assignment of export proceeds

• Search Search Please fill out this field.
• Corporate Finance
• Corporate Finance Basics

Assignment of Proceeds: Meaning, Pros and Cons, Example

Diane Costagliola is a researcher, librarian, instructor, and writer who has published articles on personal finance, home buying, and foreclosure.

Investopedia / Jiaqi Zhou

What Is an Assignment of Proceeds?

An assignment of proceeds occurs when a beneficiary transfers all or part of the proceeds from a letter of credit to a third-party beneficiary . Assigning the proceeds from a letter of credit can be utilized in many types of scenarios, such as to pay suppliers or vendors in a business transaction or to settle other debts.

Key Takeaways

• An assignment of proceeds can be used to redirect funds from a line of credit to a third party.
• An assignment of proceeds must be approved by the financial institution that granted the line of credit following a request and fulfillment of any obligations by the original beneficiary.
• A benefit of this type of transaction is the ability to redirect only a portion of the proceeds, in which case both the original beneficiary and third party can access the same letter of credit.
• A drawback of this type of transaction is that the original beneficiary is still responsible for fulfilling all requirements under the letter of credit, even when the funds are redirected to the third party.
• This type of transaction is used in a number of circumstances, such as when paying suppliers or vendors, or when settling outstanding debts.

Understanding an Assignment of Proceeds

A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. The original beneficiary, the named party who is entitled to receive the proceeds from a letter of credit, may choose to have them delivered to a third party instead, through an "assignment of proceeds."

Due to the nature of international dealings, including factors such as distance, differing laws in each country, and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade.

In order to process an assignment of proceeds, the original beneficiary of the letter of credit must submit a request to the bank or other financial institution issuing the letter of credit requesting to assign the funds to a different individual or company. The assignment of proceeds will need to be approved by the financial institution once it is submitted, pending the fulfillment of any requirements set forth in the letter of credit.

If the original beneficiary does not meet the obligations outlined in the letter of credit, no assignment will take place. Once approved, the bank or other entity will release the money to the specified third party to be drawn upon at will.

Advantages and Disadvantages of an Assignment of Proceeds

The main benefit of an assignment of proceeds is that the original beneficiary has the ability to assign all or just a portion of the letter of credit to the third party. The original beneficiary will retain access to any portion of the proceeds not redirected to the third party. This allows both entities to make use of the same letter of credit when necessary.

This benefit must be weighed against the potential drawback of this type of transaction. When an assignment of proceeds takes place, the financial institution is not contracting directly with the third-party beneficiary. It is only acting as an agent in supplying the funds to the third party. The original beneficiary is still responsible for completing any and all requirements under the letter of credit.

Example of an Assignment of Proceeds

Assume XYZ Customer, in Brazil, is purchasing widgets from ABC Manufacturer, in the United States. In order to sign off on the deal, ABC Manufacturer requires that XYZ Customer obtains a letter of credit from a bank to mitigate the risk that XYZ may not pay ABC for the widgets once ABC has shipped them out of the country.

At this point, ABC Manufacturer is able to request that a portion of these funds be redirected to DEF Supplier, whom ABC still owes money for parts used in making the widgets. Even though a portion of the funds has been redirected to DEF Supplier, ABC Manufacturer still has to fulfill its obligations under the letter of credit, such as shipping out the widgets to XYZ.

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Letter of Credit: Maximizing Security with Assignment of Proceeds

1. introduction to letter of credit, 2. understanding assignment of proceeds, 3. benefits of assignment of proceeds, 4. how assignment of proceeds works, 5. parties involved in assignment of proceeds, 6. types of assignment of proceeds, 7. risks and challenges in assignment of proceeds, 8. case studies on assignment of proceeds, 9. conclusion and key takeaways.

When it comes to international trade, it is essential to have a safe and secure payment method that protects the interests of both the buyer and the seller. One such method is the Letter of Credit. A Letter of Credit, also known as a documentary credit, is an agreement between the buyer's bank, the seller's bank, and the buyer and seller themselves. This agreement ensures that the seller will receive payment for the goods or services they provide, while the buyer is guaranteed that the goods or services they receive will meet their specifications.

Here are some key points to understand about Letters of Credit:

1. The buyer's bank issues the Letter of Credit on behalf of the buyer. This document guarantees that payment will be made to the seller as long as they meet the terms and conditions of the agreement . The seller's bank acts as an intermediary between the seller and the buyer's bank, verifying that the terms of the agreement have been met before releasing payment to the seller.

2. Letters of Credit can be either revocable or irrevocable. A revocable Letter of Credit can be changed or cancelled by the buyer's bank at any time without the seller's consent. An irrevocable Letter of Credit, on the other hand, cannot be changed or cancelled without the agreement of all parties involved.

3. Letters of Credit can also be confirmed or unconfirmed. A confirmed Letter of Credit means that the seller's bank has received confirmation from the buyer's bank that payment will be made. This provides an extra layer of security for the seller, as they know they will receive payment even if the buyer's bank is unable to make the payment. An unconfirmed Letter of Credit means that the seller's bank has not received confirmation from the buyer's bank, and the seller is relying solely on the buyer's ability to make payment.

4. One way to ensure that the seller receives payment is through the Assignment of proceeds . This means that the buyer's bank agrees to pay the seller's bank directly, rather than paying the buyer first. This provides an additional layer of security for the seller, as they know that the funds are available before they ship the goods or provide the services.

The Letter of Credit is an essential tool for international trade , providing security and peace of mind for both buyers and sellers . Understanding the different types of Letters of Credit and the Assignment of Proceeds can help ensure a smooth transaction for all parties involved.

Introduction to Letter of Credit - Letter of Credit: Maximizing Security with Assignment of Proceeds

Understanding Assignment of Proceeds is a crucial aspect of a letter of credit transaction. It is a security measure that ensures payment to the beneficiary by assigning the proceeds to a third party. The assignment of proceeds is a document that instructs the bank to pay the proceeds of a letter of credit to a third party. The third party can be the seller's bank, a factor, or a financing institution. The purpose of the assignment is to protect the beneficiary from non-payment or default by the issuing bank or the buyer. The assignment of proceeds is also used to finance the transaction and improve cash flow .

Here are some important things to know about the Assignment of Proceeds:

1. The beneficiary requests the assignment of proceeds from the issuing bank. The issuing bank will then send an advice of assignment to the nominated bank, which is the bank of the beneficiary.

2. The nominated bank will acknowledge receipt of the advice of assignment and confirm the assignment of proceeds to the third party.

3. The issuing bank will then make the payment to the third party in accordance with the assignment of proceeds.

4. The third party may deduct its fees and expenses from the proceeds before releasing the balance to the beneficiary.

5. The assignment of proceeds is irrevocable and cannot be cancelled by the buyer or the issuing bank.

For example, a company based in the United States wants to purchase goods from a supplier in China. The supplier requires a letter of credit to ensure payment. The issuing bank in the United States issues a letter of credit in favor of the supplier, with the nominated bank in China as the advising bank. The beneficiary requests the assignment of proceeds to a financing institution in China to provide financing for the transaction. The issuing bank sends an advice of assignment to the nominated bank, which confirms the assignment of proceeds to the financing institution. The financing institution deducts its fees and expenses from the proceeds before releasing the balance to the supplier.

The assignment of proceeds is an important security measure in a letter of credit transaction. It protects the beneficiary from non-payment or default and provides financing for the transaction. Therefore, it is essential to understand the assignment of proceeds when dealing with international trade.

Understanding Assignment of Proceeds - Letter of Credit: Maximizing Security with Assignment of Proceeds

The Assignment of Proceeds (AOP) is a powerful tool that can help maximize security in international trade when dealing with a letter of credit. It can be defined as an irrevocable instruction from the beneficiary to the bank to release the proceeds of a letter of credit to a third party. The third party can be a supplier, a logistics provider, or a financial institution. The main benefit of AOP is that it helps mitigate the risk of non-payment, particularly when dealing with unfamiliar buyers or suppliers. In this section, we will explore the benefits of AOP from different points of view and provide in-depth information about this essential mechanism.

1. For the Beneficiary

The primary benefit of AOP for the beneficiary is that it provides a secure payment mechanism that ensures that the proceeds of the letter of credit are released only to the designated party. This mechanism helps reduce the risk of fraud or non-payment, which is particularly useful when dealing with unknown buyers or suppliers. For example, a supplier who receives an AOP from the beneficiary can be confident that the payment will be made, even if the buyer defaults or becomes insolvent.

2. For the Buyer

AOP can also be beneficial to the buyer, as it provides an additional level of security to the transaction. By agreeing to an AOP, the buyer can reassure the supplier that payment will be made once the goods or services have been delivered. This mechanism can help build trust between the parties and facilitate future transactions.

3. For the Bank

Banks can also benefit from AOP, as it provides them with an additional layer of security. By releasing the proceeds of the letter of credit only to the designated party, the bank can help prevent fraudulent activities or disputes between the parties. This mechanism can also help reduce the bank's exposure to risk and improve its reputation in the market.

The Assignment of Proceeds is an essential mechanism that can help maximize security in international trade. By providing a secure payment mechanism, it helps reduce the risk of non-payment or fraud, build trust between the parties, and improve the reputation of the bank.

Benefits of Assignment of Proceeds - Letter of Credit: Maximizing Security with Assignment of Proceeds

When it comes to international trade transactions , the use of letters of credit (LCs) has become increasingly popular as they offer a secure method of payment for both buyers and sellers. However, there is still a risk of non-payment, especially if the buyer defaults on their obligation. This is where the assignment of proceeds comes in. This mechanism provides an added layer of security for the seller, ensuring that they receive payment for their goods or services. In this section, we will explore how assignment of proceeds works in a letter of credit transaction.

Here are some important things to know about assignment of proceeds:

1. Definition: Assignment of proceeds is a legal agreement between the beneficiary (seller) and their bank, where the bank is instructed to release the payment to a third party nominated by the beneficiary. This third party is usually a financing institution that has provided funding to the seller.

2. Process: Once the LC is issued, the seller assigns the proceeds to the financing institution. The bank then notifies the financing institution that the payment has been received and is ready for release. The financing institution will then provide the necessary funds to the seller, minus any fees or charges.

3. Benefits: The seller benefits from assignment of proceeds as it provides added security and reduces the risk of non-payment, especially if the buyer defaults. It also allows the seller to obtain financing at a lower cost, as the financing institution will use the LC as collateral.

4. Examples: Let's say a seller in China is exporting goods to a buyer in the United States. The buyer has opened an LC in favor of the seller, and the LC specifies that the proceeds will be paid to the seller's bank. The seller then assigns the proceeds to a financing institution in China. Once the goods are shipped and the documents are presented to the bank, the financing institution is notified and releases the funds to the seller, minus any fees or charges.

The assignment of proceeds is an important mechanism that provides added security for sellers in letter of credit transactions . By assigning the proceeds to a financing institution, the seller can reduce the risk of non-payment and obtain financing at a lower cost.

How Assignment of Proceeds Works - Letter of Credit: Maximizing Security with Assignment of Proceeds

When it comes to the assignment of proceeds in a letter of credit, there are various parties involved in the process. These parties have different roles, responsibilities, and interests in the transaction. Understanding the perspectives of each party involved can help in maximizing the security of the letter of credit .

1. The Applicant : The applicant is the buyer who requests the letter of credit from their bank. They are also the beneficiary of the proceeds from the letter of credit. The applicant assigns the proceeds to the nominated bank as a security measure for the seller. By doing so, the applicant ensures that the seller will receive payment only if they comply with the terms and conditions of the letter of credit.

2. The Issuing Bank : The issuing bank is responsible for issuing the letter of credit and ensuring that it conforms to the terms and conditions of the underlying contract. The issuing bank may also act as the nominated bank in some cases. If the issuing bank is not the nominated bank, it will forward the assignment of proceeds to the nominated bank.

3. The Nominated Bank : The nominated bank is responsible for examining the documents presented by the seller and ensuring that they comply with the terms and conditions of the letter of credit. The nominated bank is also the beneficiary of the assigned proceeds. The nominated bank releases the proceeds to the seller only when all the conditions of the letter of credit have been met.

4. The Seller : The seller is the beneficiary of the letter of credit and the party that receives payment from the nominated bank. The seller must comply with the terms and conditions of the letter of credit to receive payment. The assignment of proceeds provides the seller with security that they will receive payment once they have fulfilled their obligations.

Understanding the roles and responsibilities of the parties involved in the assignment of proceeds is crucial for maximizing the security of a letter of credit . For example, if the nominated bank is not a reliable institution, it might be beneficial for the seller to request a change of the nominated bank to a more trustworthy one. By doing so, the seller can ensure that they will receive payment once they have fulfilled their obligations, and the buyer can rest assured that their payment is secure.

Parties Involved in Assignment of Proceeds - Letter of Credit: Maximizing Security with Assignment of Proceeds

When it comes to Letter of Credit transactions, the Assignment of Proceeds is a critical tool that can add an extra layer of security for both the buyer and the seller. This method allows the seller to assign the right to receive payment from the issuing bank to a third party, typically a financing bank, as collateral for a loan or as payment for goods or services. The financing bank, in turn, can use these proceeds to pay off the seller's obligations, reducing the risk of non-payment. There are different types of Assignment of Proceeds that can be used in different situations, each with its own benefits and limitations.

1. Clean Assignment of Proceeds: This type of assignment is the simplest form, where the seller assigns all of its rights to receive payment to the financing bank. It is often used when the seller needs to obtain financing and wants to use the Letter of Credit as collateral. The financing bank can then use the proceeds to pay off the seller's debt or use them for other purposes.

2. Trust Receipt Assignment of Proceeds: In this type of assignment, the financing bank takes possession of the goods shipped under the Letter of Credit and holds them in trust for the seller. The seller retains the right to sell the goods and collect payment, but the proceeds must be used to repay the financing bank. This type of assignment is useful when the seller needs to obtain financing to produce the goods, but the buyer wants to ensure that the goods are delivered before payment is made.

3. Transferable Assignment of Proceeds: This type of assignment allows the seller to transfer the right to receive payment to a third party, such as a supplier or subcontractor. The third party can then use the proceeds to pay for goods or services provided to the seller. This type of assignment is useful when the seller is acting as an intermediary between the buyer and the supplier.

Assignment of Proceeds is a powerful tool that can be used to enhance the security of Letter of Credit transactions. By assigning the right to receive payment to a third party, the seller can reduce the risk of non-payment and obtain financing more easily. Different types of Assignment of Proceeds can be used depending on the specific situation, each with its own benefits and limitations.

Types of Assignment of Proceeds - Letter of Credit: Maximizing Security with Assignment of Proceeds

The assignment of proceeds is an important tool that can be used to help maximize the security of a letter of credit. However, there are also risks and challenges associated with the use of this tool. These risks and challenges can come from a variety of different sources, including the actions of the parties involved in the transaction and the specific terms of the letter of credit itself. In order to fully understand the risks and challenges associated with the assignment of proceeds, it is important to consider the issue from a number of different points of view.

Here are some of the risks and challenges that are commonly associated with the assignment of proceeds:

1. Misapplication of funds - One of the biggest risks associated with the assignment of proceeds is the possibility that the funds will be misapplied. This can occur if the bank or other party responsible for disbursing the funds fails to follow the instructions provided in the letter of credit. For example, if the letter of credit specifies that the funds are to be used to pay for a particular shipment of goods, but the bank instead uses the funds to pay off an unrelated debt, the result can be disastrous for the parties involved in the transaction.

2. Disputes over payment - Another risk associated with the assignment of proceeds is the possibility that there will be disputes over payment. This can occur if one of the parties involved in the transaction feels that they are entitled to more or less than what is being offered. For example, if the beneficiary of the letter of credit believes that they are entitled to a higher payment than what the bank is offering, they may refuse to accept the funds and dispute the matter in court.

3. Conflicting instructions - A third risk associated with the assignment of proceeds is the possibility of conflicting instructions. This can occur if the letter of credit provides conflicting instructions regarding the disbursement of funds. For example, if one part of the letter of credit specifies that the funds are to be used to pay for a particular shipment of goods, but another part of the letter of credit provides different instructions, the result can be confusion and disputes over payment.

4. Bankruptcy - Finally, there is a risk that one of the parties involved in the transaction will declare bankruptcy before the funds are disbursed. This can occur if the beneficiary of the letter of credit goes bankrupt before the funds are released, or if the bank responsible for disbursing the funds goes bankrupt before they are able to do so. In either case, the result can be delays and complications in the payment process that can be difficult to resolve.

The assignment of proceeds is an important tool that can help to maximize the security of a letter of credit. However, it is important to be aware of the risks and challenges associated with this tool in order to ensure that it is used effectively. By understanding these risks and challenges, parties involved in the transaction can take steps to minimize the possibility of problems and protect their interests.

Risks and Challenges in Assignment of Proceeds - Letter of Credit: Maximizing Security with Assignment of Proceeds

Case studies on Assignment of Proceeds are an essential aspect of understanding the Letter of credit . It is always good to learn from practical examples to understand the concept of Assignment of Proceeds, which is one of the most commonly used tools to minimize the risk of non-payment in international trades. The studies we will discuss here will provide insights from different angles and will give you a better understanding of the role of Assignment of Proceeds in securing payments in international trade.

1. In the first case study, consider a situation where the exporter is not satisfied with the creditworthiness of the importer's bank. The exporter can then require the importer to arrange for an Assignment of Proceeds. This agreement requires the importer's bank to pay the exporter when the documents meet the terms of the Letter of Credit. With this arrangement, the exporter does not have to rely on the creditworthiness of the importer's bank to receive payment.

2. Another case study involves a situation where the exporter is shipping high-value goods, and the importer's country is known for political instability. In such cases, the exporter can arrange for an Assignment of Proceeds to a bank in a different country. This arrangement ensures that the payment is secure and is not affected by the political situation in the importer's country.

3. In the third case study, consider a situation where the exporter has used several modes of transportation, including air, sea, and road. The exporter can arrange for an Assignment of Proceeds that specifies the bank responsible for releasing the payment at each stage. With this arrangement, the exporter can receive payment as soon as the relevant documents are submitted to each bank.

These case studies demonstrate the significance of Assignment of Proceeds in international trade. It is an effective way to minimize the risk of non-payment and ensure that all parties involved in the transaction are protected.

Case Studies on Assignment of Proceeds - Letter of Credit: Maximizing Security with Assignment of Proceeds

It is clear that the Assignment of Proceeds (AOP) is a valuable tool for enhancing the security of transactions involving letters of credit. It provides an effective mechanism for ensuring that the seller is paid promptly and that the buyer receives the goods or services that they have purchased. From the seller's perspective, the AOP can help to reduce the risk of non-payment and improve cash flow. Meanwhile, from the buyer's point of view, the AOP provides reassurance that the seller will not be paid until the goods or services have been delivered to the required standard. Overall, the AOP can help to create a win-win situation for both parties .

So, what are the key takeaways from this blog post? Here are five key points to remember :

1. The Assignment of Proceeds can be a valuable tool for enhancing the security of transactions involving letters of credit.

2. The AOP provides an effective mechanism for ensuring that the seller is paid promptly and that the buyer receives the goods or services that they have purchased.

3. The AOP can help to reduce the risk of non-payment and improve cash flow for the seller.

4. The AOP provides reassurance that the seller will not be paid until the goods or services have been delivered to the required standard for the buyer.

5. The AOP can help to create a win-win situation for both parties .

To illustrate these points, let's consider the example of a small business that is exporting goods to an overseas buyer. In order to secure payment for their goods, they decide to use a letter of credit with an AOP clause. The AOP clause requires that the bank holding the letter of credit pays the seller's bank directly once the goods have been shipped and the seller's bank confirms that the goods have been loaded onto the carrier. This provides the seller with reassurance that they will be paid once the goods have been delivered, and it also reduces the risk of non-payment. Meanwhile, the buyer can be confident that they will not be required to pay until the goods have been delivered to the required standard.

The Assignment of Proceeds is a powerful tool that can help to enhance the security of transactions involving letters of credit. By providing a mechanism for ensuring that the seller is paid promptly and that the buyer receives the goods or services that they have purchased, the AOP can help to create a win-win situation for both parties.

Conclusion and Key Takeaways - Letter of Credit: Maximizing Security with Assignment of Proceeds

Read Other Blogs

In the realm of economics, the concept of a kinked demand curve is pivotal in understanding how...

Moles are common skin growths that can appear anywhere on the body. They are usually harmless, but...

In the dynamic landscape of startup growth, the strategic selection of real estate plays a pivotal...

One of the most important aspects of running a successful startup is understanding and managing its...

In the dynamic landscape of entrepreneurship, the significance of customer support cannot be...

When it comes to making payments, there are several options available, each with its own set of...

The world of cryptocurrencies is full of opportunities and challenges for entrepreneurs who want to...

Distributed Capital is a form of capital that is spread among multiple individuals or entities. It...

The advent of mobile technology has ushered in a transformative era for healthcare, one where the...

Letters of Credit for Export

Protecting the Beneficiary

• First Online: 15 February 2020

Cite this chapter

• Stephen A. Jones 2  

414 Accesses

The primary concern of a seller is whether they will be paid by the buyer for the shipment of goods. A letter of credit provides an independent payment undertaking of a bank, subject to the presentation of complying documents. For the seller, it is often said that ‘the documents are more important than the goods’.

If the documents do not fully conform to the credit, this is known as a ‘discrepant’ presentation which at best can result in delayed payment and at worst in rejection of documents and no payment.

This chapter discusses the optimum structure of the export letter of credit to mitigate risk for the seller and to provide a pre-shipment finance or post-shipment discount or negotiation solution. The same trading scenario is examined in Chap. 5 to illustrate the key differences in structure between an export and import letter of credit.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

• Available as EPUB and PDF
• Read on any device
• Instant download
• Own it forever
• Compact, lightweight edition
• Dispatched in 3 to 5 business days
• Free shipping worldwide - see info
• Durable hardcover edition

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Author information

Authors and affiliations.

AXS Trade Finance Ltd., Solihull, West Midlands, UK

Stephen A. Jones

You can also search for this author in PubMed   Google Scholar

Corresponding author

Correspondence to Stephen A. Jones .

Rights and permissions

Reprints and permissions

Copyright information

© 2019 The Author(s)

About this chapter

Jones, S.A. (2019). Letters of Credit for Export. In: The Trade and Receivables Finance Companion. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-25139-0_6

Download citation

DOI : https://doi.org/10.1007/978-3-030-25139-0_6

Published : 15 February 2020

Publisher Name : Palgrave Macmillan, Cham

Print ISBN : 978-3-030-25138-3

Online ISBN : 978-3-030-25139-0

eBook Packages : Economics and Finance Economics and Finance (R0)

Share this chapter

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Publish with us

Policies and ethics

• Find a journal
• Track your research

• Notifications
• FEMA New Notifications

Foreign Exchange Management Act Notification

Corrigendum.

1 Substituted vide Notification No. FEMA 23(R)/(4)/2021-RB dated January 08, 2021 published in the Official Gazette of India, Extra Ordinary, Part III, Section 4 dated January 11, 2021 .

2 Deleted with effect from June 23, 2017 vide GSR 635(E) dated June 23, 2017.

3 Inserted vide Notification No. FEMA 23(R)/(3)/2020-RB dated March 31, 2020 published in the Official Gazette of India, Extra Ordinary, Part III, Section 4 dated March 31, 2020 .

4 Substituted vide Notification No. FEMA 23(R)/(5)/2021-RB dated September 08, 2021 published in the Official Gazette of India, Extra Ordinary, Part III, Section 4 dated September 10, 2021 .

§ 5-114. Assignment of Proceeds.

(a) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit . The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.

(b) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit .

(c) An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.

(d) An issuer or nominated person has no obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor .

(e) Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.

(f) Neither the rights recognized by this section between an assignee and an issuer , transferee beneficiary , or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by Article 9 or other law. Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by Article 9 or other law.

Personal Banking

• Corporate Banking

For Shareholders

• ไทย

Personal Banking ไทย

• Investments
• Digital Banking
• Other Services
• Stories & Tips

Corporate Banking ไทย

• Credit Facilities
• Investment Banking
• Capital Markets
• Cash Management
• Financial Markets
• Corporate Trust
• Trade Finance
• International Network

For Shareholders ไทย

• Company Information
• Shareholder Services
• Financial Information
• Shareholders FAQ
• Stock Information

About Us ไทย

• Board of Director
• Senior Executive Officers
• Sustainability
• Awards and Ranking
• Corporate Governance
• SCB X Group

SCB Global Network

Scb global network ไทย.

• Personal Loans
• Business Loans

RELATES LINKS

• Rates & Fees
• Title deed redemption service
• Track Loan Application Status
• Debit Cards
• Credit Card
• Prepaid Card

RELATED LINKS

• Track Credit Card Application Status
• Savings Account
• Current Accounts
• Fixed Deposit Accounts
• Long Term Deposit Account
• SCB Payroll Solution
• Terms and Conditions
• Product Sales Sheet
• Accident Insurance
• Savings Insurance
• Health Insurance
• Others Insurance
• Online Claim Service
• Mutual Funds
• Investment Glossary
• Direct Debit
• SCB EASY App
• SCB Connect
• SCB PromptPay
• About SCB DBank
• Business Solution
• Domestic Fund Transfer
• Other Services International Remittance Service via SWIFT
• Other Services Foreign Exchange
• Tele-consultation with specialist Doctors
• Promissory Note
• Clean Bill Discount
• Long Term Loan
• Letter of Guarantee
• Standby Letter of Credit
• Acceptance Aval

Related Links

• Foreign Exchange Rate
• Financial Advisory
• Merger Acquisition
• Fixed Income Instrument and Underwriting Service
• Structured Finance
• Project Finance
• Business Collection
• Business Payment
• Account Management
• Business e-Channel
• SCB Business Anywhere
• SCB Business Net
• Foreign Exchange Rate Risk Management
• Interest Rate Risk Management
• Investment Solutions
• Mutual Fund Supervisor
• Escrow Agent
• Security Agent
• Debenture's Holder Representativ
• SCB Custodian Net
• Additional Trade Services
• SCB Trade Club
• SCB Trade Net
• SCB Cross Border Payment Tracking
• SCB FX Online
• SCB Business Promtpay
• SCB Digital LG

Use and Management of Cookies

We use cookies and other similar technologies on our website to enhance your browsing experience. For more information, please visit  our Cookies Notice.

We use cookies and other similar technologies on our website to enhance your browsing experience. For more information, please visit our Cookies Notice.

SCB Assignment of Proceeds

Export proceeds may be easily assigned in order to strengthen your outsourcing power while also allowing manufacturers to get paid rapidly.

Service Features

Illustration, service channels.

This assignment confirms that after the goods have been shipped; the assignee will be paid in accordance with the terms of the contract.

• Original L/C or amendment L/C (if any)
• Billing documents under the terms and conditions of the letter of credit e.g. invoice, packing list, bill of exchange, bill of lading, etc.

SCB Business Call Center is available Monday - Sunday from 08:30 - 19:00 hrs.

SCB Locations

Find the branches and ATMs that are the most convenient for you.

Send us a message if you require any additional information.

Related Products and Services

Scb outward bills for collection.

Assured that your outgoing bills are eligible for collection anywhere in the world.

SCB Outward Bills under Letter of Credit

Assured in perfectly examining the L/C and submitting documents to partners all over the world within 4 hours.

SCB Packing Credit

Short-term financing is credited to your account within 3 hours, which helps your business run smoothly by increasing liquidity in production.

!!!(langSite == "/th" ? "คำที่คนส่วนใหญ่ใช้ค้นหา" : "Keyword Suggestions")

Recent searches.

ผลการค้นหา "{{keyword}}" ไม่ปรากฎแต่อย่างใด

You are exiting the Bank's services and entering

which is the third’s party website or application.

We suggest you to review privacy notice and product terms and conditions on such website or application before executing any transactions.

• International Banking
• Investor Relations
• About Bangkok Bank

Change Language

Online Banking

• Bualuang iBanking
• Mobile Banking
• Bualuang iFunds
• iCash (New System)
• BIZ iBanking
• Corporate iCash
• Bualuang iCustody
• Merchant iPay
• Bualuang iSupply
• Bualuang e-Guarantee
• Customs Paperless e-Payment
• Trade iReport

• My International Trade

Export Services

Get full support for your export business until you receive payment from your overseas trade partners

Service Highlights

Asia Trade Fast Track

Electronic import and export services

e-Form services

Our services.

We will provide you with end-to-end export services while you wait for payment from your overseas trade partners.

Advising Letter of Credit

You will be notified within 24 hours when there is a Letter of Credit from trade partners delivered to you through Bangkok Bank.

Letter of Credit Confirmation

Be assured you will get full payment for goods as stated in the conditions with a guarantee of the Letter of Credit of the issuing bank

Transferring Letter of Credit

Transfer the full or partial amount to the goods owner or to one or more manufacturers

Assignment of Proceeds from Letter of Credit

Arrange payments to local manufacturers by assigning a Letter of Credit to a designated recipient

Packing Credit

Short-term credit for purchasing raw materials or goods for product manufacturing

Bill Receivable Under Letter of Credit

Receive payment in advance from the Bank in the form of short-term credit

Outward Bill for Collection

Have your collection documents delivered to your trade partner promptly and efficiently via our worldwide network of correspondent banks

Inward Fund Transfer

Receive your funds quickly and securely through our international branch network and over 1,000 correspondent banks worldwide

Forward Contract

Export goods with confidence, without worrying about fluctuations in the exchange rate

Foreign Currency Deposit Account

Deposit funds in any of 16 major currencies

Export Credit Insurance Service

Reduce the risks of not receiving payments from trade partners, with export insurance that provides coverage for various types of payments

Export Promissory Note (P/N)

Short-term credit that the bank offers to exporters

Receive advice of a Letter of Credit that has already been authenticated by Bangkok Bank within 24-hours of the Letter of Credit being delivered by your trade partner.

If you check the terms and conditions and detect mismatched details but do not notify the importer to amend the L/C, or if you cannot follow the terms and conditions stated in the L/C and there is a discrepancy, you may be exposed to the risk of not receiving payment or a delayed payment.

We guarantee the payment once you have fulfilled the conditions as stated in the Letter of Credit.

The Bank has no obligation to pay if you cannot comply with the terms and conditions specified in the L/C and submit documentation with discrepancies to the Bank.

Build confidence for product manufacturers, facilitate business operation and sourcing.

Bangkok Bank will transfer the rights of the first beneficiary in accordance with the terms and conditions specified in the L/C (“TRANSFERABLE” L/C only) to a manufacturer or a second beneficiary. This will facilitate smooth business operations and procurement, while providing an assurance to the manufacturer under the transferred L/C. An L/C can be transferred only once. You can transfer the full or partial amount to the goods owner or to one or more manufacturers. There is no prohibition on partial shipment if there is more than one transferee.

Responds to exporters who require sourcing of goods from domestic manufacturers.

If you arrange exports from domestic producers to an overseas customer but do not manufacture or own the goods this service is a convenient way to arrange payments. Even though the L/C is not described as transferable, the beneficiary may request Bangkok Bank to assign the proceeds under the L/C to the assignee. All the rights under the L/C still belong to the beneficiary.

Receive a loan for short-term working capital for the purchase of materials or intermediate goods for export.

This service allows you to receive payment in advance from the bank in the form of a short-term loan instead of waiting for payment from the L/C issuing bank. You may choose to receive payment after the L/C issuing bank has paid the cost.

To ensure your application will be processed quickly, please prepare all required documents as follows:

• Original L/C
• Original documents required by the L/C as condition for payment
• Request for negotiation/discount of export bills drawn under Letter of Credit (BBL application form)

Outward bill for collection delivery service for request payments

Have your collection documents delivered to your trade partner promptly and efficiently via our worldwide network of correspondent banks. We can track payments made to you by your trade partner.

Our network of over 1,000 partner banks worldwide and International branches in ASEAN and across major economies means you can receive money from abroad quickly, safely and efficiently and save on fees. The following information should be sent to the transferee:

• Recipient’s name and bank account number
• Name and address of the recipient’s bank: Bangkok Bank Thailand, 333 Silom Road Bangkok 10500 Thailand
• Bank’s SWIFT Address: BKKBTHBK

If you receive a charge for goods or services more than 360 days after the exportation date or after the transaction date, you must fill in the form and provide related documents (if any) to ask for relaxation of the regulations from The Bank of Thailand.  

Confidently export goods with no need to worry about currency fluctuations.

You can sell foreign currency in advance by making a forward contract with Bangkok Bank and specifying the amount, currency and exchange rate which you will pay on the agreed date. Forward contracts can help you avoid the risk of foreign currency fluctuations and accurately calculate your expected business revenue from the transaction date.

You must provide documents to the bank that indicate your underlying future foreign currency obligations when you reserve the exchange rate.

Open a foreign currency deposit account  in any of 16 currencies. This is a convenient way to reduce the risk of currency fluctuations because you can deposit funds in a foreign currency and convert them quickly to Thai baht.

This will give you flexibility and enable you to efficiently manage your income and expenses.

Reduce the potential risk of not receiving payment from your trade partner

With our Export Credit Insurance Service you will receive protection for various payments to cover the cost of exporting products to commercial markets worldwide. (Coverage is 80% of damages from trading risks and 90% of damages from political risks).

Receive liquidity with our short-term loan for exporters

We offer short-term credit to exporters to use as working capital while they are waiting for payments under ‘Open Account’ trade conditions.

Tools & Assistance

For more information, call us at corporate service center (66) 0 2031 7888, for more information, call us at corporate service center  (66) 0 2031 7888.

• Business Banking

Cookies setting

Accept all cookies

Cookie Setting

The Bank uses Strictly Necessary Cookies in order that you can access information and use the Bank's website safely, and uses Functional Cookies to facilitate you when you revisit the website. In addition, the Bank uses other type of Cookies, namely Analytic Cookies and Advertising Cookies, where disabling these Cookies may cause you inconvenience when using website as follows.

Analytic Cookies

The Bank uses this type of Cookies to analyze or evaluate website performance and to understand your interest in order to manage, improve and better the Bank’s website. Disabling this type of Cookies may cause the Bank being unable to properly improve or better the website from the accurate usage statistic.

Advertising Cookies

The Bank uses this type of Cookies to introduce information or advertisement to suit your interest and preference. Disabling this type of Cookies may cause you to not receive information that suit to your attention.

You are using an outdated browser. Please upgrade your browser to improve your experience.

You are now leaving Bangkok Bank's website

หนังสือแจ้งการคุ้มครองข้อมูลส่วนบุคคล (Privacy Notice) สำหรับบุคลากรของธนาคารกรุงเทพ จำกัด (มหาชน)

   ธนาคารกรุงเทพ จำกัด (มหาชน) (“ธนาคาร”) ให้ความสำคัญในการคุ้มครองข้อมูลส่วนบุคคลของท่านและการปฏิบัติตามกฎหมายและกฎเกณฑ์ที่เกี่ยวข้อง ธนาคารจึงจัดทำหนังสือนี้ เพื่อแจ้งให้ท่านทราบถึงการคุ้มครองข้อมูลส่วนบุคคลและสิทธิของเจ้าของข้อมูลส่วนบุคคล

1. ข้อมูลส่วนบุคคลของเจ้าของข้อมูลส่วนบุคคลที่ธนาคารจะนำมาเก็บรวบรวมและใช้ ประกอบด้วย

   1.1.ข้อมูลที่สามารถระบุตัวตนท่านได้ ไม่ว่าทางตรง หรือ ทางอ้อม        (1) ข้อมูลส่วนตัว ได้แก่ ชื่อ-นามสกุล เพศ วันเดือนปีเกิด ส่วนสูง น้ำหนัก ข้อมูลบนบัตรประจำตัวประชาชนหรือหนังสือเดินทาง เลขประจำตัวพนักงาน ข้อมูลบนบัตรประกันสังคม เลขประจำตัวผู้เสียภาษีอากร ข้อมูลบนทะเบียนบ้าน รูปถ่ายใบหน้า สัญชาติ ลายมือชื่อ ข้อมูลเกี่ยวกับการเข้าออกประเทศ ประวัติการศึกษา ข้อมูลเกี่ยวกับการทำงาน สถานภาพ สมาชิกภาพ ใบอนุญาตต่าง ๆ เช่น ใบอนุญาตทำงาน ใบอนุญาตขับขี่รถยนต์ ใบอนุญาตในการประกอบอาชีพ        (2) ข้อมูลเกี่ยวกับการเงินและการทำธุรกรรม ได้แก่ รายได้ หมายเลขบัญชีเงินฝากที่ใช้สำหรับรับค่าจ้าง หมายเลขบัตรเครดิต ข้อมูลเกี่ยวกับการทำประกันผ่านธนาคาร ข้อมูลเกี่ยวกับทรัพย์สิน ความสามารถในการลงทุน ข้อมูลเกี่ยวกับการกระทำหรือถูกกล่าวหาว่ากระทำความผิด การถูกดำเนินคดี การถูกบังคับคดี ข้อมูลเกี่ยวกับการขอใช้สินเชื่อสวัสดิการต่าง ๆ การวิเคราะห์ความเสี่ยงและความสามารถในการชำระหนี้ ข้อมูลการชำระหนี้ ข้อมูลเกี่ยวกับทรัพย์สิน ข้อมูลเกี่ยวกับการหักบัญชีสำหรับรับค่าจ้างเพื่อชำระหนี้ตามคำสั่งหรือคำพิพากษาของศาลหรือหน่วยงานของรัฐ ข้อมูลเกี่ยวกับการเป็นสมาชิกหรือการถือหน่วยลงทุนหรือการดำเนินการใด ๆ กับกองทุน สมาคม องค์กร ชมรม มูลนิธิ        (3) ข้อมูลติดต่อ ได้แก่ ที่อยู่ไปรษณีย์อิเล็กทรอนิกส์ (E-mail Address) หมายเลขโทรศัพท์ และข้อมูลผู้ติดต่อที่ท่านให้ไว้กับธนาคาร ชื่อหรือบัญชีสำหรับการใช้งานผ่านแอปพลิเคชันหรือช่องทางดิจิทัล เช่น ไลน์ กูเกิล เฟซบุ๊ก ยูทูป ทวิตเตอร์ วอทส์-แอป หรือวีแชท        (4) ข้อมูลการปฏิบัติงานและการใช้งาน ได้แก่ ชื่อหรือรหัสสำหรับการใช้บริการ (Username) รหัสผ่านสำหรับการใช้บริการ (Password) ข้อมูลเกี่ยวกับการค้นหา สถิติการเข้าดู ระยะเวลาการใช้งานผ่านอุปกรณ์อิเล็กทรอนิกส์ แพลตฟอร์ม แอปพลิเคชัน เวลาที่คลิกครั้งสุดท้าย (Timestamp of last click) รายการโปรด ข้อมูลถามตอบ ข้อมูลจราจรคอมพิวเตอร์ (Log File) ข้อมูลการสื่อสาร ข้อมูลจากการติดต่อผ่านโทรศัพท์ ช่องทางอิเล็กทรอนิกส์ สื่อสังคมออนไลน์ ข้อมูลจากกล้องวงจรปิด (CCTV) ทั้งในรูปแบบ เทปบันทึกเสียงหรือบันทึกการทำรายการ ภาพถ่ายหรือภาพเคลื่อนไหว        (5) ข้อมูลทางเทคนิค ได้แก่ หมายเลขอินเทอร์เน็ตโพรโทคอล (IP Address) ล็อก (Log)รหัสอุปกรณ์ (Device ID) ประเภทและเวอร์ชันของปลั๊กอิน เบราว์เซอร์ ระบบปฏิบัติการและแพลตฟอร์มระบบอินเทอร์เน็ตหรือเครือข่ายโทรศัพท์มือถือ ข้อมูลตำแหน่งที่ตั้งทางภูมิศาสตร์ ข้อมูลการตั้งค่าในอุปกรณ์ และข้อมูลทางเทคนิคอื่นๆ จากการใช้งานบนแพลตฟอร์ม แอปพลิเคชันและระบบปฏิบัติการของธนาคาร        (6) ข้อมูลเกี่ยวกับพฤติกรรม ได้แก่ ข้อมูลเกี่ยวกับความสนใจ หรือความชื่นชอบส่วนตัว ลักษณะการใช้บริการ และข้อมูลที่ได้รับจากการใช้บริการ

   1.2 ข้อมูลส่วนบุคคลที่เป็นข้อมูลอ่อนไหว ซึ่งธนาคารต้องได้รับความยินยอมจากเจ้าของข้อมูลก่อนจึงจะเก็บรวบรวมได้ ได้แก่ ข้อมูลเกี่ยวกับเชื้อชาติ ศาสนา ประวัติอาชญากรรรม ข้อมูลสุขภาพ ความพิการ ข้อมูลสหภาพแรงงาน ข้อมูลพันธุกรรม ข้อมูลชีวภาพ หรือข้อมูลอื่นใดตามที่คณะกรรมการคุ้มครองข้อมูล ส่วนบุคคลประกาศกำหนด

2. วัตถุประสงค์ในการเก็บรวบรวม ใช้ และ เปิดเผย ข้อมูลส่วนบุคคลของท่าน

• Bills and Collections User Guide
• Processing Bills
• Bills and Collections Contract Input Details
• Process the Assignment of proceeds

4.2.2.3 Process the Assignment of proceeds

On liquidation of the bill if the details are given in assignment of proceeds block in BC contract screen. Then the system will split the amount to be credited and will liquidate the amount proportionately to the assignees and the exporter based on the maintenance.

Either the assignment of proceeds can be initiated by the beneficiary or by the exporter's bank. If the beneficiary initiates it, then the payment will be done at the export side. If it is initiated by exports bank, then the payment will be done at the importer's side.

Parent topic: Main Tab

• Investor Relations

• Products & Services

You may be looking for the following

Suggested Searches

POPULAR SEARCHES

SUGGESTED SEARCHES

Building better Export Trade Services.

Rhb export trade services, as an exporter who is aspiring to expand your business internationally, collaborating with a banker will minimise your risks and boost your trading confidence..

RHB Export Trade Services offers services that will lend credibility and strength to your foreign trade transactions.

A wide range of services that will

Help you to trade better..

Documentary Collection

Let RHB Bank help you to collect and receive payment based on instructions and documents presented for domestic and international trade transactions. The collection is governed by the International Chamber of Commerce rules.

Letter of Credit Advising

You are an Exporter and are expecting a Letter of Credit (LC) to effect your shipment urgently. RHB as an intermediary will forward the LC from the Issuing Bank to you. This is known as LC advising or export LC advising.

Letter of Credit Confirmation

If you are a beneficiary of an Export Letter of Credit and require additional payment comfort, RHB Bank can mitigate the non-payment risk by adding its confirmation to the export Letter of Credit to guarantee payment to you upon your presentation of compliant documents.

Silent Confirmation

In times of uncertainty, it is always best to have your Letter of Credit (LC) to be confirmed to avoid unnecessary risks. This allows RHB Bank to add its payment guarantee to the LC that does not call for confirmation. Present your documents for negotiation or discounting to RHB Bank and if the proceeds are not forthcoming from the issuing bank, RHB Bank shall not claim reimbursement from you.

Buyer Benefits

Transferable Letter of Credit

If you are a middleman who does not have the capability to issue a Letter of Credit (LC) to your Exporters, transferring an LC is key to widening your business opportunities. By doing this, you will transfer part or all of your rights and obligations to the actual supplier who will ship the goods directly to the Buyer.

Back to Back Letter of Credit

If you are a middleman who receive a Master Letter of Credit (LC) from the buyer and you do not wish to expose the original supplier of the goods, you can request RHB Bank to issue a Back to Back LC (BBLC) to secure delivery from the actual supplier.

Assignment of Proceeds

Assignment of Proceeds is a convenient service rendered by RHB Bank to help you to redirect funds to the ultimate supplier with the proceeds you received under a Letter of Credit (LC).

Standby Letter of Credit

If you need a simple form of guarantee that is acceptable internationally, a Standby Letter of Credit (SBLC) will be the right choice as it is governed under the International Chamber of Commerce rules. RHB Bank as the Issuer will guarantee on your behalf in the event of default or non-performance.

Chinese RENMINBI (RMB) Trade Products and Payment Services

If you need to settle your cross-border transactions with China counterpart in Chinese Renminbi (RMB), RHB’s RMB Trade Products and Payments Services will be able to assist you.

Start building better international businesses with  

As your ally, helping you grow your business to new heights is our top priority. With RHB Reflex Premium Plus, we’ll sort out your financial, sales, accounting, people management and other processes so you can focus on giving your business your all.

View real-time banking balance and make payment directly from Financio then automated reconciliation to RHB Reflex.

Kakitangan/Talenox works via RHB Reflex Premium Plus to manage leave, payroll and statutory payments.

Take credit card payments on the go via MPOS where the collections are directly linked to your Business Current Account.

Eligibility

New and existing Exporters.

This product is subject to the availability of the Letter of Credit (LC) issuing bank & country limits and on case-to-case basis. It is available to existing borrowing customers who are named beneficiaries of the LC. The LC must be acceptable to RHB Bank.

Existing customers of the bank who are the first beneficiary of the Transferable Letter of Credit (TLC). No credit facility is required.

Customers who are exporters and as a middleman, where they are named beneficiary in the Master Letter of Credit.

New and existing Exporters. No credit facility is required.

New and existing customers who have been granted the Standby Letter of Credit (SBLC) facility.

These solutions may also help you maximise your business growth

RHB Multi-Currency Account

Manage up to 20 foreign currencies in separate wallets under one account.

RHB Export Trade Financing

Offers a variety of financing products to help you increase your working capital for international trading.

Please fill in the fields below so we can get in touch with you.

Only Deposit products are protected by PIDM up to RM250,000 for each depositor. Click here  for PIDM’s DIS brochure.

• Investments
• Life Insurance
• General Insurance
• Banking Methods
• Safe Deposit Box
• Digital Services
• Islamic Wealth Management
• Imports/Exports
• Asset Management
• Start-up / Entrepreneur
• Retailer / F&B
• Service Provider
• Online Business
• Retail Trader / Wholesaler
• Construction / Transportation
• Manufacturing
• Associations
• Investment Holding Company
• Education Provider
• Interest / Profit Rates
• Service Charges
• PIDM's DIS Brochure
• List of Insured Deposits
• Treasury Rates
• Vendor Management
• Sustainability
• RHB Foundation
• Corporate Governance
• Whistleblowing Policy
• General Information
• Investment Banking
• RHB Online Banking
• RHB TradeSmart

© 2024 RHB Bank Berhad 196501000373 (6171-M). All rights reserved.

• Customer Service Charter
• e-Banking Charter
• Privacy Policy
• Personal Data Protection Act
• Terms & Conditions
• Product Disclosure Sheet
• Disclaimers
• Fraud Awareness

You are about to enter a third party website and RHB Banking Group's privacy policy will cease to apply.

This link is provided for your convenience only, and shall not be considered or construed as an endorsement or verification of such linked website or its contents by RHB Banking Group.

RHB Banking Group also makes no warranties as to the status of this link or information contained in the website you are about to access.

PIDM Membership Representation

You are about to enter a third party website and RHB Banking Group's privacy policy will cease to apply.

We used cookies to improve your experience on our website. By continuing to use our website and/or accepting this message, you agree to our use of cookies. Please refer to our Privacy Policy  for more information.

• Submit Post
• Union Budget 2024

FEMA: Detailed Note on Export of services

As per Master Direction – Export of Goods and Services issued by RBI (FED Master Direction No. 16/2015-16)

Realization and repatriation of proceeds of export of goods / software / services

It is obligatory on the part of the exporter to realize and repatriate the full value of goods / software / services to India within a stipulated period from the date of export, as under:

(i) It has been decided in consultation with the Government of India that the period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further notice.

RBI Master Direction – Export of Goods and Services

(ii) In view of the outbreak of pandemic COVID-19, it has been decided, in consultation with the Government of India, to increase the period of realization and repatriation to India of the amount representing the full export value of goods or software or services exported, from nine months to fifteen months from the date of export, for the exports made up to or on July 31, 2020.

(iii) For goods exported to a warehouse established outside India, the proceeds shall be realized within fifteen months from the date of shipment of goods.

Counter-Trade Arrangement

Counter trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in US Dollar will be considered by the Reserve Bank subject to following conditions:

(i) All imports and exports under the arrangement should be at international prices in conformity with the Foreign Trade Policy and Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under.

(ii) No interest will be payable on balances standing to the credit of the Escrow Account but the funds temporarily rendered surplus may be held in a short-term deposit up to a total period of three months in a year (i.e., in a block of 12 months) and the banks may pay interest at the applicable rate.

(iii) No fund based/or non-fund based facilities would be permitted against the balances in the Escrow Account.

(iv) Application for permission for opening an Escrow Account may be made by the overseas exporter / organization through his / their AD Category – I bank to the Regional Office concerned of the Reserve Bank.

Export of Services

It is clarified that, in respect of export of services to which none of the Forms specified in these Regulations apply, the exporter may export such services without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the Act, and these Regulations, as also other rules and regulations made under the Act.

Set-off of export receivables against import payables

AD category –I banks may deal with the following requests received from their Exporter/Importer constituents for allowing set-off of outstanding export receivables against outstanding import payables:

i. Set-off of outstanding export receivables against outstanding import payables from/to the same overseas buyer/supplier.

ii. Set-off of outstanding export receivables against outstanding import payables with their overseas group/associate companies either on net basis or gross basis, through an in-house or outsourced centralized settlement arrangement.

The set-off shall be subject to the following conditions:

a. The arrangement shall be operationalized/supervised through/by one AD Category – I bank only

b. AD Category – I bank is satisfied with the bonafides of the transactions and ensures that there are no KYC/AML/CFT concerns;

c. The invoices under the transaction are not under investigation by Directorate of Enforcement/Central Bureau of Investigation or any other investigative agency;

d. Import/export of goods/services has been undertaken as per the extant Foreign Trade policy

e. The export / import transactions with ACU countries are kept outside the arrangement; (China is not in ACU countries list as per RBI)

f. Set-off of export receivables against goods shall not be allowed against import payables for services and vice versa.

g. AD Category – I bank shall ensure that import payables/export receivables are outstanding at the time of allowing set-off. Further, set-off shall be allowed between the export and import legs taking place during the same calendar year.

h. In case of bilateral settlement, the set-off shall be in respect of same overseas buyer/supplier subject to it being supported by verifiable agreement/mutual consent.

i. In case of settlement within the group/associates companies, the arrangement shall be backed by a written, legally enforceable agreement/contract. AD Category – I bank shall ensure that the terms of agreement are strictly adhered to;

j. Set-off shall not result in tax evasion/avoidance by any of the entities involved in such arrangement.

k. Third party guidelines shall be adhered to by the concerned entities, wherever applicable;

l. AD Category – I bank shall ensure compliance with all the regulatory requirement relating to the transactions;

m. AD Category – I bank may seek Auditors/CA certificate wherever felt necessary.

n. Each of the export and import transaction shall be reported separately (gross basis) in FETERS/EDPMS/IDPMS, as applicable.

o. AD Category – I bank to settle the transaction in E/IDPMS by utilizing the ‘set-off indicator’ and mentioning the details of shipping bills/bill of entry/invoice details being settled in the remark column (including details of entities involved).

Export of Services as per  Memorandum of Instructions on Project and Service Exports (PEM) 

C.1 (i) Contracts for export of consultancy, technical and other services by Indian companies/firms generally fall in the following categories:

(a) Preparation of project/feasibility reports, drawings, designs, etc.

(2) Supply of technical know-how/engineering services in different fields.

(3) Operation, maintenance and supervision of manufacturing plants, buildings and structures, etc.

(4) Management contracts for commercial concerns.

Export of services may also involve supply of some associated mechanical wherewithals, consumables and spares e.g. contractors may generally have to procure tools and instruments for their own personnel for performing their jobs.  They may sometimes be called upon to give performance guarantees but the scope of such guarantees would be limited to their own work, i.e. satisfactory performance of the personnel provided and/or technical etc. services rendered.

(ii) Indian exporters of services have normally to undertake overseas contracts on “cash” terms.  Overseas service contracts undertaken on “cash” terms do not require prior clearance of Reserve Bank or the Working Group if no facilities are required.  Resident individuals, firms and companies may, therefore, freely provide consultancy/technical/management services to overseas clients subject to the condition that the income earned abroad minus expenses will be promptly repatriated to India through normal banking channels.   Individuals/firms/companies executing service contract in computer software should, however, repatriate to India income equivalent to atleast 30% of contract value and the balance income upto 70% of contract value could be retained for meeting contract-related expenses abroad.  Indian companies/firms executing service contracts abroad, requiring facilities like opening of foreign currency bank accounts and site offices abroad, etc. will need approval from Authorised Dealer/Exim Bank/Working Group at the post-award stage.  In the case of exporters executing software service contracts abroad, authorised dealers may permit remittances towards maintenance expenses of the persons deputed abroad to execute such contracts, out of receipts of advance/down payments in respect of the contract from the overseas client and on submission of a declaration by the exporter that the aggregate exchange facilities already availed of / to be availed of for execution of the contract would be within the overall ceiling of project related expenses viz. 70% of the contract value.

Documents & compliances that every exporter needs to keep in mind

In terms of the GST law services qualify as ‘export’ where:

1. Supplier of service is located in India;

2. Recipient of service is located outside India;

3. Place of Supply (‘POS’) of service is outside India;

4. Payment for such service has been received by the supplier of service in convertible foreign exchange; and

5. Supplier of service and the recipient of service are not merely establishments of a distinct person

For cross-border transactions, unless specifically mentioned the default POS for services is the location of the recipient of service i.e. outside India. For specified services, POS is as follows:

• For services in relation to immovable property (eg. renting, construction, designing etc.) – POS is the location of such immovable property;
• For performance based services (eg. training programs, repair maintenance of goods or tour and travel) – POS is the place where such services are performed;
• For events – POS is where the event is conducted

It is relevant to note that in case of points a, b and c above in case the POS is in India, GST would be attracted even if the recipient of service is located outside India.

Another specified service is that where the supplier acts as an ‘intermediary’/ agent. POS in such cases is the location of the ‘intermediary’/ agent i.e. in India, accordingly same would also be eligible to GST. The concept of intermediary has opened a Pandoras box where most of the captive units exporting services have to face the wrath of litigations.

Accordingly, a service exporter should ensure documentation and compliance with respect to the following:

• Furnish a  LUT or Bond in case exports are intended to be made without payment of taxes
• Ensure that a robust Agreement/ Purchase Order is entered into with the recipient of services for export of services;
• Issue a tax invoice typically containing the following details:
• Endorsement stating “supply meant for export on payment of integrated tax” or “supply meant for export without payment of integrated tax”;
• Name, address and GSTIN of the supplier
• Invoice No. and date;
• Name and address of the recipient;
• HSN code of the services along with description
• Total value of services
• Signature of the supplier of the authorised signatory.

It must be ensured that the payments are received in convertible foreign exchange within the prescribed time period (typically one year from the date of export), else GST would be payable on the transaction. Further, robust documentation to prove the receipt of such payment (such as Foreign Inward Remittance Certificate, Bank Realisation Certificate etc.) should be maintained.

Further, exporters of notified services are also entitled for Duty Credit Scrip under the Services Exports from India Scheme (‘SEIS’) at a prescribed percentage (3%/5%/7%) of Net Foreign Exchange [i.e. Gross Earnings of Foreign Exchange minus Total expenses / payment / remittances of Foreign Exchange]. In addition, the benefit of refund under GST may also be explored. Further, although IEC is not a pre-condition for service exporters, however IEC is a pre-condition in case the exporter intends to claim benefit under SEIS.

It is therefore recommended that an exporter of goods/ services should ensure that complete and robust trail of documentation should be maintained to ensure that benefit of tax incentives granted by the Government for exports from India can be claimed.

Export Procedure

In general, an export procedure flows as stated below:

Step 1. Receipt of an Order

The exporter of goods is required to register with various authorities such as the income tax department and Reserve Bank of India (RBI). In addition to this, the exporter has to appoint agents who can collect orders from foreign customers (importer). The Indian exporter receives orders either directly from the importer or through indent houses.

Step 2. Obtaining License and Quota

After getting the order from the importer, the Indian exporter is required to secure an export license from the Government of India, for which the exporter has to apply to the Export Trade Control Authority and get a valid license.  The quota is referred to as the permitted total quantity of goods that can be exported.

Step 3. Letter of Credit

The exporter of the goods generally ask the importer for the letter of credit, or sometimes the importer himself sends the letter of credit along with the order.

Step 4. Fixing the Exchange Rate

Foreign exchange rate signifies the rate at which the home currency can be exchanged with the foreign currency i.e. the rate of the Indian rupee against the American Dollar. The foreign exchange rate fluctuates from time to time. Thus, the importer and exporter fix the exchange rate mutually.

Step 5. Foreign Exchange Formalities

An Indian exporter has to comply with certain foreign exchange formalities under exchange control regulations. As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is required to furnish a declaration in the form prescribed in a manner. The declaration states:-

I. The foreign exchange earned by the exporter on exports is required to be disposed of in the manner specified by RBI and within the specified period.

II. Shipping documents and negotiations are required to be done through authorised dealers in foreign exchange.

III. The payment against the goods exported will be collected through only approved methods.

Step 6. Preparation for Executing the Order

The exporter should make required arrangements for executing the order:

I. Marking and packing of the goods to be exported as per the importer’s specifications.

II. Getting the inspection certificate from the Export Inspection Agency by arranging the pre-shipment inspection.

III. Obtaining insurance policy from the Export Credit Guarantee Corporation (ECGC) to get protection against the credit risks.

IV. Obtaining a marine insurance policy as required.

V. Appointing a forwarding agent (also known as custom house agent) for handling the customs and other related matters.

Step 7. Formalities by a Forwarding Agent

The formalities to be performed by the agent include –

I. For exporting the goods, the forwarding agent first obtains a permit from the customs department.

II. He must disclose all the required details of the goods to be exported such as nature, quantity, and weight to the shipping company.

III. The forwarding agent has to prepare a shipping bill/order.

IV. The forwarding agent is required to make two copies of the port challans and pays the dues.

V. The master of the ship is responsible for the loading of the goods on the ship. The loading is to be done on the basis of the shipping order in the presence of customs officers.

VI. Once the goods are loaded on the ship, the master of the ship issues a receipt for the same.

Step 8. Bill of Lading

The Indian exporter of the goods approaches the shipping company and presents the receipt copy issued by the master of the ship and in return gets the Bill of Lading. Bill of lading is an official receipt which provides the full description of the goods loaded on the ship and the name of the port of destination.

Step 9. Shipment Advise to the Importer

The Indian exporter sends shipment advice to the importer of the goods so that the importer gets informed about the dispatch of the goods. The exporter sends a copy of the packing list, a non-negotiable copy of the Bill of Lading, and commercial invoice along with the advice note.

Step 10. Presentation of Documents to the Bank

The Indian exporter confirms that he possesses all necessary shipping documents namely; Marine Insurance Policy The Consular Invoice Certificate of Origin The Commercial Invoice The Bill of Lading Then the exporter draws a Bill of Exchange on the basis of the commercial invoice. The Bill of Exchange along with these documents is called Documentary Bill of Exchange. The exporter then hands over the same to his bank.

Step 11. The Realisation of Export Proceeds

In order to realise the proceeds of the export, the exporter of the goods has to undergo specific banking formalities. On submission of the bill of exchange, these formalities are initiated. Generally, the exporter receives payment in foreign exchange.

• « Previous Article
• Next Article »

Name: Shikha Mehra Chawla

Qualification: cs, company: n/a, location: new delhi, delhi, india, member since: 20 nov 2021 | total posts: 21, my published posts, join taxguru’s network for latest updates on income tax, gst, company law, corporate laws and other related subjects..

• Join Our whatsApp Channel
• Join Our Telegram Group

Leave a Comment

Your email address will not be published. Required fields are marked *

Post Comment

Subscribe to Our Daily Newsletter

Latest posts.

Live Course on Appeal, Pleading & Drafting under GST by CA Sachin Jain

Live Course on How to Reply to GST Notices & SCN & to Fake ITC Notices? – Last day to Register

Issuance of second SCN without adjudicating first is jurisdictionally void: CESTAT Mumbai

AO Cannot Transfer Income Tax Assessment Without Section 127 Order: Delhi HC

Professional Misconduct: CA Deviates from Assignment Requirements, Causing Loss

ICAI Penalizes CA for Negligence in Certifying Form 8

Failure to report instances of financial irregularities: ICAI suspends CA & imposes Penalty

SCN & orders issued within a short timeframe, Adjournment request disregarded: HC Set-aside GST order

SC issues Notice against HC Ruling on GST for Development Rights in JDA

ITC not eligible on Immovable Property construction for Commercial Renting

PPF for NRI’s?

Lack of Participation: Madras HC Remands Income Tax Reassessment & Penalty Orders

Featured posts.

Legal Services by Lawyers Excluded from Consumer Protection Laws: SC

ICAI Penalizes CA for Neglecting Registered Office Visit Before Filing SPICe Form

Unlisted Shares: Capital Gain Tax and Its Reporting in ITR 2

Arrest cannot be Routine on mere CGST Act Violation Allegations: Bombay HC

Real-Time Feedback Monitoring in Annual Information Statement introduced

Live webinar: Block Credit in GST under Section 17(5)

Non-filing of e-Form CHG-4 for satisfaction of Charges: MCA imposes ₹19.50 Lakh Penalty

Applicability & Non-Compliance in Cost Records/Audit: MCA Notices & ICMAI Advisory

Non-filing of e-Form DIR-12 for Additional Director regularisation: MCA Imposes ₹6 Lakh Penalty

Non-Appointment of CS: MCA imposes a whopping ₹21.73 Lakh Penalty

Popular posts.

Due Date Compliance Calendar May 2024

Corporate Compliance Calendar for May, 2024

GST Implications on Hotels & Restaurant Industry

May, 2024 Tax Compliance Tracker: Income Tax & GST Deadlines

Empanelment with Punjab & Sind Bank for Concurrent Audit: Last Date 08/06/2024

GST compliance calendar for May 2024

Time Limits in GSTR 3B for Late Input Tax Credit Claims

Importance of a Well-Crafted Signature for Chartered Accountants (CA)

CBDT Circular No. 6/2024: Relief for TDS Deductors on PAN-Aadhar Linkage

SC explains Principals of Condonation of delay