As per the provisions of the Foreign Exchange Regulation Act, 1947 (FERA), Foreign Exchange Guidelines vol 1 (as of 31 May, 2009) and Foreign exchange guideline vol 2 (as of July 31, 2010 issued by Bangladesh Bank, the exporters are under a legal obligation to repatriate the foreign proceeds against the exported goods within 4 months of export. The law is equally applicable to repatriation of export proceeds against services as defined in Section 2(bbb) of the Foreign Exchange Regulation (FER) Act 1947. Under Section 23 of the FERA, non-repatriation or partial repatriation is a punishable offence.
At the same time, the lender bank is in order to recover the loan amount against import of raw materials under the back-to-back L/c against mother L/c and supported under Export Development Fund (EDF). Most of the exporters have to rely on bank loan for procuring the raw materials essential for the production of the goods/articles to be exported. To that end, the exporters have to open BTK LC for procuring raw materials either from local or foreign suppliers. Additionally, for facilitating the export, the exporters may have to avail several credit facilities from the banks. After exporting and repatriating the foreign proceeds, the liabilities are adjusted against the said foreign proceeds. This repatriation is not only essential to generate revenue for the exporters but also to satisfy the overdue bills against the BTB LCs and other credit facilities availed for export purposes.
An affected exporter who has not managed to repatriate the export proceeds may go for arbitration, if the contracts are well written with provision of arbitration. Such affected exporter may also file civil suit for realisation of export value along with compensation and interests as well as criminal case for criminal breach of trust against the local agency of the buyers, if any, in exporter's country. The exporters may also file lawsuit against the buyers to recover the overdue export amount in the courts of buyer's country.
Banks are under obligation to take several legal actions against such exporters i.e. (1) selling or taking control and possession of the mortgaged and hypothecated properties, shares etc., (2) listing the name of the exporter along with guarantors as defaulters in the CIB list of Bangladesh Bank,(3) filing Artha Rin Suit under Artha Rin Adalat Ain, 2003, (4) cheque dishonour case under Negotiable Instruments Act, 1881, and (5) more aggressively criminal cases under Penal Code, 1860 for breach of trust, cheating, and others. The repatriation is not fully under control of exporter and the question of professional immunity is arises. The question is what legal remedies are available to the affected exporters in case of non-repatriation of foreign proceeds as such.
There is a small breathing space for exporter. Bangladesh Bank has the legal authority to exempt the affected exporters from the liability to repatriate the foreign proceeds by exercising the powers under Section 12 (2) (b) of the FERA. BB may exercise the power under section 12 (3) of the FERA and may permit the affected exporters to sell the exported goods from the port of the buyer's country and procure the sale proceeds accordingly. In this way, the affected exporter may have the opportunity to sell his exported goods to some other buyers other than the original buyer by way of selling 'stock-lot' and very high discounted prices. Even after that, if the affected exporters fail to sell the exported goods, upon request of the exporters, the BB has the authority under Section 12 (3) of the FERA, to direct that the goods be assigned to the Government. If any such assignment is made to the Government by BB, the Government is under a legal obligation to pay such amount to the affected exporters after selling the assigned goods under Section 12 (4) of the FERA. BB also has the legal authority to protect the lender bank, Authorised Dealer (AD) bank and affected exporters by exercising its regulatory powers under Sections 45 and 49 of the Bank Companies Act, 1991.
India has much more favorable terms and condition for the exporters. Indian Foreign Exchange Regulation Act permitted to realise and repartee the export proceeds within Nine months from the date of export. Any export to a warehouse established outside India with permission of the RBI are allowed to bring the export proceeds within 15 months from the date of shipment. Subject to the directions issued by the RBI in this behalf, the AD Bank may, for a sufficient and reasonable cause shown, extend the period of 9 months or 15 months, as the case may be. Additionally, in terms of the RBI Master Directions on Exports, the RBI has permitted the AD Banks to extend the period for realization of the export proceeds, for a maximum period of 6 (six) months beyond the stipulated period, irrespective of the invoice value and subject to the following conditions: (1) the export transactions covered by the invoices are not under investigation by Directorate of Enforcement, Central Bureau of Investigation or other investigating agencies; (2) the AD Bank is satisfied that the exporter has not been able to realize export proceeds for reasons beyond his control; (3) the exporter submits a declaration that the export proceeds will be realized during the extended period; (4) while considering extension beyond 1 (one) year from the date of export, the total outstanding of the exporter does not exceed USD One Million or 10% of the average export realizations during the preceding three financial years, whichever is higher; and (5) in cases where the exporter has filed suits abroad against the buyer, extension may be granted irrespective of the amount involved/outstanding. Write-off of Unrealized Export Bills: In terms of the RBI Master Directions on Exports, an exporter who has not been able to realize the outstanding export dues despite best efforts, may either self-write off or approach the AD Bank, who had handled the relevant shipping documents, with appropriate supporting documentary evidence. The limits prescribed for write-offs of unrealized export bills due to lost of cargo in transit are as under: i. When shipments from India for which payment has not been received either by negotiation of bills under letters of credit or otherwise are lost in transit, the AD Category - I banks must ensure that insurance claim is made as soon as the loss is known. ii. In cases where the claim is payable abroad, the AD Category - banks must arrange to collect the full amount of claim due on the lost shipment, through the medium of their overseas branch/correspondent and release the duplicate copy of EDF only after the amount has been collected. iii. A certificate for the amount of claim received should be furnished on the reverse of the duplicate copy. iv. AD Category - I banks should ensure that amounts of claims on shipments lost in transit which are partially settled directly by shipping companies/airlines under carrier's liability abroad are also repatriated to India by exporters. The RBI Master Directions on Exports further provide that the write-off will be subject to certain conditions that the relevant amount has remained outstanding for more than one-year, satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realize the dues. Indian has easier rules and AD bank also can extend time of realization of export proceeds but in Bangladesh, BB may extend sometimes. Finally, the exporters are exempt of liability if they use all the available options to realize the money from abroad, but Bangladesh exporters usually face criminal liability although BB may exempt some of them at their discretion. Finding no other option, there is a heresay that most of the exporters use unfair manner to send the money from Bangladesh to other countries and bring back the amount in the export account to meet the legal requirement. The entire roundabout transactions are illegal and offence of severe punishment. The law forced the exporter to do major offence to come out of a debatable 'offence' in the eye of the Foreign Exchange Regulating Act, 1947.
The writer is former Non-Government Adviser, Bangladesh Competition Commission, Legal Economist & CEO, Bangla Chemical
