In the growing era of globalization along with other economic reforms and relaxations by governments, the trade of goods and services between countries has increased drastically. India is one such country, among many others, that has benefited to a very large extent from this, as evident from the increasing exports of goods and services. However, along with the many attractive incentives to indulge in the export of goods and services, Indian exporters may also have to face some risks associated with dealing with other countries and one such risk is the situation of delay in payment or non-payment for the exports made. In this article, I will be addressing the remedies that are available to an aggrieved Indian exporter when defaulting importer delays or fails to make payments for the exports made by such an exporter.
The Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 deals with the provisions relating to the export of goods and services from India to a foreign country. According to Regulation 2 (iv), the term ‘export’ involves the taking or sending out of goods by land, sea, or air, on consignment, or by way of sale, lease, hire-purchase, or under any other arrangement known by any other name. Further, in the case of software, it also includes transmission through any electronic media. Regulation 8 of the aforesaid regulations deals with the manner of payment of the export value of goods. It provides that the payment should be made through an authorised dealer and in the manner specified in the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 unless otherwise authorized by the RBI. However, as provided in the explanation of this regulation, re-import into India, within the period specified for realization of the export value, of the exported goods in respect of which a declaration was made under Regulation 3, shall be considered to be realization of the totality of the export value of such goods. Generally, as provided in Regulation 9, the export value of goods/ software/ services is to be realised and repatriated to India within the time-period of nine months or within such period as the Reserve Bank of India may specify for the said purpose, in consultation with the Government, from time to time from the date of export. However, this provision is subject to certain exceptions in some cases.
In dealing with a foreign country, there may arise a situation of delay in payment or non-payment of exports made by the Indian exporter. Regulation 14 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 deals with situations of delay in payment. In a situation of delay in receipt of payment, the RBI may issue directions for securing payment. However, in case the RBI does not issue any such directions, it does not mean that the person committing the contravention is absolved from the consequences of non-payment of the exports made.
In case of non-payment of export proceeds, there are also a few key Indian organizations that an exporter can approach. The Quality Complaints and Trade Disputes (QCTD) is an online platform introduced by the Directorate-General of Foreign Trade (DGFT) to address the grievances of both importers and exporters in order to settle trade disputes amicably. The process provided by the DGFT is, in fact, not cumbersome. An aggrieved exporter can file a complaint on the DGFT website, and under the Services tab, go to the Quality Complaints and Trade Disputes section and upload all the relevant documents supporting the claim. Thereafter, the complaint is forwarded to the concerned Indian Mission Abroad (IMA) of the country of action. An aggrieved exporter may also register a complaint with the Federation of Indian Export Organisations (FIEO). Errant importers are blacklisted by the FIEO and the DGFT after an inquiry.
The aggrieved exporter also has the option to register a complaint with the Indian embassy in the country of the importer. This will make the trade wing in the country of the importer put pressure on the corresponding trade organizations to take action against the importer.
Trade disputes may also be settled through international commercial arbitration. However, this may turn out to be excessively expensive, particularly for small businesses.
With the right documentation and supporting and follow-up communication, exporters can also approach international organisations like M.A.H. International Corporation in Switzerland. In most cases, in order to avoid any damage to their reputation, the importers clear the outstanding payments. However, this process is expensive, both in terms of money as well as time.
Approved insurance coverage by the Export Credit Guarantee Corporation (ECGC) is one of the most ideal options available for a novice exporter who has shipped goods but has not received payment for the same. After reimbursement to the exporter, the Export Credit Guarantee Corporation, with its network of connections, finds out the actual cause of default. If ECGC’s investigation report is not satisfactory, such firm or importer will be blacklisted and the information is circulated among all international associates of ECGC. The implication would be that the buyer cannot buy/import goods from any other suppliers/sellers/exporters on a credit basis.
To conclude, it can be said that an aggrieved Indian exporter who has not received payment by a defaulting foreign importer for the exports made, has several legal remedies as well as other remedies to ensure that he/she receives the export proceeds with little or no hassles. However, it is imperative that while challenging non-payment for exports made, the aggrieved exporter maintains and provides sufficient supporting documents, as and when required.
- Foreign Exchange Management (Export of Goods and Services) Regulations, 2015
- Article – How to raise complaints for non-payment against goods already shipped (https://economictimes.indiatimes.com/small-biz/trade/exports/post-exports/how-to-raise-complaints-for-non-payment-against-goods-already-shipped/articleshow/87177360.cms?from=mdr)
- What does ECGC do on the default of payment of any overseas buyer?(https://howtoexportimport.com/What-does-ECGC-do-on-default-of-payment-of-any-ove-61.aspx#:~:text=We%20have%20discussed%20about%20the,has%20been%20insured%20by%20ECGC)
This article is written by Mr. Manveer Titus, IInd Year LL.B. Student of Law Centre II, Faculty of Law, University of Delhi
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