‘Showing declared value on bill of lading not mandatory’

We want to import Iran-origin material through a thirdcountry seller, either in US dollars or in another currency. When they want to send payment in advance to the seller, their bank did not accept payment either in USD or any other currency, saying they are regularly dealing in USD through their correspondent bank in the US. So, they want to avoid banking transactions related to Iran-origin goods. What are the RBI guidelines?

As per Regulation 5 (2) (b) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016, payment should be made in a currency appropriate to the country of shipment of goods. In your case, it appears the bank has taken a decision not to fall foul of the US sanctions against Iran. It is a matter of the individual bank’s policy.

Is the shipping line under mandatory obligation to mention the value declared by shipper on bill of lading (BL)?

Rule 3 of the Rules Relating to Bill of Lading set out in the Schedule to the Carriage of Goods by Sea Act, 1925, does not mandate the value of the goods should be mentioned in the bill of lading. But where it is stated as declared by the shipper, the liability of the carrier will be limited to the value stated, in the event of loss of cargo.

We had placed an order on a foreign supplier. We know that the equipment contains some components exported by another Indian party by claiming export incentives. Will there be any impact on us, if we import the equipment?

The export of components by the Indian party to the foreign supplier against receipt of payment in foreign exchange for full value of components, and your import from the foreign party against payment in foreign exchange for full value of the equipment, are independent transactions. So, I do not see any impact on you, when the equipment is imported.

Under a merchanting trade transaction, can an Indian make payment to a Russian supplier in USD for shipment to a buyer in Iran and get paid in non-convertible rupees?

Para C.14 of RBI FED Master Direction No. 17/2016-17 dated January 1, 2016 (as amended), deals with the merchanting trade. It does not deal specifically with the issue you have raised. What you propose does not quite reconcile, because the mechanism for receipt in rupees is for exports to Iran from India (Para 2.46 II (b) of FTP). You may move RBI for clarity.

If export proceeds are received short due to a contractual penalty imposed by the buyer, will the proportionate drawback have to be surrendered?

For the shortfall in realisation of export proceeds, you have to move bank, seeking a write-off. In that case, the provisions of sub-para (iv) of Para C.23 of RBI FED Master Direction no. 16/2015-16 dated January 1, 2016 (as amended), dealing with export of goods and services will come into play. It permits the banks to allow write-off provided the exporter has surrendered proportionate export incentives, if any, availed of in respect of the relative shipments. The AD Category-i bank should obtain documents evidencing surrender of export incentives availed before permitting the relevant bills to be written off.