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TMI BlogMaster Circular on Import of Goods and Services (As amended up to June 18, 2015)X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for detailed information, if so needed. Yours faithfully, (C.D.Srinivasan) Chief General Manager INDEX Section I - Introduction Section II - General Guidelines for imports B.1. General Guidelines B.2. Form A-1 B.3. Import Licenses B.4. Obligation of Purchaser of Foreign Exchange B.5. Time Limit for Settlement of Import Payments B.6. Import of Foreign exchange / Indian Rupees B.7. Third Party Payment for Import Transactions Section III - Operational Guidelines for Imports C.1. Advance Remittance C.2. Interest on Import Bills C.3. Remittances against Replacement Imports C.4. Guarantee for Replacement Import C.5. Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites C.6. Receipt of Import Bills/Documents by the Importer Directly from Overseas Suppliers C.7. Evidence of Import C.8. Issue of acknowledgement C.9. Verification and Preservation C.10. Follow up for Import Evidence C.11. Issue of Bank Guarantee C.12. Import of Gold C.13. Import of Other Precious Metals C.14. Import Factoring C.15. Merchanting Trade Annex - 1 Annex - 2 Annex - 3 Appendix Consolidated List of Circulars in the Mast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are made available by the importer and the remittance is for bona fide trade transactions as per applicable laws in force. B.3. Import Licences Except for goods included in the negative list which require licence under the Foreign Trade Policy in force, AD Category - I banks may freely open letters of credit and allow remittances for import. While opening letters of credit, the 'For Exchange Control purposes' copy of the licence should be called for and special conditions, if any, attached to such licences should be adhered to. After effecting remittances under the licence, AD Category - I banks may preserve the copies of utilised licence /s till they are verified by the internal auditors or inspectors. B.4. Obligation of Purchaser of Foreign Exchange (i) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorised Dealer Category - I bank under Section 10(5) of the Act or to use it for any other purpose for which acquisition of foreign exchange is permissible under the said Act or Rules or Regulations framed there und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of Section 6 of the Foreign Exchange Management Act, 1999, and the Foreign Exchange Management (Export and Import of Currency) Regulations 2000, made by Reserve Bank vide Notification No.FEMA 6/2000-RB dated May 3, 2000, as amended from time to time. (ii) Reserve Bank may allow a person to bring into India currency notes of Government of India and / or of Reserve Bank subject to such terms and conditions as the Reserve Bank may stipulate. B.6.1. Import of Foreign Exchange into India A person may - (i) Send into India, without limit, foreign exchange in any form other than currency notes, bank notes and travellers cheques; (ii) Bring into India from any place outside India, without limit, foreign exchange (other than unissued notes), which shall be subject to the condition that such person makes, on arrival in India, a declaration to the Custom Authorities at the Airport in the Currency Declaration Form (CDF) annexed to these Regulations; provided further that it shall not be necessary to make such declaration where the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in by such person at any one time does not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guarantee is issued against the counter-guarantee of an international bank of repute situated outside India, is obtained. (b) In cases where the importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/State Government/s) is unable to obtain bank guarantee from overseas suppliers and the AD Category - I bank is satisfied about the track record and bonafides of the importer, the requirement of the bank guarantee / standby Letter of Credit may not be insisted upon for advance remittances up to USD 5,000,000 (US Dollar five million). AD Category - I banks may frame their own internal guidelines to deal with such cases as per a suitable policy framed by the bank's Board of Directors. (c) A Public Sector Company or a Department/Undertaking of the Government of India / State Government/s which is not in a position to obtain a guarantee from an international bank of repute against an advance payment, is required to obtain a specific waiver for the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100,000. (ii) All payments towards advance remittance for imports shall be subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 million, for direct import of each aircraft, helicopter and other aviation related purchases. The remittances for the above transactions shall be subject to the following conditions: i The AD Category - I banks should undertake the transactions based on their commercial judgment and after being satisfied about the bonafide of the transactions. KYC and due diligence exercise should be done by the AD Category-I banks for the Indian importer entity and the overseas manufacturer company as well. ii. Advance payments should be made strictly as per the terms of the sale contract and are made directly to the account of the manufacturer (supplier) concerned. iii. AD Category - I bank may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors. iv. In the case of a Public Sector Company or a Department / Undertaking of Central /State Governments, the AD Category - I bank shall ensure that the requirement of bank guarantee has been specifically waived by the Ministry of Finance, Government of India for advance remittances exceeding USD 100,000. v. Physical import of goods into India is made within six months (three years in case of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e import bills, remittances may be made only after reducing the proportionate interest for the unexpired portion of usance at the rate at which interest has been claimed or LIBOR of the currency in which the goods have been invoiced, whichever is applicable. Where interest is not separately claimed or expressly indicated, remittances may be allowed after deducting the proportionate interest for the unexpired portion of usance at the prevailing LIBOR of the currency of invoice. C.3. Remittances against Replacement Imports Where goods are short-supplied, damaged, short-landed or lost in transit and the Exchange Control Copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the original endorsement to the extent of the value of the lost goods may be cancelled by the AD Category - I bank and fresh remittance for replacement imports may be permitted without reference to Reserve Bank, provided, the insurance claim relating to the lost goods has been settled in favour of the importer. It may be ensured that the consignment being replaced is shipped within the validity period of the license. C.4. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort documents by the importer directly from overseas suppliers in case of specified sectors As a sector specific measure, AD Category - I banks are permitted to allow remittance for imports up to USD 300,000 where the importer of rough diamonds, rough precious and semi-precious stones has received the import bills / documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. AD Category - I banks may undertake such transactions subject to the following conditions: (i) The import would be subject to the prevailing Foreign Trade Policy. (ii) The transactions are based on their commercial judgment and they are satisfied about the bonafides of the transactions. (iii) AD Category - I banks should do the KYC and due diligence exercise and should be fully satisfied about the financial standing / status and track record of the importer customer. Before extending the facility, they should also obtain a report on each individual overseas supplier from the overseas banker or reputed overseas credit rating agency. C.6.3. Receipt of import documents by the AD Category - I bank directly from overseas suppliers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s than USD 1,000,000 or its equivalent. (b) The importer is a company listed on a stock exchange in India and whose net worth is not less than ₹ 100 crore as on the date of its last audited balance sheet, or, the importer is a public sector company or an undertaking of the Government of India or its departments. (ii) The above facility may also be extended to autonomous bodies, including scientific bodies/academic institutions, such as Indian Institute of Science / Indian Institute of Technology, etc. whose accounts are audited by the Comptroller and Auditor General of India (CAG). AD Category - I bank may insist on a declaration from the auditor/CEO of such institutions that their accounts are audited by CAG. C.7.3. Non-physical Imports (i) Where imports are made in non-physical form, i.e., software or data through internet / datacom channels and drawings and designs through e-mail / fax, a certificate from a Chartered Accountant that the software / data / drawing/ design has been received by the importer, may be obtained. (ii) AD Category - I bank should advise importers to keep Customs Authorities informed of the imports made by them under this clause. C.8. Issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bank Guarantee AD Category - I banks are permitted to issue guarantee on behalf of their importer customers in terms of Notification No. FEMA 8/2000-RB dated May 3, 2000, as amended from time to time. C.12.1 Import of Gold * It was made incumbent on all nominated banks / agencies / entities from July 22, 2013 onwards to ensure that at least one fifth of every lot of import of gold (in any form or purity) is exclusively made available for the purpose of export. This 20:80 principle of import of gold was withdrawn on November 28, 2014. However, the obligation to export under the 20:80 scheme would apply to the unutilised gold imported before November 28, 2014. * Nominated banks and nominated agencies, as notified by DGFT, are permitted to import gold on consignment basis. All sale of gold domestically will, however, be against upfront payment. Nominated banks are free to grant gold metal loans. * Star and Premier Trading Houses (STH/PTH) can import gold on Document against Payment (DP) basis as per entitlement without any end use restrictions. * The import of gold coins and medallions is permitted. However, prohibition on sell of gold coins and medallions by banks continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omer (KYC) norms and Anti-Money Laundering (AML) guidelines, issued by the Reserve Bank are adhered to while undertaking import of the metals and rough, cut and polished diamonds. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide and are not intended for interest / currency arbitrage. C.13.2. Import of / Platinum / Silver on Unfixed Price Basis The nominated agency/bank may import platinum and silver, on outright purchase basis subject to the condition that although ownership of the same shall be passed on to the importer at the time of import itself, the price of shall be fixed later, as and when the importer sells to the users but within the permissible time period for settling the transaction. C.14. Import Factoring (i) AD Category - I bank may enter into arrangements with international factoring companies of repute, preferably members of Factors Chain International, without the approval of Reserve Bank. (ii) They will have to ensure compliance with the extant foreign exchange directions relating to imports, Foreign Trade Policy in force and any other guidelines/directives issued by Rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier, AD bank may handle such transactions by providing facility based on commercial judgement. It may, however, be ensured that any such advance payment for the import leg beyond USD 200,000/- per transaction, the same should be paid against Bank Guarantee / LC from an international bank of repute, except in cases and to the extent where payment for export leg has been received in advance; (h) Letter of Credit to the supplier is permitted against confirmed export order keeping in view the outlay and completion of the transaction within nine months; (i) Payment for import leg may also be allowed to be made out of the balances in Exchange Earners Foreign Currency Account (EEFC) of the Merchant Trader. (j) AD bank should ensure one-to-one matching in case of each Merchanting Trade transaction and report defaults in any leg by the traders to the concerned Regional Office of RBI, on half yearly basis in the format as given in Annex 3, within 15 days from the close of each half year, i.e. June and December. (k) The names of defaulting Merchanting Traders, where outstanding reaches 5% of their annual export earnings, would be Caution-listed. (l) The KYC and AML guidelines should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow up for Evidence of Import July 12, 2005 11 AP(DIR Series) Circular No. 33 Liberalisation of Export and Import procedures February 28, 2007 12 AP(DIR Series) Circular No. 34 Import of Goods of Value USD 100,000 and Less -Clarification on Follow up for Evidence of Import March 2, 2007 13 AP(DIR Series) Circular No. 63 Import of Equipments by BPO Companies in India for International Call Centre May 25, 2007 14 AP(DIR Series) Circular No. 77 Advance Remittance for Import of aircrafts / helicopters / other aviation related purchases June 29, 2007 15 AP(DIR Series) Circular No. 18 Direct Receipt of Import Bills / Documents - Liberalisation November 7, 2007 16 AP(DIR Series) Circular No. 37 Direct Receipt of Import Bills / Documents for Import of Rough Precious & Semi-Precious Stones April 16, 2008 17 AP(DIR Series) Circular No. 03 Advance Remittance for Import of Rough Diamonds August 4, 2008 18 AP(DIR Series) Circular No. 08 Advance Remittance for Import of Rough Diamonds August 21, 2008 19 AP(DIR Series) Circular No. 09 Foreign Exchange Management Act, 1999- Advance Remittance for Import of Goods - Liberalisation August 21, 2008 20 AP(DIR Serie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty payments for export / import transactions February 04, 2014 42 AP(DIR Series) Circular No.103 Import of Gold / Gold Dore by Nominated Banks /Agencies /Entities - Clarifications February 14, 2014 43 AP(DIR Series) Circular No.115 Merchanting Trade Transactions - Revised guidelines March 28, 2014 44 A P (DIR Series) Circular No.116 Advance Remittance for Import of Rough Diamonds April 01, 2014 45 AP(DIR Series) Circular No.122 Trade Credits for Imports into India - Review of all-in-cost ceiling April 10, 2014 46 AP(DIR Series) Circular No.133 Import of Gold by Nominated Banks / Agencies / Entities May 21, 2014 47 AP(DIR Series) Circular No.146 Export & Import of Currency- Enhanced Facilities June 19, 2014 48 AP(DIR Series) Circular No. 2 Import of Rough, Cut and Polished Diamonds - credit relaxation July 07, 2014 49 A. P. (DIR Series) Circular No.42 Import of Gold by Nominated Banks/Agencies November 28, 2014 50 AP(DIR Series) Circular No 76 Form A1- Payments for Imports - Discontinuance thereof February 12, 2015 51 AP(DIR Series) Circular No 79 Guidelines on Import of Gold by Nominated Banks / Agencies February 18, 2015 52 AP(DIR Series) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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