How to write off the unrealized invoice if export payment is not received ?

[Kishan Barai]

How to write off the unrealized invoice if export payment is not received? 

Based on RBI Guidelines explained by Kishan Barai to stay away from Caution List

Write-off of unrealized export bills 

1. After an exporter’s best efforts, if he has not been able to realize export overdue then either he reports self-write-off or approaches the Banks. While approaching Banks, these banks must be previously handled the relevant shipping documents before. Therefore, they should provide such shipping documents with appropriate and concrete documentary evidence in support. The unrealized export bills have certain limits in case of write-offs which are given below:

An exporter reporting self-write off (Business leaders and status holders, who have excelled in international trade and contributed to country's foreign trade, are exceptions)	5%*
Status Holders reporting self-write-off	10%*
AD Category–I Banks reporting write-off	10%*
*of the total paid proceeds of export during previous year. Such Writeoff is also allowed without explanation or justification in details and could be done by Exporter self itself via bank.

2. With mentioned limits, all paid proceeds of the export of the last year will be made available accumulatively in a year. Startup Exporter has to realize 95% of the money of Invoice Bill from Overseas anyhow but if he is unable to fetch 95% then he has to face the penalty of RBI which could be 30% to 150% or any % of the Invoice as per RBI because RBI may think that Exporter may have received the money via hawala or some other illegal monetary channel, so what to do to prove yourself genuine if the buyer is not paying you ? You need to take proper action steps against the buyer ....
3. The above-mentioned write-off limits will undergo the following conditions: How to do 100% write-off of Invoice? 10% to 100% Write-off of Invoice.
   1. For more than a calendar year, the relevant amount has been overdue.  
   2. On submission of satisfactory and complete documentary evidence, proved that the exporter has made all efforts in paying the dues. So if you are able to show yourself genuine then there are chances that RBI will forgive you. 
   3. The mentioned case classified as one of the following classifications:
      1. Foreign buyers proved to be unable to pay debts and official indication from a liquidator that recovery of payable or paid proceeds of export is not possible at all
      2. Foreign buyers proved to be untraceable for a long reasonable time
      3. The exported goods have been destroyed or offered by the Customs / Port / Health systems in the country where they have been imported
      4. In regard to settling the case by the mediation by any official organization such as the Foreign Chamber of Commerce and the Indian Embassy, the outstanding indicates the due amount.
      5. It should be made clear that the balance of an export bill has not been drawn (export bill equals or less than 10% of the total invoice value) and has been the unrealizable amount even after all the possible efforts done by the exporter
      6. In case of any legal proceedings, the cost of taking it would be out of proportion to the unpaid amount or it could be that exporter could not follow the Court’s order against the foreign buyer due to reasons beyond his control
      7. The overdue amounts have not been paid because the foreign buyer did not pay the seller despite, the difference between the credit’s letter (a document issued by a financial institution that ensures the payment from the buyer to seller) and net exports, bills were drawn.
4. If the exporter availed any of the relative shipments, then banks should collect documents representing the proportionate export incentives. Before permitting the relevant bills to be written off banks should be doing this on their priority.
5. If the write-off is being reported by the exporter himself then he has to bring a Chartered Accountant’s certificate to the bank. The certificate has to show the export realized in the previous year. Furthermore, it should also show any previously availed write-off amount of the current year and the previous year. This must show along with invoice value, relevant EDF - Export Declaration Form to be written off, exported commodity, Bill No. and name of the respective country, where the export happened. If he availed any of the export benefits and surrendered it, then this should be indicated by the CA certificate.
6. But, the write-off facilitation would not entertain the following points:
   1. There is an externalization problem in the country where exports have made. The central banking authorities of the country have not allowed being repatriating the value of export which has been deposited by the overseas buyer in local currency.
   2. The law enforcement agencies investigated the outstanding bills of civil / criminal suits, which are of the subject matter. These agencies could be Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc.
7. Export Data Processing and Monitoring System (EDPMS) by the Reserve Bank of India (RBI) should be used by banks to report write off.
8. It is advised that there should be a system in place, in banks, under which auditors or internal inspectors even external auditors hired or appointed by banks. This system should be carrying out a random or sudden sample or percentage check of outstanding export bills with write off.
9. Certain cases that are not falling under the mentioned instructions or are beyond the comprehension of the limits mentioned above, should be referred to RBI, to the concerned regional office.

  Export Demanded Rights

1. Banks may cancel export claims on the application if the export proceeds have already been converted and realized to Indian currency from official other source bank account, and the exporter is nowhere in caution list of the Reserve Bank
2. If the exporter had received any export benefits, he is expected to surrender the proportional amount in all cases of remittances.

Write off in cases when Insurance Regulatory and Development Authority (IRDA) and Export Credit Guarantee Corporation (ECGC) regulated private insurance companies are claiming payment of claims

1. Banks can be requested by the exporter to set aside the relative export bill report in EDPMS. For this, the exporter must bring supported documented proof from the ECGC or by the private insurance companies. The evidence should be proving that the claim regarding outstanding bills has been settled by the aforementioned authorities.
2. 10% is therefore not applicable to such write-off. Write-off would be in accordance with ECGC or insurance policy, for example ECGC is able to pay 80% of the bill value than 20% would be the write-off. 
3. It should be noted that export realization in foreign exchange is not interpreted as IRDA regulated private insurance companies and ECGC settling claims in rupees.
4. Claim settled by ECGC can be considered for incentives under FTP

  Caution List of Exporters

1. EDPMS automates the listing of cautioning/de-cautioning of exporters. Every day, the caution of exporters is being updated and can be accessed through EDPMS. In EDPMS, cautioning/de-cautioning criteria are given below:
   1. If any shipping bill against the exporter kept open in EDPMS for about two years or more while there is no extension that has been given by RBI / AD bank, he would be caution listed. The shipment date [Shipping Bill Date, not BL date] will be used to calculate the realization period.
   2. When the exporter will pay all the related bills or will receive an extension for realization then he will automatically de-caution listed.
   3. As recommended by the banks, if the expiration of two years hasn’t been reached, the exporters can be caution listed even. The basis of such recommendation will be if the exporter is:
      1. Exporter Not traceable
      2. In an attempt to not making any serious efforts bring export proceedings from Buyer
      3. Being investigated by law enforcement agency
      4. In such cases, bank may recommend caution list the exporter to the concerned regional office of RBI.

My Payment is not arrived from foreign in full, how can I make an application to the bank to avoid the RBI penalty or to save my company reputation from caution list or blacklist by RBI for Export-Import?

First of all, don't panic.... you have your ECGC who will pay your money... no worries... even if you don't have ... then never worry about RBI issues if you are correct...  you can submit your application to your bank and bank will forward it to RBI. There are no fixed rules to punish you If you are genuine then no need to worry with proper steps and justification you can satisfy RBI 

Request for Write Off of Export Bills

I/We hereby request you to permit us to write off the export dues as mentioned below, as we could not realise the same despite our best efforts.

1. Name and address of the exporter : 

2. IEC Number allotted by DGFT :

3. Shipping Bill Number :

4. Customs Serial No :

5. Date of shipment :

6. Name/address of the Overseas Buyer :

7. Invoice value :

8. Terms of payment (DP/DA/LC/Open Account)

9. If usance bill, was it accepted by Drawee : Bills of Exchange Details

10. Amount realized : 

11. Amount of write off sought :

12. Export proceeds realised during the previous: in USD

13. a) Aggregate write off permitted earlier during the calendar year - Not demanded to write off previously

      b) Percentage of write off already approved (to exportrealisation during previous calendar year through us.) - Not demanded to write off previously

14. Reasons for non-realisation - Enter your true emotional story in details which could enter into the hearts of RBI 

15. Steps were taken for realisation - 

• Approached Debt Collection Agencies like MNS Credit & MAH International [Such reputed Agencies don't charge any advance money from the exporter, they only charge once they succeed to bring money from your overseas buyer]
• FIR filed 
• Legal Case open against Buyer 
• Approached International Chamber of Commerce 
• Lodge the claim in ECGC for default of the buyer or Marine Insurance Companies as buyer not accepted the BL or Docs via bank, they are returned and we are processing for marine insurance due to transit damage of goods, etc. 
• Approached abroad Embassy and Chamber of Commerce for recovery 

16. Export Bill Reference No. of the Bank. [Kindly ask this to bank]

17. If present write off Request is granted, percentage of total write off during the calendar year to previous calendar years actual export realisation through us. - Not demanded to write off previously

We furnish herewith the following documentary evidence to substantiate our request.

(i) Certificate of insolvency of the Buyer issued by official liquidator.

(ii) Certificate issued by Indian High Commission etc. that the Buyer is not traceable.

(iii) Certificate issued by Port/Customs/Health authority that perishable goods have been Destroyed/auctioned and ECGC claim is lodge for non-payment of the buyer. 

(iv) Estimate of cost of legal action issued by overseas solicitors :

We further undertake to surrender relative export incentives received in connection with this shipment to the authorities/agencies concerned. We also declare that the above export bills are not subject matter of civil/criminal suit and that there are no cases against us by CBI, Enforcement Directorate and such other agencies.

Thanking you,

Place : Yours faithfully,

Date :

(Signature with seal)

Space for branch use

M/s. _________________________________________ enjoy following limits with us.

Nature Limit Outstandings Overdue if any 

Packing Credit (Only if availed)

We certify that

i) The details as mentioned above by the exporter are correct.

ii) All the conditions as per relevant Exchange Control Regulation have been complied with.

iii) Preshipment/post-shipment finance against the relative shipment is recovered along with interest and necessary charges.

iv) Their dealings with us are satisfactory.

We recommend for approval of write off the unrealised export dues by exporter.

For Bank

Branch :

Date :

Dy. Manager/Manager(Forex)/Chief Manager

Space for Approving Authority

Write off of Shipping Bill as detailed above approved.

For Bank

Asst. General/Deputy General Manager