Simplifying EDF Waivers for Export Samples: A Call for Policy Change

As per RBI’s Master Direction on Export of Goods and Service, only status holder exporters are permitted to send export samples free of cost. The relevant extract is reproduced here under –

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C.1 Grant of EDF waiver

AD Category – I banks may consider requests for grant of EDF waiver from exporters as under:

Status holders shall be entitled to export freely exportable items (excluding Gems and Jewellery, Articles of Gold and precious metals) on free of cost basis for export promotion subject to an annual limit as below:

a.?Annual limit of 2% of average annual export realization during preceding three licensing years for all exporters (excluding the exporters of following sectors-(1) Gems and Jewellery Sector, (2) Articles of Gold and precious metals sector).

b.?Annual limit of Rupees One Crore or 2% of average annual export realization during preceding three licensing years, whichever is lower. (for exporters of the following sectors-(1) Gems and Jewellery Sector, (2) Articles of Gold and precious metals sector).

c.?In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to health programmes of international agencies such as UN, WHO-PAHO and Government health programmes, the annual limit shall be up to 8% of the average annual export realisation during preceding three licensing years.

Such free of cost supplies shall not be entitled to Duty Drawback or any other export incentive under any export promotion scheme.

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This provision is made in line with Para 1.29 (h) of FTP which allows export of freely exportable items on a free of cost basis for export promotion based on percentage of average annual export realization. Separate provisions are made under this Para for pharma companies. These are the privileges granted to status holders.

Exports of goods not involving any foreign exchange transaction directly or indirectly require the waiver of EDF procedure from the Reserve Bank.

Para 1.29 (h) of policy is primarily meant for export promotion and banks have been authorized to accommodate such transactions. However, free of cost exports are also essential irrespective of the fact whether the company is a status holder or not. In fact, policy has special provisions under 2.43 for exports of bonafide trade and technical samples. The relevant extract is reproduced here under –

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Exports of Specific Categories:

2.43 Export of Samples

(a) Exports of bonafide trade and technical samples of freely exportable item shall be allowed without any limit.

(b) The procedure for Export of Samples and Free of charge goods shall be governed by provisions given in Para 2.63 of Handbook of Procedures.

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These samples are needed to be exported sometimes on FOC basis because the policy specifically states that they are” bonafide trade and technical samples”. A company may require this to enter a new market, and the company may not have a status holder certificate. In such cases, the company has no option but to approach RBI for getting waiver of EDF. Since banks are not authorized to give EDF waiver, genuine companies face difficulties in obtaining permission from RBI, which ultimately delays the sending of samples.

Hence, separate provisions need to be made to directly allow bankers to accept and grant requests for EDF waiver.

Master direction, therefore, should be amended to include powers of granting EDF waiver for export of bonafide trade and technical samples, as covered under Para 2.43 of the FTP on Free of Cost basis.

This will not only bring ease of doing business but also save valuable time for exporters and help export promotion.

Hope the necessary action is taken by the concerned authorities.