Sending goods outside India for auction

This query is : Resolved

C B Prakash (Querist)
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25 January 2023 Sending goods outside India for auction. Example company A in India send machines to Mexico for auction. Price will not be known at the time sending the machines. Only auction agreement will be made available to us. How do I send the machines? and at what price I have to issue the invoice?. Price may change according to the bidding in the auction i.e, it may go up or down.

What are issues related to FEMA if price goes down in auction.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 Sending goods from India to Mexico for auction involves several considerations, especially when the final price is uncertain until the auction concludes. Here’s a structured approach to address your queries:

### Sending Machines to Mexico for Auction:

1. **Shipping Method**:
- Choose a suitable mode of transport (air freight or sea freight) based on the size and weight of the machines.
- Ensure compliance with export documentation requirements such as the Shipping Bill or Bill of Export, which are necessary for customs clearance.

2. **Invoice Value**:
- Since the final auction price is uncertain at the time of shipment, you can issue a proforma invoice or a commercial invoice with a nominal or estimated value.
- Mention on the invoice that the final price will be determined based on the auction results.

3. **Auction Agreement**:
- Obtain a copy of the auction agreement which outlines the terms and conditions of the auction process, including the responsibilities of both parties (sender and auction house).

### Issues Related to FEMA (Foreign Exchange Management Act):

1. **Repatriation of Funds**:
- If the auction proceeds are lower than expected or if there is a currency conversion loss due to unfavorable exchange rates, it may impact the repatriation of funds back to India.
- Ensure that the auction agreement and any related documentation address the mechanism for repatriation of funds to India in case of variations in the auction price.

2. **Currency Fluctuations**:
- Monitor exchange rate fluctuations between the Indian Rupee (INR) and Mexican Peso (MXN) as they can impact the final repatriation amount.
- Consider hedging options or consulting with a financial advisor to mitigate currency risk if significant amounts are involved.

3. **Compliance with FEMA Regulations**:
- Ensure compliance with FEMA regulations for outward remittances and repatriation of export proceeds.
- Obtain necessary approvals from authorized banks or financial institutions if required under FEMA guidelines.

4. **Documentation and Reporting**:
- Maintain accurate records of all transactions related to the export of goods for auction.
- File required forms and declarations with the Reserve Bank of India (RBI) or authorized banks for reporting purposes as per FEMA regulations.

### Conclusion:

- **Preparation**: Plan the export shipment carefully, ensuring compliance with export documentation and customs requirements.
- **Invoice**: Issue an invoice with an estimated value and clearly state the auction terms.
- **FEMA Compliance**: Stay informed about FEMA regulations regarding export proceeds and currency fluctuations.
- **Professional Advice**: Seek guidance from a customs broker, legal advisor, or financial consultant to navigate potential issues related to currency fluctuations and FEMA compliance.

By addressing these aspects comprehensively, you can facilitate the export of machines to Mexico for auction while mitigating potential risks related to currency fluctuations and ensuring compliance with FEMA regulations.