Export Obligation

[Asked by Guest]

We are 100%EOU and exported goods to party. Due to some reason party could not make our paymnet . We relised our payment  in INR aganist export through ECGC (Insurence Comapny). Kindly let us know how we can consider the received paymnet as realisation from party.So that this amount can be added in our export obligation.

[RadheyShyam Mangal]

You can follow the following procedure as prescribed in RBI Circular. Recently RBI has notified that DBK or DEPB will not be surrendered if claim of exports is recieved from ECGC, however there is no clear cut provision for EOU. In my opinion this will form part of exports made. 

C.22 Write off in cases of Payment of Claims by ECGC and private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA)

(i) AD Category – I banks shall, on an application received from the exporter supported by documentary evidence from the ECGC and private insurance companies regulated by IRDA confirming that the claim in respect of the outstanding bills has been settled by them, write off the relative export bills and delete them from the XOS statement.

(ii) Such write-off will not be restricted to the limit of 10 per cent indicated above

(iii) Surrender of incentives, if any, in such cases will be as provided in the Foreign Trade Policy.

(iv) The claims settled in rupees by ECGC and private insurance companies regulated by IRDAshould not be construed as export realisation in foreign exchange.

[YAGAY and SUN]

Procedure enumerated by Mr. Mangal will be helpful to you in this scenario.

[KASTURI SETHI]

Explained nicely.I fully agree with the views of M/s.YAGAY AND SUN.Ultimate goal of export is earning of foreign exchange in the interest of our nation which has not been achieved by the exporter. Hence amount received in Indian Currency cannot added in the export obligation.

AI Summary

Export realisation in foreign exchange: rupee claims paid by insurers are not treated as export realisation for export obligations.
A 100% EOU received rupee payment from ECGC for an unpaid export; AD Category I banks may write off export bills where insurers confirm settlement, and such write offs are not limited by earlier percentage caps. Surrender of incentives follows the Foreign Trade Policy. Importantly, claims settled in rupees by ECGC or IRDA regulated insurers are not to be construed as export realisation in foreign exchange, raising doubt about counting such receipts against export obligation for EOUs.