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Project Export and services Expots - FEMA Ready Reckoner - FEMAExtract Memorandum of instruction on project and services exports (PEM) has been released in July 2014 vide RBI AP (DIR) circular no. 11 dated 22/07/2014 make provisions relating to project exports. Project exports Export of engineering goods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are collectively referred to as Project Exports . Project export contracts are generally of high value and exporters undertaking them are required to offer competitive credit terms to be able to secure orders from foreign buyers in the face of stiff international competition. Indian exporters offering deferred payment terms to overseas buyers in respect of export of goods and those who have been awarded turnkey, civil construction contracts by overseas parties have to secure prior approval at post award stage from Authorised Dealer / Exim Bank for credit terms to be offered, third country imports etc. Deferred payment contract Contracts for export of goods against payment to be received partly or fully beyond the period (at present 9 month ) statutorily prescribed for realisation of export proceeds are treated as deferred payment exports. Ordinarily, contracts providing for deferred payment terms will be allowed only for export of engineering goods (capital goods and consumer durables). Turn Key Project Turnkey projects involve rendering of services like designing, civil construction and erection and commissioning of plant / factory along with supply of machinery, equipment and materials. Civil Construction Contracts Execution of civil construction contracts abroad involves mainly erection and civil construction work and supply of construction materials and equipment going into the civil works. Period of deferred credit The periods for which credit may be offered for export of goods, consumer durables, turnkey contracts and civil construction contracts will depend on merits of individual case and may be determined by the exporter and his banker in mutual consultation on the basis of commercial judgement. However, consumer durables and miscellaneous engineering goods (Part B of List) should ordinarily be exported on cash terms. Four major factors viz. anticipated life of the goods to be exported, extent of foreign competition, nature of the foreign market and the contract value constitute the criteria for determining the overall terms of credit. Clearance of Proposals Each project export contract or Service Export Contract involving Deferred Payments need to be approved either by AD/ EXIM Bank in India. Such approval need to be obtained on post award stage but before actual execution of the project. After entering into contract, the exporter should submit to his bankers an application in form DPX-1 (in respect of turnkey and deferred payment supply contracts) or in form PEX-1 (in respect of civil construction contracts), as the case may be, in six copies along with six copies of the contract. Authorised Dealers should deal expeditiously with all applications made by exporters in connection with project exports. Project exports - Regulation 17 Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 (1) Required prior approval before entering specific projects exports Where an export of goods or services is proposed to be, made on deferred payment terms or in execution of a turnkey project or a civil construction contract, the exporter shall, before entering into any such export arrangement, submit the proposal for prior approval of the approving authority , which shall consider the proposal in accordance with the guidelines issued by the Reserve Bank of India from time to time. Required a Guarantee prior approval In case a guarantee is required to be given prior to post award approval, the same may be issued by an authorized dealer bank/ a person resident in India being an exporting company, for performance of a project outside India, or for availing of credit facilities, whether fund-based or non-fund based, from a bank or a financial institution outside India in connection with the execution of such project, provided that the contract / Letter of Award stipulates such requirements. Explanation: For the purpose of this Regulation, 'approving authority' means the EXIM Bank of India or the authorised dealer. Opening of bank account in or out India for project exports Person who is executing construction contract or is exporting services can open and maintain foreign account in or out of india as per condition stipulated in regulation 7(5) of foreign exchange management (Foreign current account by a person resident in India) Regulation, 2015. Reporting to RBI Exports of goods and services under project exports should report in prescribed form. The revised forms are given in Memorandum of PEM issued by RBI in July, 2014.
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