EPCG Export Obligation in USD - Exchange rate to be considered for export obligation calaculation

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VIJAYALAKSHMI K (Querist)
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23 January 2024 Dear All,

I have a query regarding exchange rate to be applied for calculation of export obligation in USD (as per SB). Do we have to apply exchange rate prevailing on the day of SB filing or shall we apply exchange rate as per licence.

My understanding after reading attached POLICY CIRCULAR NO. 8(RE-98)/98-99 dt.:28.05.98 of DGFT, we shall take exchange rate as per EPCG licence for calculation of export obligation in USD and no need to apply exchange rate prevailing on the day of SB filing.

Is that correct? what is the practice followed in the trade?

Can anyone help me on this?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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06 July 2024 In the context of calculating export obligations in USD under an EPCG (Export Promotion Capital Goods) licence, the practice and procedure can vary based on regulatory requirements and trade practices. Here’s a general understanding and approach:

1. **Exchange Rate for Export Obligation Calculation**:
- As per the EPCG scheme guidelines and relevant policy circulars, the exchange rate to be used for calculating export obligations is typically specified in the EPCG licence itself.
- The exchange rate mentioned in the EPCG licence is considered authoritative for determining the value of exports in USD against which the export obligations are calculated.

2. **Day of SB Filing vs. Licence Exchange Rate**:
- While the exchange rate prevailing on the day of Shipping Bill (SB) filing is used for customs purposes and for reporting the value of exports to authorities like DGFT (Directorate General of Foreign Trade), the exchange rate for fulfilling export obligations under EPCG may differ.
- The EPCG licence often specifies a fixed exchange rate or a mechanism to determine the exchange rate (e.g., average rate for the quarter, rate on the date of export, etc.).

3. **Policy Circular No. 8(RE-98)/98-99**:
- This circular from DGFT may provide specific guidance on exchange rate applicability for EPCG obligations. It’s crucial to review this circular thoroughly to understand any specific provisions or updates regarding exchange rate applicability.

4. **Trade Practice and Compliance**:
- Generally, exporters follow the exchange rate mentioned in the EPCG licence to compute their export obligations. This ensures compliance with the conditions stipulated in the licence and avoids discrepancies during audits or assessments.
- Trade practices may vary, but adherence to the exchange rate specified in the licence is essential for consistency and regulatory compliance.

5. **Consultation and Clarification**:
- For precise guidance tailored to your situation, consulting with a trade consultant or a DGFT advisor would be beneficial. They can provide insights based on current regulations and practices specific to your industry and export scenario.
- Additionally, reaching out to DGFT or related authorities for clarification on any ambiguities in the policy circular or specific licence terms is advisable.

In summary, while the exchange rate for SB filing and export obligation calculation may differ, the exchange rate specified in your EPCG licence should be used for determining export obligations in USD, as per the terms and conditions laid out in the licence and relevant policy circulars. Always ensure to align your practices with current regulatory requirements and seek expert advice for complex scenarios.