What changed
Exim Bank signed a Line of Credit agreement with the Government of Ethiopia on January 27, 2009, effective June 1, 2009, for USD 166.23 million. The credit finances Indian goods and services for Ethiopia's sugar industry, with a minimum 85% Indian content. Last date for LC opening and disbursement is 48 months for project exports and 72 months (January 26, 2015) for supply contracts from the agreement date.
What it means for you
Banks must ensure that exports under this LOC comply with the 85% Indian sourcing rule and that shipments are declared on GR/SDF forms. No agency commission is payable under the LOC, but if needed, exporters can use their own resources or EEFC balances for commission in free foreign exchange after full payment realization. AD Category-I banks should guide exporters to Exim Bank for detailed terms.
What you must do
- Inform exporter clients about the LOC terms, especially the 85% Indian content requirement and the 48/72-month timelines for LC and disbursement.
- Ensure all shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Allow remittance of agency commission only after full contract value realization, using exporter's own resources or EEFC balances, and only if permitted under prevailing guidelines.
- Direct exporters to Exim Bank's Mumbai office or website for complete LOC details.
Who it affects
AD Category-I banks handling export transactions under Exim Bank LOCs, Exporters of goods and services for Ethiopia's sugar industry, Exim Bank as the credit provider
What is the minimum Indian content required under this LOC?
At least 85% of the contract price must be supplied from India; the remaining 15% (excluding consultancy services) can be procured from outside India.
Can agency commission be paid under this LOC?
No agency commission is payable under the LOC. However, if required, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full payment realization, subject to prevailing instructions.
What are the key deadlines for this LOC?
The last date for opening LCs and disbursement is 48 months from scheduled completion of project contracts, or 72 months (January 26, 2015) from the agreement execution date for supply contracts.