FEDAI rules related to Normal Transit Period and the notional due date

The 10^th edition of FEDAI Rules came in force from 01 April 2019. Concepts of normal transit period and notional due date are linked to the interest rate on export bills and to arrive at the due date of the bill/export credit. Many people get confused with the Normal Transit period with the time taken for the arrival of the goods at the destination. It is not so. The Normal transit period comprises the average period normally involved from the date of negotiation/purchase/discount till the receipt of the bill proceeds.

FEDAI rule 2.3 has prescribed a Normal transit period for different categories of export business which are as under.

1. Fixed Due Date: The actual due date is already known in case of usance bills where due dates are fixed or are reckoned from the date of shipment or date of bill of exchange etc. No need to calculate normal transit period for usance bills. 
2. In the case of Bill drawn on DP/At Sight Basis and not under Letter of Credit (LC) Normal Transit period applicable as under.

AD Bank may apply transit period that varies (Higher or lower) from above prescribed NTP for exceptional situations based on historic data for specific exporter/overseas buyer/supply destination and mode of transportation etc. Any deviation from the above prescribed NTP should be documented with the rationale for such deviation. However, if the bank extending finance beyond the above prescribed NTP, the maximum period is restricted up to 90 days from the date of shipment. In the case of exports to a county under United Nations Guidelines Normal transit period shall be a maximum of 120 days.

Further, AD Bank should be responsible to demonstrate the document relying upon which the facility of post-shipment export finance provided for extended/reduced NTP period. It is important to note that no changes in due date shall be permitted subsequent to the purchase, discounting or negotiation of the export bill.

The Notional Due dates in case of Bills drawn in Rupees under Letters of Credit (L/C) reimbursement are as under.

TT reimbursement under Letters of Credit (L/C)

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