export House 500
Five Star Export House 2000

• Approved Exporter Scheme

✓ Manufacturers who are also Status Holders are enabled to self-
certify their manufactured goods as originating from India.
✓ This self-certification qualifies them for preferential treatment
under various Preferential Trading Agreements (PTAs), Free Trade
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Agreements (FTAs), Comprehensive Economic Co-operation

Agreements (CECA), and Comprehensive Economic Partnerships
Agreements (CEPAs).

• Establishment of Export Warehouses

Two-star and above Export houses are permitted to establish export
warehouses.

• Accredited Clients Programme (ACP)

Three-star and above Export houses are entitled to the benefits of
the Accredited Clients Programme (ACP) as per the guidelines of
CBEC.

• Preferential Treatment and Priority in the handling of their

consignments by the concerned agencies.

• Free Export of Items for Promotion

The status holders to be entitled to export freely exportable items on
free of cost basis for export promotion subject to an annual limit of
Rs.10 lakhs or 2% of average annual export realization during
preceding three licensing years whichever is higher.

2. Simplification & Merger of Reward Schemes (MEIS & SEIS)

Existing multiple schemes for Exports of Merchandise and Services
have been replaced by following two new schemes:

a) Merchandise Exports from India Scheme (MEIS)

• Previous Schemes Merged
Five different schemes (Focus Product Scheme, Market Linked Focus
Product Scheme, Focus Market Scheme, Agri. Infrastructure
Incentive Scrip, VKGUY) have been merged into a single scheme,
MEIS.
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• Freely Transferable Scrips

Scrips and goods imported/locally procured against the MEIS scrip
are freely transferable.

• Rewards for Export of Notified Goods

✓ Rewards are payable as a percentage of realized FOB value in free
foreign exchange.
✓ Notified goods like dairy products, vegetables, confectionary,
pharmaceutical products, capital goods, etc., exported to notified
markets/countries from April 1, 2015, receive benefits ranging
from 2% to 5% of FOB value or FOB value realized, whichever is
less.

• Adjustment of Customs Duty

✓ Debits towards basic customs duty in transferable reward duty
credit scrips are allowed adjustment as duty drawback.
✓ Benefit extended to export of goods through courier or foreign
post office using e-commerce up to FOB value of INR 25,000.

• Ineligible Categories
Ineligible categories for Duty Credit Scrip entitlement under MEIS
include EOUS/EHTPS/BTPs/STPs availing direct tax
benefits/exemption, supplies made from DTA units to SEZ units,
Diamond Gold, Silver, Platinum, other precious metals, including
plain and studded jewellery, and other precious and semi-precious
stones.

(ii) Service Exports from India Scheme (SEIS)

• Replacement of SFIS
1. SEIS replaces the Served From India Scheme (SFIS).

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2. Applies to all Service Providers located in India, regardless of

constitution or profile.

• Rate of Reward
✓ The rate of reward is based on net foreign exchange earned.
✓ SEIS scrips are freely transferable and usable for all types of goods
and service tax debits on procurement of services/goods.

• Eligibility Criteria
✓ Service providers with a minimum net foreign exchange earnings
of USD 15,000 in the preceding financial year are eligible.
✓ SEIS scrip issued is 5% or 3% (depending on the category of
service) of net foreign exchange earned, replacing the earlier SFIS
scheme which provided scrip of 10% of net foreign exchange
earned.

• Ineligible Categories
✓ Foreign exchange remittances other than those earned for
rendering of notified services are not counted for entitlement.
✓ Other sources of foreign exchange earnings such as equity or debt
participation, donations, receipts of repayment of loans, and any
other inflow of foreign exchange unrelated to rendering of service
are ineligible.

3. EPCG (Export Promotion Capital Goods) scheme

• Reduced Export Obligation (EO) for domestic procurement under
EPCG scheme from 90% to 75%.
• Higher rewards for products with high domestic content and value
addition.
• Focus on promoting domestic capital goods manufacturing.
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4. New initiatives for EOUs/EHTPs/STPs

a) Sharing of Infrastructural Facilities
This enables units to optimize the use of infrastructure, avoiding
duplication of efforts and costs associated with creating separate
facilities.
b) Inter Unit Transfer
This facilitates groups of units to centralize inputs sourcing, obtaining
bulk discounts, reducing transportation and logistics costs, and
maintaining an effective supply chain.

c) Setting Up Warehouses Near Port of Export:

This helps in reducing lead time for the delivery of goods and
addresses the issue of unpredictability in supply orders.

d) Use of Duty-Free Equipment for Training

This supports the development of skills among employees.

e) Supply of Spares/Components to Domestic Market

100% EOU units are allowed to supply spares/components up to 2%
of the value of the manufactured articles to a buyer in the domestic
market for after-sale services.

f) Cumulative Net Foreign Exchange Earning (NFE)

• EOUs have to achieve Positive Net Foreign Exchange Earning (NFE)
cumulatively in a period of 5 years.
• Adverse market conditions or genuine hardship can extend the
NFE completion period by one year.

g) Revised Validity of Letter of Permission (LOP)

• LOP for EOUs/EHTP/STPI/BTP Units has an initial validity of 2
years to facilitate plant construction and machinery installation.

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• Further extension, up to one year, can be granted by the

Development Commissioner.
• Extension beyond 3 years is possible if the unit has completed
2/3rd of activities, including construction.

h) Return of Capital Goods

EOUs/EHTP/STPI units can transfer capital goods to other units, and
if rejected by the recipient, the goods can be returned to the
supplying unit without payment of duty.

i) Fast Track Clearances

• Eligible EOUs: With a physical export turnover of Rs.10 crore and
above.
• Fast track clearances are based on pre-authenticated
procurement certificates issued by customs/central excise
authorities, eliminating the need for procurement permission for
every import consignment.

j) Fast Track De-bonding/Exit Procedure:

A simplified procedure is provided to fast-track the de-bonding/exit
of STP/EHTP units, saving time and reducing transaction costs.

5. Gems & Jewellery sector:

• Exporters can import/procure duty-free inputs for manufacturing
export products.
• Various schemes like Advance Procurement/Replenishment of
Precious Metals, Replenishment Authorization for Gems, and
more are outlined in the FTP.

MISCELLANEOUS

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TRADE FACILITATION & EASE OF DOING BUSINESS

a) Online Filing and Paperless Trade

• DGFT facilitates online filing for applications under FTP.
• Move towards paperless processing.
• Online procedure for digitally signed documents by authorized
professionals.

b) Simplification and Digitization

• EPCG scheme: Dispensed with the need for a certificate from an
independent Chartered Engineer.
• Records maintenance reduced from 3 to 2 years.
• Exporter Importer Profile for streamlined document submission.
• Enhanced communication with exporters/importers through
SMS/email.
• Online exchanges with CBDT and MCA for data exchange.
• Applications for refunds process has been made online

c) Facilitating Dual-Use Items (SCOMET)

• Validity of SCOMET export authorization extended from 12 to 24
months.
• Simplified verification for Defense Export Offset Policy.
• Outreach programs for stakeholder awareness.

d) Facilitating Defense Exports

Export obligation period extended to 24 months for defense-related
items.

e) E-Commerce Exports

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Certain goods eligible for benefits under FTP if exported via e-

commerce platforms.

f) Duty Exemption and Additional Ports

• Imports against Advance Authorization eligible for exemption
from Transitional Product Specific Safeguard Duty.
• Calicut Airport and Arakonam ICD notified as registered ports.

g) Duty Free Tariff Preference (DFTP) Scheme

Duty-free tariff preference extended to 33 Least Developed
Countries.
h) Quality Complaints and Trade Disputes
• Introduction of a new chapter to resolve quality complaints and
trade disputes.
• Formation of Committee on Quality Complaints and Trade
Disputes (CQCTD).

i) Towns of Export Excellence

Addition of Vishakhapatnam and Bhimavaram as towns of export
excellence.

Niryat Bandhu - Hand Holding Scheme

• Implemented by DGFT for mentoring new exporters/importers.
• Identification of MSME clusters for targeted interventions.
• Collaboration with stakeholders for resource optimization.

E-BRC (Electronic Bank Realization Certificate) Project

Successful implementation capturing export proceeds details
electronically.

Duty free Import Authorization (DFIA) Scheme

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• Issued for duty-free import of inputs.

• Exempted from Basic Customs Duty.
• Adjustment of additional customs duty/excise duty as CENVAT
credit.
• Drawback available for duty-paid inputs.

CHAPTER 5.4

FOREIGN EXCHANGE MANAGEMENT ACT

Background
• Repealed FERA in 2000, aligning with a more open economy.
• Aims to modernize regulations for foreign exchange transactions
in India.

Objectives of FEMA
• Facilitate external trade and payments.
• Promote the orderly development of the foreign exchange
market.

Applicability
• Applies to the entire India and branches, offices, and agencies
outside India controlled by a resident in India.
• Covers contraventions committed outside India by applicable
individuals.

SOME HIGHLIGHTS OF FEMA

Authorized Persons
• Prohibits forex dealings without an 'authorized person.'
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• Receipt of forex payment without corresponding inward

remittance deemed as from a non-authorized person.

Prohibited Forex Remittances:

• Certain forex remittances are strictly prohibited.
• Some transactions allowed up to specified limits through
authorized persons.

Current Account Transactions (Prohibited)

Eight types of current account transactions are prohibited. These are
as under:
1. Remittance out of lottery winning
2. Remittance of income from racing/riding etc. or any other hobby.
3. Remittance for purchase of lottery tickets, banned/proscribed
magazines football pools, sweepstakes, etc.
4. Payment of commission on exports made towards equity
investment in Joint Ventures/Wholly Owned Subsidiaries abroad of
Indian companies.
5. Remittance of dividend by any company to which the requirement
of dividend balancing is applicable
6. Payment of commission on exports under Rupee State Credit
Route, except commission to 10% of invoice value of exports of tea
and tobacco.
7. Payment related to Call Back Services of telephones.
8. Remittance of interest income on funds held in Non-Resident
Special Rupee (Account) Scheme

Freedom for Residents

• Residents allowed to hold, own, transfer foreign securities or
immovable property acquired when they were residents.
• Similar freedom for inherited properties from residents.

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Use of Exchange Drawn

Exchange drawn can be used for purposes other than originally
intended.

Liberalized Remittance Scheme (LRS)

• Allows resident individuals to remit up to USD 2,50,000 per
financial year for permitted transactions.
• Not applicable to corporates, trusts, etc.

EEFC and RFC Account Holders

Permitted to freely use funds for permissible current account
transactions.

Foreign Investment Rules

• Transparent rules for foreign investment in India and Indian
investment abroad.
• Allows Indian companies in specified sectors to acquire shares of
foreign companies through ADRs/GDRs.

Civil Nature of FEMA

• Unlike FERA, FEMA is a civil law.
• Burden of proof on enforcement agency, not on the implicated.
• Provides an elaborate redressal mechanism for fairness and
justice.

BUYER'S/SUPPLIER'S CREDIT

Definition of 'Trade Credit'

• Credit extended for imports of goods, compliant with DGFT
Foreign Trade Policy.

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• Two categories: Suppliers' credit (by overseas supplier) and

Buyers' credit (arranged by the importer from a foreign bank or
financial institution).

Amount and Tenor

• Trade credit for non-capital goods: Up to one year or the
operating cycle (whichever is lower).
• Trade credit for capital goods: Up to five years from the shipment
date, with an ab initio contract period of six months.
• AD banks can approve trade credits for imports up to USD 20
million per transaction, with specific conditions:

a) Maturity period of more than one year and up to five years from
the date of shipment.
b) No roll-over/extension will be permitted beyond the permissible
period.

All-in-Cost Ceilings
Maturity period Up to one All-in-cost ceilings over 6 months
year LIBOR*
More than one year and up to
three years
350 basis points
More than three years and up
to five years

*for the respective currency of credit or applicable benchmark

Includes various fees and charges in addition to LIBOR.
Issuance of Guarantee/Letter of Credit

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• AD banks can issue Letters of Credit/guarantees/LoU/LoC in favor

of overseas entities, up to USD 20 million per transaction.
• Period aligned with credit period, not exceeding three years for
capital goods.
• Quarterly reporting required to the RBI on such issuance.

Compliance and Reporting

• Importers must comply with RBI stipulations.
• Non-compliant requests require approval from RBI Central Office.
• AD Category I banks to provide quarterly consolidated statements
to RBI on guarantees/LoU/LoC issuance.

CHAPTER 5.5
ICC - UCPDC GUIDELINES

Uniform Customs and Practice for Documentary Credits (UCP) and

Electronic Presentation (eUCP)

UCP Overview
• UCP is a set of rules governing the issuance and use of letters of
credit.
• First introduced in 1933 (UCP-82) by the International Chamber of
Commerce (ICC).
• Subsequent versions include UCP 270, UCP 400, UCP 500, and the
latest UCP 600 (effective since July 1, 2007).

UCP 600 Key Changes

• Reduced articles from 49 to 39.
• Added two new articles: "Definitions" and "Interpretations" for
clarity.
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• Defined negotiation as the "purchase" of drafts or documents.

• Set a maximum period of five banking days for acceptance or
refusal of documents.
• Introduced provisions allowing the discounting of deferred
payment credits.

e-UCP Introduction
• e-UCP is a supplement to UCP, created for electronic presentation
of documents.
• eUCP version 1.1 aligns with UCP 600, with the flexibility to
accommodate electronic and paper documents.

UCPDC Guidelines (Highlights)

Applicability of Rules (ART-1):

Rules apply when the credit text expressly indicates it's subject to
UCPDC.

Revocable and Irrevocable Credits (ART-3):

Unspecified credits are deemed irrevocable.

Separate Transactions (ART-4):

Credits are independent of sale or other contracts mentioned.

Document Focus (ART-5):

Banks deal with documents, not goods or services.

Expiry Date and Place of Presentation (ART-6):

• A credit must state an expiry date, and the place for presentation
is where the credit is available.
• Different places for presentation may be specified.

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Issuing Bank's Obligation (ART-7):

Issuing bank is irrevocably bound to honor compliant documents.

Advising a Letter of Credit (ART-9):

• Advising implies authenticating signatures of the issuing bank.
• If not advising, the issuing bank and beneficiary must be promptly
informed.
• The beneficiary is informed if authenticity can't be established.

Amendments to Credits (ART-9d):

The same bank advising the credit should handle amendments.

Partial Acceptance of Amendments (ART-10e):

Partial acceptance of amendments in one advice is not allowed.

Swift Messages and UCP Incorporation (ART-14):

• Swift messages are considered bank-to-bank communication.
• Proper UCP incorporation clause is crucial for SWIFT
communicated credits.

Scrutiny of Documents (ART-14):

Issuing banks must scrutinize documents within 5 banking days.

Time Limits for Presentation (ART-14c):

Presentation of original transport documents must occur within 21
calendar days after the shipment.

Dating of Documents (ART-14(0)):

A document can be dated before the credit issuance but not later
than its presentation date.

Original Documents Definition (ARTS 22-24):

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Describes what constitutes an original document, including

signatures, stationery, and authenticity indicators.

Clean Transaction (ART 27):

Banks accept only clean transport documents without clauses
declaring defects.

Insurance Document (ART 28):

Insurance documents must be issued and signed by an insurance
company, underwriter, or agent. Broker-issued cover notes are not
accepted.

Additional Banking Responsibilities

Liability and Responsibility (ART 37b):

An issuing or advising bank assumes no liability if transmitted
instructions aren't carried out.

Instructions to Reimbursing Bank (ART 38):

Issuing banks provide instructions to the reimbursing bank for a
clean payment.

Advising Bank's Commission (ART 38):

Advising banks unable to recover commission from the beneficiary
can recover it directly from the issuing bank.

Reimbursing Bank's Charges (ART 38):

Charges of the reimbursing bank are borne by the issuing bank.
Bank Charges for Transfer (ART 38c):
Unless specified, charges for LC transfer are payable by the first
beneficiary.

Transport and Insurance Documents

• Transport documents must be clean without defects.
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• Insurance documents must be issued by an insurance company,

underwriter, or agent.

e-UCP-Specific Articles
e1 to e12 cover scope, relationship with UCP, definitions, format,
presentation, examination, notice of refusal, originals and copies,
date of issuance, transport, corruption of electronic records, and
additional disclaimer of liability.

Importance of e-UCP
• Developed to meet market demands for electronic document
presentation.
• Allows for electronic, paper, or mixed presentations.
• Works in tandem with UCP, providing rules for electronic
presentations.

CHAPTER 5.6 FEDAI GUIDELINES

Guidelines from the Foreign Exchange Dealers' Association of India

(FEDAI)

Export Transactions

1. Export Bills Purchased/Discounted/Negotiated:

• Rates: Foreign currency bills processed at the current bill buying
rate or contracted rate (for booked forward contracts).
• Crystallization and Recovery: Exporters must repatriate proceeds.
Bills are crystallized after realization due date. Crystallization into
Rupees uses TT selling rate, and recovery includes interest and
charges.

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• Realization After Crystallization: Adjust Rupee liability using TT

buying rate or contracted rate after crystallization.

2. Application of Interest:
• Rates as per Reserve Bank of India guidelines.
• Overdue interest for non-received payments within normal
transit/usance bill due date, per RBI directives.
3. Normal Transit Period
• Time from negotiation/purchase of bill to realization.
• Varies based on category (Rupees, letters of credit, fixed due
date).

Import Transactions

1. Retirement of Bills
• Selling rate on retirement date or forward sale contract rate
applied.
• Unpaid import bills under letters of credit crystallized as per bank
policies.

2. Application of Interest
Bills negotiated under import letters of credit carry commercial
interest.
Interest from the date of debit to the Authorised Dealer's Nostro
account until crystallization/retirement.

MERCHANT TRADE
Remittances made on open letters of credit for overseas suppliers or
merchant traders not acting as financial intermediaries.

CLEAN INSTRUMENTS
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Encashment of foreign currency travelers' cheques, currency notes,

and prepaid cards at the Authorised Dealer's option using buying
rates on the encashment date.

OUTWARD REMITTANCES
Effected at the TT selling rate of the bank on the remittance date or
at the forward contract rate.

GUARANTEES
• Authorised Dealers should avoid guarantees for unlimited
amounts and periods.
• Include a clause specifying the claim period and expiry date in all
guarantees.

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