Set-off of Export Receivables against Import Payables

There have been many times in business practice wherein the imports and exports are related to the same manufacturer/trader. Many cases have been found that the importer wants to set off their trade payables with the trade receivables.

Reserve Bank of India (RBI), as a measure to resort such cases, have prescribed the regulations for setting-off of export receivables against import payables, but the same are subject to certain terms and conditions as stated below:

ü  The import must be as per the Foreign Trade Policy in force.

ü  Invoices/Bills of Lading/Airway Bills and Exchange Control copies of Bills of Entry for home consumption have been submitted by the importer to the Authorized Dealer bank.

ü  Payment for the import is still outstanding in the books of the importer.

ü  Both the transactions of sale and purchase may be reported separately in R-Returns (NOSTRO and VOSTRO) and Foreign Exchange Transactions – Electronic Reporting System (FETERS)

ü  The relative EDF will be released by the AD bank only after the entire export proceeds are adjusted / received.

ü  The set-off of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for set-off has been obtained from him.

ü  The export / import transactions with Asian Clearing Union (ACU) countries should be kept outside the arrangement.

ü  All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions.