Prohibited exports - backdated contracts?
As per Para 1.5 of the FT, In case an export or import that is permitted freely under FTP is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that shipment of export or import is made within original validity with respect to available balance and time period of an irrevocable letter of credit established before date of imposition of such restriction. However, a time limit for operationalising such LCs may be prescribed.
The irrevocable letter of credit was recently changed to 'irrevocable commercial letter of credit'.
DGFt now clarifies that while examining the documents submitted by applicant under Para 1.5 of FTP, it needs to also be ensured that the payments for exports covered under the documents are routed and deducted through the concerned commercial letter of credit and not from some other accounts/channels. Absence of the above mentioned mode and routing/deduction of payment would amount to violation of the Transitional Arrangements in Para 1.5 of FTP.
DGFT CIRCULAR NO. 4 (RE-2007)/2004-2009, Dated: August 16, 2007