What changed
Exim Bank signed a Line of Credit agreement with the Government of Ethiopia on February 18, 2011, effective from May 24, 2011, for USD 91 million. The credit is specifically for financing eligible Indian exports to develop Ethiopia's sugar industry, with a minimum 75% Indian content requirement.
What it means for you
Banks can facilitate exports under this LOC with the 75% Indian sourcing rule and no agency commission from the credit. Disbursement timelines differ: 48 months from project completion for project exports, and 72 months from agreement date (February 17, 2017) for supply contracts. Exporters must use GR/SDF forms and can pay commission from own resources or EEFC accounts after full payment realization.
What you must do
- Inform exporter customers about this LOC and direct them to Exim Bank for full details.
- Ensure shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Allow agency commission remittances only after full contract value realization, using exporter's own resources or EEFC balances.
- Verify that at least 75% of contract value is sourced from India for exports under this LOC.
Who it affects
AD Category-I banks handling export transactions, Exporters of goods, services, machinery, and equipment to Ethiopia, Exim Bank as the credit provider
What is the minimum Indian content requirement for exports under this LOC?
At least 75% of the contract price must be supplied from India. The remaining 25% (excluding consultancy services) can be procured from outside India.
What are the disbursement deadlines for this Line of Credit?
For project exports, the last date for opening LCs and disbursement is 48 months from the scheduled completion date of the contract. For supply contracts, it is 72 months from the agreement execution date, i.e., February 17, 2017.
Can exporters pay agency commission under this LOC?
No agency commission is payable from the LOC funds. However, exporters may use their own resources or EEFC account balances to pay commission in free foreign exchange after full contract value realization, subject to prevailing RBI instructions.