India's Directorate General of Foreign Trade (DGFT) says some exporters are illegally obtaining registration certificates for wheat exports under letter of credit (L/C) terms using "improper documents" in attempts to bypass new legislation.

As a result, the directorate has ordered that all L/Cs for wheat exports should be verified while exporters or bankers complicit with the production of fraudulent documentation face prosecution.

Plugging the loophole

Last month India banned exports of wheat due to soaring global prices, but exports already arranged under L/C terms before the ban are still allowed (DC World News, 16 May 2022).

"In order to plug the loophole, it has been decided that regional authorities will do a physical verification of all L/Cs, whether already approved or under process," according to a DGTF notice. If necessary, a professional agency may be authorised to verify the L/C documents it adds.

Legal action

"In cases where the L/C date is on or prior to 13 May [2022] but the SWIFT message/message exchange date between the Indian and foreign bank is after 13 May 2022, regional authorities may conduct a full investigation if these are found to be antedated," the notice says.

Legal proceedings will be issued against bankers found acting complicitly in cases where antedating is established the notice concludes. It says exporters found to have antedated L/C documentation will face immediate legal proceedings.

The DGFT's notice on this matter can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.