Module: | MODULE A: INTERNATIONAL BANKING
Q115: Consider the following statements regarding advance payments received against exports:
1. When an exporter receives an advance payment from an overseas buyer, the physical shipment of goods must be made within 3 years from the date of receipt of the advance.
2. If the exporter is unable to make the shipment within the stipulated 3 year period, they are freely permitted to remit the refund of the unutilized advance payment at any time without intervention from an Authorized Dealer bank or the central bank.
3. An exporter may legally receive an advance payment where the export agreement itself explicitly provides for a manufacturing and shipment timeline extending beyond 3 years.
Which of the above statements is or are INCORRECT?
2. If the exporter is unable to make the shipment within the stipulated 3 year period, they are freely permitted to remit the refund of the unutilized advance payment at any time without intervention from an Authorized Dealer bank or the central bank.
3. An exporter may legally receive an advance payment where the export agreement itself explicitly provides for a manufacturing and shipment timeline extending beyond 3 years.
Which of the above statements is or are INCORRECT?
✅ Correct Answer: B
🎯 Quick Answer:
Statement 2 is the only incorrect statement.Structural Breakdown: The 2026 mandate requires the actual shipment to occur within 3 years of receiving the advance payment.
However, exporters dealing in heavy machinery or long-term capital goods can legally draft contracts that outline a shipment timeline extending beyond this 3 year window.
Historical Context: In previous regulatory regimes, shipments had to be completed within a strict 1 year period, causing massive compliance friction for infrastructure exporters who faced natural manufacturing and supply chain delays.
Causal Reasoning: Statement 2 is incorrect because if the 3 year timeline expires without a shipment being made, the exporter cannot simply send the money back.
Strict regulatory blocks prevent the free remittance of unutilized advances or the payment of interest after the expiry period without specific regulatory approval.
This protocol exists to prevent businesses from disguising external commercial borrowing or illegal loans as fake export advances.