An Indian exporter (“Exporter”) is permitted to receive export advances against export of goods from India to an overseas buyer. Such export advance arrangements enable Exporters to reduce interest cost, widen fund raising options and elongate the debt maturity profile of the Exporter.This note briefly deals with the various schemes under which such export advances may be received by an Exporter.

Indian Regulations

The following Indian regulations are to be complied with vis-à-vis the above-mentioned arrangements
1) The Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 (as amended); and
2) The Master Direction on Export of Goods and Services dated 1st January 2016 (as amended).

Types of advance payment arrangements

As per the aforesaid Indian regulations, an Exporter can avail export advances under the following schemes:

1) Short-term

In such export advance arrangements, the Exporter is under an obligation to ensure that the shipment of goods is made within 1 (one) year from the date of receipt of advance payment. The rate of interest, if any, payable on such advance payments cannot exceed London Inter-Bank Offered Rate + 100 basis points.

2) Long-term

Exporters having a minimum of 3 (three) years’ satisfactory track record have been permitted to receive long term export advances up to a maximum tenor of 10 (ten) years subject to fulfilment of certain conditions. The rate of interest, if any, payable on such advance payments cannot exceed London Inter-Bank Offered Rate + 200 basis points.

In addition to the above, authorized dealer category- I banks may also allow Exporters to receive advance payment for export of goods which would take more than 1 (one) year to manufacture and ship. In such instances, the export agreement should provide for shipment of goods extending beyond the period of 1 (one) year from the date of receipt of advance payment and shall remain subject to fulfillment of certain additional conditions. The rate of interest, if any, payable on such advance payments cannot exceed London Inter-Bank Offered Rate + 100 basis points.

Juris Corp’s experience

In India, very few law firms have a robust trade and commodity finance practice. Juris Corp has been highly regarded in this practice area and has assisted in a wide array of trade and commodity finance mandates. Juris Corp has acted as preferred legal advisors to various lenders / funding banks / participating banks / arrangers / buyers in relation to advance payment and supply arrangements availed by prominent exporters including, Fortune 500 Companies and large conglomerates. The deal values ranged from USD 150 million to USD 1525 million. In the calendar year 2019, we concluded 20 such transactions. This shows the development in this sector and our leadership and effectiveness in concluding these transactions. We would be more than happy to share our credentials statement with more details of our expertise.

In case of any queries/clarifications, please feel free to contact

Pratish Kumar
Email: pratish.kumar@jclex.com                       
Ankit Sinha
Principal Associate
Email: ankit.sinha@jclex.com

About Juris Corp
Founded in 2000, Juris Corp is a law firm adding value in Foreign Investments into India, Banking, Securities, Derivatives, Corporate Commercial, Joint Ventures, M&A Private Equity, Real Estate, Dispute Resolution and International Arbitration, Bankruptcy and Restructuring.

Firms’ Objective
Provide unbiased and unmatched legal services in our areas of practice. Be the Preferred Law Firm for our clients and take that relationship forward by becoming more than a legal advisor: Being their business advisors.

Accolades And Recognition
Juris Corp has been consistently ranked in the top tiers over the years in Banking & Finance, Capital Markets, Corporate M&A, Dispute Resolution, Foreign Direct Investment, Real Estate, Private Equity, Securitisation & Structured Finance and Taxation by several institutions.

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