India's Directorate General of Foreign Trade (DGFT) is reportedly seeking details of stranded rice cargoes for which agreements and letters of credit L/Cs pre-date restrictions on rice exports.

In a surprise move announced 8 September, India banned the export of broken rice and imposed a 20 per cent duty on unmilled white rice, husked brown rice and semi-milled or wholly-milled rice. Exports of basmati rice are not affected.

As a result, rice cargoes in transit have become stranded as exporters assess the impacts of the ban and duty increases, which could mean that they have to pay an additional 20 per cent duty on shipments sold to international importers at an agreed price.

Issues to resolve

Amongst the issues to be resolved is whether the increased duty payable on the rice subject to the increase is payable on shipments for which agreements were signed or L/Cs opened before the 8 September ban.

When India banned exports of wheat earlier this year due to soaring global prices, exports already arranged under L/C terms before the ban are still allowed (DC World News, 16 May 2022) but it is unclear whether this applies to the stranded rice cargoes.

It is not surprising that the DGFT is seeking details of the stranded rice cargoes because after the wheat ban was imposed, the directorate said some exporters illegally obtained registration certificates for wheat exports under L/C terms using "improper documents" in attempts to bypass the ban (DC World News, 1 June 2022).

Food security and inflation

India has had a poor rice harvest this season while the finance ministry has justified the export restrictions on the basis of concerns about inflation and food security amidst soaring global prices.

The stranded rice shipments are reportedly destined primarily to the UAE, China, Senegal and Sri Lanka.

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