Master Circular on Import of Goods and Services.
07/2011-12 Dated:- 1-7-2011 Master Circular
FEMA
RBI 2011-12/7
Master Circular No. 7/2011-12
July 01, 2011
To,
All Category – I Authorised Dealer Banks
Madam / Sir,
Master Circular on Import of Goods and Services
Import of Goods and Services into India is being allowed in terms of Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000 viz. Foreign Exchange Management (Current Account) Rules, 2000 as amended from time to time.
2. This Master Circular consolidates the existing instructions on the subject of “Import of Goods and Services” at one place. The list of underlying circulars consolidated in this Master Circular is also furnished.
3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2012 and be replaced by an updated Master Circular on the subject.
Yours faithfully,
(Rashmi F
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and rough, cut & polished diamonds
C.16.
Import factoring
C.17.
Merchanting Trade
Annex-1
Annex – 2
Annex-3
Annex- 4
Appendix
List of Circulars consolidated in the Master Circular
Section A – Introduction
(i) Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry, Department of Commerce, Government of India. Authorised Dealer Category – I (AD Category – I) banks should ensure that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by the Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000 and the Directions issued by Reserve Bank under Foreign Exchange Management Act, 1999 from time to time.
(ii) AD Category – I banks should follow normal banking procedures and adhere to the provisions of Uniform Customs and Practices for Documentary Credits (UCPDC), etc. while opening letters o
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D 500 or its equivalent, towards imports into India must be made in Form A-1 (Annex-4).
B.3. Import Licenses
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)
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.1. Time limit for normal imports
(i) In terms of the extant regulations, remittances against imports should be completed not later than six months from the date of shipment, except in cases where amounts are withheld towards guarantee of performance, etc.
(ii) AD Category – I banks may permit settlement of import dues delayed due to disputes, financial difficulties, etc. Interest in respect of delayed payments, usance bills or overdue interest for a period of less than three years from the date of shipment may be permitted in terms of the directions in para C.2 of Part III below.
B.5.2. Time limit for deferred payment arrangements
Deferred payment arrangements, including suppliers and buyers credit, providing for payments beyond a period of six months from date of shipment up to a period of less than three years, are treated as trade credits for which the procedural guidelines laid down in the Master Circular for External Commercial Borrowings and Trade Credits may be followed.
B
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late.
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 exceed USD10,000 (US Dollars ten thousand) or its equivalent and/or the aggregate value of foreign currency notes (cash portion) alone brought in by such person at any one time does not exceed USD 5,000 (US Dollars five thousand) or its equivalen
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side India or a guarantee of an AD Category – I bank in India, if such a 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 aga
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ce, AD bank may ensure the following:
(a) The importer should be a recognized processor of rough diamonds as per the list to be approved by Gems and Jewellery Export Promotion Council (GJEPC) in this regard and should have a good track record of export realisation;
(b) AD Category – I bank should undertake the transaction based on their commercial judgment and after being satisfied about the bonafides of the transaction;
(c) Advance payments should be made strictly as per the terms of the sale contract and should be made directly to the account of the company concerned, that is, to the ultimate beneficiary and not through numbered accounts or otherwise. Further, due caution may be exercised to ensure that remittance is not permitted for import of conflict diamonds;
(d) KYC and due diligence exercise should be done by the AD Category – I bank for the Indian importer entity and the overseas company; and
(e) AD Category – I bank should follow up submission of the Bill of Entry / docu
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September and March every year. The report should be submitted within 15 days from the close of the respective half year.
C.1.3. Advance Remittance for Import of Aircrafts/Helicopters and other Aviation Related purchases
As a sector specific measure, airline companies which have been permitted by the Directorate General of Civil Aviation to operate as a schedule air transport service, can make advance remittance without bank guarantee, up to USD 50 million. Accordingly, AD Category – I banks may allow advance remittance, without obtaining a bank guarantee or an unconditional, irrevocable Standby Letter of Credit, up to USD 50 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:
* 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 dil
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ant period. It is clarified that where advance is paid as milestone payments, the date of last remittance made in terms of the contract will be reckoned for the purpose of submission of documentary evidence of import.
* Prior to making the remittance, the AD Category – I bank may ensure that the requisite approval of the Ministry of Civil Aviation / DGCA / other agencies in terms of the extant Foreign Trade Policy has been obtained by the company, for import.
* In the event of non-import of aircraft and aviation sector related products, AD Category – I bank should ensure that the amount of advance remittance is immediately repatriated to India.
Prior approval of the Regional Office concerned of the Reserve Bank will be required in case of any deviation from the above stipulations.
C.1.4. Advance Remittance for the import of services
AD Category – I bank may allow advance remittance for import of services without any ceiling subject to the following conditions:
(a) Where the amo
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k may allow payment of interest on usance bills or overdue interest for a period of less than three years from the date of shipment at the rate prescribed for trade credit from time to time.
(ii) In case of pre-payment of usance 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,
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installed at their overseas sites in connection with the setting up of their International Call Centres (ICCs) subject to the following conditions:
(i) The BPO company should have obtained necessaryapproval from the Ministry of Communications and Information Technology, Government of India and other authorities concerned for setting up of the ICC.
(ii) The remittance should be allowed based on the AD Category – I banks' commercial judgment, the bonafides of the transactions and strictly in terms of the contract.
(iii) The remittance is made directly to the account of the overseas supplier.
(iv) The AD Category – I banks should also obtain a certificate as evidence of import from the Chief Executive Officer (CEO) or auditor of the importer company that the goods for which remittance was made have actually been imported and installed at overseas sites.
C.6. Receipt of Import Bills/Documents
C.6.1. Receipt of import documents by the importer directly from overseas suppliers
Impor
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tance 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 direc
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lative remittance was made, to ensure that the importer submits :-
(a) The Exchange Control copy of the Bill of Entry for home consumption,
or
(b) The Exchange Control copy of the Bill of Entry for warehousing, in case of 100% Export Oriented Units,
or
(c) Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Authorities, where import has been made by post, as evidence that the goods for which the payment was made have actually been imported into India.
(ii) In respect of imports on D/A basis, AD Category – I bank should insist on production of evidence of import at the time of effecting remittance of import bill. However, if importers fail to produce documentary evidence due to genuine reasons such as non-arrival of consignment, delay in delivery/ customs clearance of consignment, etc., AD bank may, if satisfied with the genuineness of request, allow reasonable time, not exceeding three months from the date of remittance, to the impo
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al 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 acknowledgement
AD Category – I bank should acknowledge receipt of evidence of import e.g. Exchange Control copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., from importers by issuing acknowledgement slips containing all relevant particulars relating to the import transactions.
C.9. Verification and Preservation
(i) Internal inspectors
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I bank should forward a statement on half-yearly basis as at the end of June & December of every year, in form BEF (Annex 1) furnishing details of import transactions, exceeding USD 100,000 in respect of which importers have defaulted in submission of appropriate document evidencing import within 6 months from the date of remittance, to the Regional Office of Reserve Bank under whose jurisdiction the AD Category – I bank is functioning, within 15 days from the close of the half-year to which the statement relates.
(iii) AD Category – I bank need not follow up submission of evidence of import involving amount of USD 100,000 or less provided they are satisfied about the genuineness of the transaction and the bonafides of the remitter. A suitable policy may be framed by the bank's Board of Directors and AD Category – I bank may set their own internal guidelines to deal with such cases.
C.11. Issue of Bank Guarantee
AD Category – I banks are permitted to issue guarantee on behalf of the
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sells the gold to the users. These instructions would also apply to import of platinum and silver.
C.13. Direct Import of Gold
AD Category – I bank can open Letters of Credit and allow remittances on behalf of EOUs, units in SEZs in the Gem & Jewellery sector and the nominated agencies / banks, for direct import of gold, subject to the following
(i) The import of gold should be strictly in accordance with the Foreign Trade Policy.
(ii) Suppliers' and Buyers' Credit, including the usance period of LCs opened for direct import of gold, should not exceed 90 days.
(iii) Banker's prudence should be strictly exercised for all transactions pertaining to import of gold. AD Category – I bank should ensure that due diligence is undertaken and all Know Your Customer (KYC) norms and the Anti-Money-Laundering guidelines, issued by Reserve Bank from time to time are adhered to while undertaking such transactions. AD Category – I bank should closely monitor such transactions. Any large or abnorm
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format enclosed at Annex-3, a monthly statement thereof, to the Chief General Manager, Trade Division, Foreign Exchange Department, Amar Building, Central Office, Reserve Bank of India, Sir P.M. Road, Fort, Mumbai 400001.
C.14. Gold Loans
(i) Nominated agencies / authorised banks can import gold on loan basis for on lending to exporters of jewellery under this scheme.
(ii) EOUs and units in SEZ who are in the Gem and Jewellery sector can import gold on loan basis for manufacturing and export of jewellery on their own account only.
(iii) The maximum tenor of gold loan would be as per the Foreign Trade Policy 2009-2014, or as notified by the Government of India from time to time in this regard.
(iv) AD bank may open Standby Letters of Credit (SBLC), for import of gold on loan basis, where ever required, as per FEDAI guidelines dated April 1, 2003. The tenor of the SBLC should be in line with the tenor of the gold loan.
(v) SBLC can be opened only on behalf of entities permitted to
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b) AD Category – I banks should ensure that due diligence is undertaken and Know Your Customer (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. All other instructions relating to import of these metals and rough, cut and polished diamonds shall continue.
C.16. 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 Reserve Bank in this rega
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on, without any delay.
AD Category – I banks may note that short-term credit either by way of suppliers' credit or buyers' credit is not available for merchanting trade or intermediary trade transactions.
Appendix
List of Circulars consolidated in the Master Circular
Import of Goods and Services
* AP (DIR Series) Circular No. 106 dated June 19, 2003
* AP (DIR Series) Circular No. 4 dated July 19, 2003
* AP (DIR Series) Circular No. 9 dated August 18, 2003
* AP (DIR Series) Circular No. 15 dated September 17, 2003
* AP (DIR Series) Circular No. 49 dated December 15, 2003
* AP (DIR Series) Circular No. 66 dated February 6, 2004
* AP (DIR Series) Circular No. 72 dated February 20, 2004
* AP (DIR Series) Circular No. 2 dated July 9, 2004
* AP (DIR Series) Circular No. 34 dated February 18, 2005
* AP (DIR Series) Circular No. 1 dated July 12, 2005
* AP (DIR Series) Circular No. 33 dated February 28, 2007
* AP (DIR Series) Circular No. 34 dated March 2, 2007
* A
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