FEMA compliance and cross-border trade settlement
Domain scope
This domain tests Indian exchange-control compliance for exports and imports under FEMA, 1999, and the role of authorised dealer banks. Focus on documentation, realisation timelines and regularisation.
Core rules
- An IEC is required for most goods trade. AD Category I banks handle trade transactions and report to RBI.
- Exporters submit an export declaration form and must realise and repatriate export proceeds within nine months from shipment, unless an extension is permitted.
- FIRC and eBRC evidence receipt and realisation. Set-off and write-off need bank approval and permitted grounds.
- Import payments are generally made within six months of shipment. The bill of entry supports the import.
- Third-party payments and receipts need documentary justification and bank acceptance.
- FEMA contraventions are civil, not criminal under FEMA itself.
Worked example
An exporter ships goods on 1 February. The expected realisation deadline is 1 November, nine months later. The buyer pays on 15 December. The exporter must ask the AD bank to regularise the delay and must not simply net the receipt against an unrelated import payable without approval.
Traps that cost marks
- Treating the IEC as a payment guarantee.
- Missing the nine-month export realisation deadline.
- Confusing FIRC with eBRC.
- Assuming third-party payment is always allowed.
- Ignoring bill of entry evidence on imports.