Master Circular on Import of Goods and Services (As amended up to June 18, 2015)
13/2014-15 Dated:- 1-7-2014 Master Circular
FEMA
RBI/2014-15/4
Master Circular No.13/2014-15
July 01, 2014
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 furnished in Appendix.
3. This Master Circular is being updated from time to time as and when the fresh instructions are issued. The date up to which the Master Circular has been updated is
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r 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 Master Circular
Section I – 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
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General Guidelines for Imports
B.1. General Guidelines
Rules and regulations to be followed by the AD Category – I banks from the foreign exchange angle while undertaking import payment transactions on behalf of their clients are set out in the following paragraphs. Where specific regulations do not exist, AD Category – I banks may be governed by normal trade practices. AD Category – I banks may particularly note to adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Operations & Development) in all their dealings.
B.2. Form A-1
Henceforth submission of Form A-1 to AD banks will not be necessary and before making the remittance for making payments towards imports in India, the AD bank will have to ensure that all the requisite details 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
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er.
(ii) Where foreign exchange acquired has been utilised for import of goods into India, the AD Category – I bank should ensure that the importer furnishes evidence of import viz., Exchange Control Copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., and satisfy himself that goods equivalent to the value of remittance have been imported.
(iii) In addition to the permitted methods of payment for imports laid down in Notification No.FEMA14/2000-RB dated 3rd May 2000, payment for import can also be made by way of credit to non-resident account of the overseas exporter maintained with a bank in India. In such cases also AD Category – I banks should ensure compliance with the instructions contained in sub-paragraphs (i) and (ii) above.
B.5. Time Limit for Settlement of Import Payments
B.5.1. 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
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f any, is as per the instructions in para C.2 of Section III of this Circular.
B.6. Import of Foreign Exchange / Indian Rupees
(i) Except as otherwise provided in the Regulations, no person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Import of foreign currency, including cheques, is governed by clause (g) of sub-section (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 note
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ndia at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees twenty five thousand only).
(ii) A person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India for any amount in denominations up to ₹ 100/-.
B.7. Third Party Payment for Import Transactions
AD banks are allowed to make payments to a third party for import of goods, subject to conditions as under:
* Firm irrevocable purchase order / tripartite agreement should be in place. However this requirement may not be insisted upon in case where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order / invoice has been produced.
* AD bank should be satisfied with the bonafides of the transactions and should consider the Financial Acti
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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
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ms 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.
v. Further, due caution may be exercised to ensure that remittance is not permitted for import of conflict diamonds (Kimberly Certification).
vi. KYC and due diligence exercise should be done by the AD Category – I banks as per the existing guidelines.
vii. AD Category – I banks should follow-up submission of the Bill of Entry / documents evidencing import of rough diamonds into the country by the importer, in terms of the Act / Rules / Regulations / Directions issued in this regard.
viii. In case of an importer entity in the Public Sector or a Department / Undertaking of the Government of India / State Government/s, AD Category – I banks may permit the advance remittance subject to the above conditions and a specific waiver of bank guarantee from the Ministry of Finance, Government of India, where the adva
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e 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 capital goods) from the date of remittance and the importer gives an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period. It is clarified that
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00,000 or its equivalent, a guarantee from a bank of international repute situated outside India, or a guarantee from an AD Category – I bank in India, if such a guarantee is issued against the counter-guarantee of a bank of international repute situated outside India, should be obtained from the overseas beneficiary.
(b) In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would be required.
(c) AD Category – I banks should also follow-up to ensure that the beneficiary of the advance remittance fulfils his obligation under the contract or agreement with the remitter in India, failing which, the amount should be repatriated to India.
C.2. Interest on Import Bills
(i) AD – Category – I bank may allow payment of inter
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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. Guarantee for Replacement Import
In case replacement goods for defective import are being sent by the overseas supplier before the defective goods imported earlier are reshipped out of India, AD Category-I banks may issue guarantees at the request of importer client for dispatch/return of the defective goods, according to their commercial judgment.
C.5. Import of Equipment by Business Process Outsourcing (BPO) Companies for their Overseas Sites
AD Category – I bank may allow BPO companies in India to make remittances towards the cost of equipment to be imported and installed at their oversea
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d be received from the banker of the supplier by the banker of the importer in India. AD Category – I bank should not, therefore, make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases:
(i) Where the value of import bill does not exceed USD 300,000.
(ii) Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.
(iii) Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy, 100% Export Oriented Units / Units in Special Economic Zones, Public Sector Undertakings and Limited Companies.
(iv) Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies.
C.6.2. Receipt of import 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
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(i) At the request of importer clients, AD Category – I bank may receive bills directly from the overseas supplier as above, provided the AD Category – I bank is fully satisfied about the financial standing/status and track record of the importer customer.
(ii) Before extending the facility, the AD Category – I bank should obtain a report on each individual overseas supplier from the overseas banker or a reputed overseas credit agency. However, such credit report on the overseas supplier need not be obtained in cases where the invoice value does not exceed USD 300,000 provided the AD Category – I bank is satisfied about the bonafides of the transaction and track record of the importer constituent.
C.7. Evidence of Import
C.7.1. Physical Imports
(i) In case of all imports, where value of foreign exchange remitted / paid for import into India exceeds USD 100,000 or its equivalent, it is obligatory on the part of the AD Category – I bank through whom the relative remittance was made
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of import.
C.7.2. Evidence of Import in Lieu of Bill of Entry
(i) AD Category – I bank may accept, in lieu of Exchange Control Copy of Bill of Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India provided :-
(a) The amount of foreign exchange remitted is less 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
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ing external auditors appointed by AD Category – I bank) should carry out verification of the documents evidencing import, e.g. Exchange Control copies of Bills of Entry or Postal Appraisal Forms or Customs Assessment Certificates, etc.
(ii) Documents evidencing import into India should be preserved by AD Category – I bank for a period of one year from the date of its verification. However, in respect of cases which are under investigation by investigating agencies, the documents may be destroyed only after obtaining clearance from the investigating agency concerned.
C.10. Follow-up for Import Evidence
(i) In case an importer does not furnish any documentary evidence of import, as required under paragraph C.7. of Section III, within 3 months from the date of remittance involving foreign exchange exceeding USD 100,000, the AD Category – I bank should rigorously follow-up for the next 3 months, including issuing registered letters to the importer.
(ii) AD Category – I banks should su
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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 Paym
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ition as at the end of the said month beginning from the 1st month of the Financial Year, as per Annex – 2.
Both the statements shall be submitted, even if there is 'Nil' position, by the 10th of the following month / half year, to which it relates.
C.12.2. Import of Gold Jewellery Including Jewellery Made of Precious Metals or/and Studded With Diamonds / Precious Stones /Semi-precious.
Suppliers' and Buyers' credit (trade credit) including the usance period of Letters of Credit opened for import of gold in any form, including jewellery made of gold/precious metals or/and studded with diamonds/semi- precious/precious stones, should not exceed 90 days from the date of shipment.
C.13. Import of Other Precious Metals
C.13.1. Import of Platinum /Palladium/Rhodium/ Silver/ Rough, Cut & Polished Diamonds / Precious and Semi-precious Stones.
(a) Suppliers' and Buyers' Credit, including the usance period of Letters of Credit opened for import of Platinum, Palladium, Rhodium and S
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num / 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 Reserve Bank in this regard.
C.15. Merchanting Trade
C.15.1. For a trade to be classified as Merchanting Trade following conditions should be satisfied:
a. Goods acquired should not enter the Domestic
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riod of nine months and there should not be any outlay of foreign exchange beyond four months.
(d) The commencement of Merchanting Trade would be the date of shipment / export leg receipt or import leg payment, whichever is first. The completion date would be the date of shipment / export leg receipt or import leg payment, whichever is the last;
(e) Short-term credit either by way of suppliers' credit or buyers' credit will be available for Merchanting Trade Transactions, to the extent not backed by advance remittance for the export lag, including the discounting of export leg LC by an AD bank, as in the case of import transactions ;
(f) In case advance against the export leg is received by the Merchanting Trader, AD bank should ensure that the same is earmarked for making payment for the respective import leg. However, AD bank may allow short-term deployment of such funds for the intervening period in an interest bearing account;
(g) Merchanting Traders may be allowed to m
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tion 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 observed by the AD bank while handling such transactions.
The Merchanting Traders have to be genuine traders of goods and not mere financial intermediaries. Confirmed orders have to be received by them from the overseas buyers. AD banks should satisfy themselves about the capabilities of the Merchanting Trader to perform the obligations under the order. The overall Merchanting Trade should result in reasonable profits to the Merchanting Trader.
C.15.3. Merchanting trade to Nepal and Bhutan
As Nepal and Bhutan are landlocked countries, there is a facility of transit trade whereby goods are i
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. 15
Advance Remittance for Imports
September 17, 2003
5
AP(DIR Series) Circular No. 49
Advance Remittance for Imports
December 15, 2003
6
AP(DIR Series) Circular No. 66
Imports into India – Direct Receipt of Import Bills/Documents
February 6, 2004
7
AP(DIR Series) Circular No. 72
Foreign Exchange Management Act, 1999 – Import of Goods into India – Evidence of Import
February 20, 2004
8
AP(DIR Series) Circular No. 2
Import of Gold by (i) Export Oriented Units (EOUs), (ii) Units in SEZ/EPZ, and (iii) Nominated Agencies
July 9, 2004
9
AP(DIR Series) Circular No. 34
Import of Gold on Loan Basis – Tenor of Loan and Opening of Stand-By Letter of Credit
February 18, 2005
10
AP(DIR Series) Circular No. 1
Import of Goods of Value USD 100,000 and Less -Clarification on Follow 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
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s) Circular No. 12
Foreign Exchange Management Act, 1999 – Import of Platinum / Palladium / Rhodium / Silver
August 28, 2008
21
AP(DIR Series) Circular No. 13
Direct Receipt of Import Bills / Documents – Liberalisation
September 1, 2008
22
AP(DIR Series) Circular No. 15
Foreign Exchange Management Act, 1999 – Advance Remittances for Import of Services
September 8, 2008
23
AP(DIR Series) Circular No.21
Advance Remittance for Import of Rough Diamonds
December 29, 2009
24
AP(DIR Series) Circular No.56
Advance Remittance for Import of Goods – Liberalisation
April 29, 2011
25
AP(DIR Series) Circular No. 59
Import of rough, cut and polished diamonds
May 06, 2011
26
AP(DIR Series) Circular No. 82
Release of Foreign Exchange for Imports – Further Liberalisation
February 21, 2012
27
AP(DIR Series) Circular No. 83
Import of Gold on Loan Basis – Tenor of Loan and Opening of Stand – By Letter of Credit
February 27, 2012
28
AP(DIR Series) Circular No. 103
Data on im
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e Credit for imports into India- Online submission of data on issuance of Guarantee/Letter of Undertaking (LoU)/Letter of Comfort (LoC) by ADs
November 19, 2013
39
AP(DIR Series) Circular No.82
Import of Gold by Nominated Banks/Agencies/Entities
December 31, 2013
40
AP(DIR Series) Circular No.95
Merchanting Trade Transactions
January 17, 2014
41
AP(DIR Series) Circular No.100
Third party 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 Ba
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