DGFT lists stringent norms for cotton yarn export registration

To ensure genuine export of cotton yarn, the Directorate General of Foreign Trade (DGFT) has come out with penal measures for breach of rules on registration of contracts for the new financial year.

Export shall be completed within 30 days from the date of issuance of registration certificate. An exporter failing to do so will be barred from further registration. In addition, a penalty could be imposed upon the exporter, ranging from a Rs 10,000 up to a maximum of five times the value of goods, whichever is more.

“These stringent measures have been suggested to ward off unscrupulous exporters who did register but never exported. Numerous instances were found last year, in case of cotton and cotton yarn, where exporters booked contracts but never exported. Cotton and cotton yarn being under quantitative restriction (amount of export is capped), creates irregularities in the entire system. It was observed that while more registrations could not be granted, those who took registration traded it with the ones who have already committed exports at exorbitant prices. Now that the cotton yarn registration is free, such checks and balances are necessary to remove anomaly,” said official sources.

Another reason for such penal measures is to discourage exports, since domestic demand is quite high. Therefore, genuine exporter, should export only after meeting domestic consumption demand.

Officials added that after the group of ministers (GoM) decided to allow 5.5 million bales of cotton exports in 2010-11 and exporters were given 45 days, the actual exports under such registered contracts were far less than the quantity approved by the GoM.

Therefore, the jurisdiction for registration for cotton and cotton yarn was shifted from the textile ministry to the commerce ministry.

Cotton is among the very few commodities facing stringent measures over and above the norms laid out in general trade policy.

Besides these measures, there are others specified to check the authenticity of exports. It has been stated as a condition that the registration of contract for yarn exports will be allowed only if the exporter furnishes a copy of irrevocable letter of credit authenticated by an Indian bank and a copy of a Foreign Inward Remittance Certificate (FIRC).

FIRC shows receipt of remittance from the foreign buyer as proof of having received full advance payment or a minimum of 25 per cent of advance payment and the balance as cash against delivery. An irrevocable letter of credit is one which cannot be cancelled and this guarantees a buyer’s payment to a seller will be received on time and for the correct amount.

These documents, along with a copy of export contract and import export code are to be submitted.