My struggle with e-commerce exports
An in depth details explaining the pain of sellers and non-supportive government.
China’s retail export through e-commerce was 1 Trillion Yuan in 2015 of which 11.5 % approximately 15 billion dollars was B2C.
With the advent of e-commerce in India, sellers are waking up to the possibilities of retail export. It’s picking pace in India. Currently retail exports form a very small fraction of e-commerce. It has a huge potential to grow. This growth has been marked down by age old rules, harassment by government officials and bullying by banks.
Sellers are being forced to do retail exports the illegal way. They sell low cost products ranging from 10-50 dollars. If you export by commercial method, sellers have to pay high clearance charges. Also the amount received on sales will be paid after deducting commission and other charges. There are times when the buyer chooses to return back the product. In such cases sellers refund the amount completely as getting back a product sold through e-commerce is a challenging task. Sellers end up paying custom duty and other charges in order to get their product back. Since no one wishes to go through this daunting task they choose to forgo this money.
My struggle began in 2015 when Amazon Global sales team approached me for opening an account on Amazon.co.uk. The option of selling internationally was tempting and I on boarded with them. I inquired them about the documents required and Amazon clearly stated that there is nothing required. They helped me tie up with a courier company called Bombino Express.
Two months down the line I was happy sending my goods to US when I spoke to one of my friends Saurabh and explained about the export that I have been doing. He enlightened me about the requirement of IEC (Import Export Code) and the importance of quoting it on every shipment. Immediately I contacted the courier partner and they stated that since my products were being sent in sample mode this requirement has been bypassed. I was not satisfied by this reply and applied for IEC and quoted them on all the shipments sent.
I had started exporting from July and in February 2016 I approached the DGFT, Kormangala office to get my queries resolved related to e-commerce retail exports. There I found that none of the officials were aware that such a medium of exports exist.
My search led me to Export Policy FY2015-20. The copy that I had in February 2016 just mentioned e-commerce export and MEIS scheme for 5 categories of product. It said that exports should be through foreign post office with a value below Rs 25000. The details were later added in the revised versions of policy. A visit to Foreign post office gave the same results. None of the officials had any details on the export through e-commerce, even though I had a print out of the policy in my hand.
Mails to Government organisation
I started contacting various organisation in order to understand the legal way to do an e-commerce retail export (Refer image email-1). Dropped a mail (Refer image email-2) to FIEO (Federation of Indian Export Organisations) and explained the issues plaguing exporters. I had a personal call with one of the members. They accepted the issues, since not many of them had raised the concern they could not take it forward.
I was joined by Abhijit Patil who helped me connect with the DGFT team. Together we sent in mails and reminders to understand the export procedure. We were disheartened as none of the agencies responded with any details.
By March 2016, being an apparel exporter, I dropped a mail to R Balaji of APEC India (Refer image email -3). I wasn’t expecting any response and I was right. Tempers and frustrations were running high. Up to this point nothing was clear on the export policies. On 15 March 2016, I dropped a mail to all the departments combined (RBI, DGFT, DIPP and others). RBI contacted me stating that the queries can only be handled by Foreign Exchange Department. That’s when I came in contact with Sakshi Parihar.
She helped me with few queries related to compliance of export. As per her statement the export procedure followed by us was correct except that the products cannot be shipped as samples. I explained her the high costs involving with commercial exports. The courier law clearly states that no remittances can be received on sample exports. She also put me in contact with ParmeshwarNath , paypal head.
On contacting Parmeshwar I found that ebay has been fighting similar battle from a long time. All payments through Paypal are routed through OPGSP (online payment gateway service provider). This ensures that all payments received for products sold through eBay meet RBI compliance. You can refer to eBay RBI issue where eBay was banned for few months from selling online as payments received were in dollars.
In April since none of the government authorities were responding, the issue was raised with the PG portal. Find the response in image. Even a tweet to mociseva was received with an answer to connect to another department (refer image tweet-1) .
Bulk Shipment issues.
Since there was no answer with any department I gave up and focussed on my business. In July 2016 I started sending bulk shipments to USA. This opened another can of worms.
All shipments sent to US FBA warehouse are treated as sales and a Sales invoice needs to be raised. Indian government does not have any rules for international stock transfer.
Sending a bulk shipment involves realisation of transaction against the export that has been made. In order to do so you need a Foreign inward remittance certificate (FIRC). This document ascertains that you have exported and that the remittance received is against it. This has to be attached with Exchange control copy of customs and submitted along with MAWB (Airwaybill), Invoice and Packing list to your bank. The bank will then realise the export thus generating e-BRC. The realisation date is within 270 days of export. You need to apply for an extension with your bank citing valid reasons.
Export is a highly regulated process. You need to comply with all the rules of RBI (FEMA) else the consequences involve severe legal issues. There are sellers who are behind bars for failing to comply with such laws.
I wasn’t aware of the facts mentioned above. To start off I just applied for FIRC with HSBC bank as Amazon routes all it’s international payments through them. HSBC takes it’s own time to respond. For an application sent in July 2016 they came back with a response in September. With the new FEDAI circular FIRC’s were no longer issued. I received inward remittance details from them.
When I approached my bank with the details, they stated that since the amount received was in rupees and the export was in dollars, it cannot be realised. I contacted Sakshi and she sent me letter explaining how through EDPMS banks could realise the transaction in other currencies.
E-BRC and success
Once again I approached the bank with the new information. They reluctantly agreed to work on it but said I need to give them the inward remittance details of HSBC. Since I had remittance details till July 2016 only from my previous correspondence, I needed details after that. So in December 2016 I applied for the remaining transactions that is from July to December. HSBC responded after 20 days stating they needed transaction details. These details are found in the banks inward via NEFT. To get them one has to check all those dates on which a remittance was received and write them down individually. This consumed another 20 days and we were almost at the end of February 2017.
After sharing the details HSBC did not respond. As a result I raised a complaint with banking ombudsman. The copy of the letter was attached and sent to HSBC who replied within a week with all the transaction details.
Finally all the details were ready but another challenge remained. The amount received in rupees was not matching exactly with the shipment sent. In a normal export the amount exported against an Invoice will receive a payment equal to the invoice raised. In case of Amazon’s export there are times when you receive more or less payment for a shipment sent. For example if you have sent goods worth 1000 dollars you might end up getting 900 or 1500 dollars as payment. Also Amazon does not provide payments against Invoice numbers that has been raised by us.
There is also an uncertainty at what value the goods will be sold in the warehouse. There are times when you need to destroy them. Since there is no invoice to invoice payment realisation becomes difficult.
For this a solution has been provided where banks can realise them partially and generate e-brc. So finally they were able to close the transaction and e-brc was generated successfully.
I would like to highlight few important points
1) Amazon’s Global selling team blindly on boards sellers. Make sure you know the details and pitfalls of selling internationally.
2) Amazon’s Global team also misguides seller’s intentionally. Check with fellow sellers before believing their statements.
3) HSBC still continues to ignore sellers request for inward remittance. Many sellers have applied through their banks but no response received. It’s better you apply early so that the time-line for realisation is met.
4) There is still no clarification as to how Amazon transfer’s money to India. A complaint has been made to RBI in January for which response is pending. Also a mail to Jeff and Amit gave no results.
If you have been exporting through Amazon and would like to know whether you are in trouble with RBI. Visit your Forex branch of your bank and ask them to check your IEC in the caution list. If you are in the list don’t worry you still have time to rectify this.
There are lot more things that this article does not cover. I will try to answer them in subsequent ones. We maintain an International whatsapp group but that’s running full. In order to get quick answers to queries on International selling you can join the ECSAI.org telegram group by registering on this link https://goo.gl/vxfKkX
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