IMPORT OF GOODS & SERVICES

Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of
Commerce & Industry, Government of India (GOI).

Banks (AD Category- I) are required to:-

ensure that the imports into India are in conformity with the Foreign Trade Policy (FTP) in
force and Foreign Exchange Management (Current Account Transactions) Rules,
2000 framed by the GOI and the Directions issued by RBI under FEMA from time to time.

Follow normal banking procedures and adhere to the provisions of Uniform Customs
and Practices for Documentary Credits (UCPDC), etc. while opening letters of credit for
import into India on behalf of their constituents.

Compliance with the provisions of Research & Development Cess Act, 1986 in respect of
import of drawings and designs.

Adhere to KYC guidelines issued by RBI in all their dealings.

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, etc.

Time Limit for Settlement of Import Payments

Nature of import Time frame Overdue interest
Normal Imports Within 6 months from the date of
shipment except cases withheld
due to performance guarantee,
disputes, financial difficulties,
etc.
Upto 3 years
permitted in case
of disputes and
resultant delays
Deferred Payment
arrangements
(including suppliers
and buyers credit)
6 months to less than 3 years
(treated as trade credits*)
--
Import of books No restriction on time limit Upto 3 years
permitted in case
of disputes and
resultant delays

* Trade Credits refer to credits extended for imports directly by the overseas supplier, bank and
financial institution for maturity of less than three years. Depending on the source of finance, such
trade credits include suppliers credit or buyers credit. Suppliers credit relates to credit for imports
into India extended by the overseas supplier, while buyers credit refers to loans for payment of
imports into India arranged by the importer from a bank or financial institution outside India for

maturity of less than three years. Buyers credit and suppliers credit for three years and above
come under the category of External Commercial Borrowings (ECB) which is governed by ECB
guidelines. The all-in-cost ceiling for maturity upto 1 year and upto 3 years is 200 bps over 6
months LIBOR for the respective currency of credit or applicable benchmark.

Import of Foreign exchange / Indian Rupees

Nature of import Guidelines
01. Foreign
Currency/cheques
Except as otherwise provided in the
Regulations, no person, without the general
or special permission of the RBI, can
import or bring into India any foreign
currency/cheques
02. Foreign exchange (other
than currency notes,
bank notes, and travelers
cheques)
No limit restriction
03. Foreign Currency Notes/
bank notes or travellers
cheques
Submit Currency Declaration Form (CDF) to
Custom Authorities in case the aggregate
value of the foreign exchange exceeds USD
10,000 or equivalent and/or the aggregate
value of foreign currency notes (cash
portion) alone brought in at any one time
does not exceed USD 5,000 (US Dollars five
thousand) or its equivalent.

04. Indian Currency and
Currency notes




*A resident Indian on return from any place
outside India (other than Nepal and Bhutan)
after a temporary visit is permitted to bring
into an amount not exceeding Rs. 7500/- per
person.
*Can bring from Nepal & Bhutan currency
notes of GOI and RBI notes other than notes
of denominations of above Rs. 100 in either
case

OPERATIONAL GUIDELINES

Guidelines in respect of advance payments for imports are as under:-

Nature of imports Guidelines on advance remittance
01. Import of goods without any
ceiling
Permitted subject to:-
*For amount exceeding USD 0.2 Mn. or
equivalent, an unconditional, irrevocable
standby LC or a guarantee from an international
bank of repute situated outside India or a

guarantee of bank(AD I) in India (if such
a guarantee is issued against the counter-
guarantee of an international bank of repute
situated outside India) is obtained.
*BG/ standby LC can be waived for imports
upto USD 5 Mn. in case of bonafide imports
by importer other than PSU bodies and govt.
importers with satisfactory track record.
*For remittance exceeding USD 0.10 Mn. In
respect of a Public Sector Company or a
Department/Undertaking of the Government of
India / State Government/s non submission of
guarantee is to be with specific waiver from the
Ministry of Finance, GOI.
02. Import of Rough Diamonds *Permitted advance remittances on behalf of
importer who are recognized processor of rough
diamonds without any limit and without
insistence of BG or Standby LC for imports
from specified 9 Mining Companies viz. De
Beers UK Ltd, RIO TINTO, UK, BHP Billiton,
Australia, etc. The payments should be strictly as
per the contract as also upon compliance of
KYC/due diligence, etc.
03. Import of Aircraft/
Helicopters and other
Aviation related items by
airline companies engaged in
air transport service as
permitted by DGCA.
*Permitted upto USD 50 Mn. without obtaining
BG or Standby LC subject to compliance of
other procedural aspects including obtaining
of requisite approval of the Ministry of Civil
Aviation/ DGCA/ other agencies in terms of
the extant Foreign Trade Policy.

*Immediate repatriation of the advance
remittance by the bank in case of non-import.
04. Import of services Permitted without any ceiling subject to:-
*obtaining BG for remittance exceeding USD
0.50 Mn. from a reputed foreign bank situated
outside India, or a BG from an Indian Bank
locally provided it is backed by counter-
guarantee of a bank of international repute
situated outside India.
* Bank is required to ensure fulfillment of the
obligation under the contract by the exporters and
any failure the amount should get repatriated to
India.




OTHER GUIDELINES

Remittance against Replacement Imports

Banks (AD-1) are permitted to effect fresh remittance for replacement imports without referring
to RBI provided the insurance claim relating to the lost goods has been settled in favour of the
importer. Banks are required to ensure that the consignment being replaced is shipped within
the validity period of the licence.

Guarantee for Replacement Import

In case replacement goods for defective import are being sent by the overseas supplier before
reshipment of the defective goods, Banks are permitted to issue BG for dispatch/return of
defective goods based on their commercial judgment.

Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas
sites

Remittances against such imports are allowed subject to obtaining necessary approval from
Ministry of Communications and Information Technology, GOI, for setting up the unit abroad
and remittance be made directly to the overseas suppliers based on the banks commercial
judgment etc.

Receipt of import documents by the bank directly from overseas suppliers

Import bills and documents should be received from the banker of the supplier by the banker of
the importer in India. Banks are, therefore, not expected to make remittance where import bills
are received directly by the importers from the overseas supplier except:-

a) Value of import below USD 0.30 Mn.;

b) Import bills received by wholly-owned Indian subsidiaries of foreign companies from
their principals;

c) Import bills received by Status Holder Exporters, EOU/units in Special Economic Zones,
PSUS & Limited companies, deemed public limited companies and private limited
companies.

Receipt of import documents by the importer directly from overseas suppliers in case of
specified sectors

Banks are permitted to allow remittance for imports up to USD 0.30 Mn. on behalf of importer
of rough diamonds, rough precious and semi-precious stones where evidence of import is
available and the remittance is subject to Foreign Trade Policy (FTP), due diligence,
compliance of KYC norms, etc.


Receipt of import documents by the bank directly from overseas suppliers

Before affecting the remittance, bank is required to satisfy the financial standing and track
record of the importer constituent and bonafide of the transaction. For invoice value above
USD 0.30 Mn. bank is required to obtain report on the overseas supplier from an overseas
banker or reputed overseas credit agency for satisfaction.

Evidence of Import

a) Physical import

In case of all imports where value of remittance exceeds USD 0.10 Mn. or equivalent, Bank
is required to obtain Exchange Control copy of Bill of Entry from the importer for home
consumption and for warehousing in case of 100% EOUs.

Custom Assessment Certificate or Postal Appraisal Form in case the import is made by
Post as evidence that the goods for which the payment was made have actually been
Imported into India

In case of imports on DA basis, bank should insist for production of evidence at the time of
remittance of import bill. In case of importers fail to produce documentary evidence due
to genuine reasons such as non-arrival of consignment, delay in delivery/ customs
Clearance of consignment, etc., bank may allow reasonable time not exceeding 3 months
from the date of remittance for submission of the evidence of import.

b) Evidence of import in lieu of Bill of Entry

A certificate from the CEO or auditor of the company stating that the goods for which
remittance was made have actually been imported into India provided:-
a) Remittance is less than USD 1.00 Mn.;
b) Importer company is a listed one and its Net Worth is not less than Rs. 100 Crore as per
latest audited balance sheet or a public sector company or an undertaking of GOI or its
departments;
c) Importer being autonomous bodies including scientific bodies/ academic institutions, etc.
whose accounts are audited by the Comptroller and Auditor General of India (CAG). Bank
may insist for a declaration from the auditor/CEO of such institutions that their accounts are
audited by CAG.

c) Non Physical Imports (Software, or data through internet / datacom channels, etc.)
A certificate from CA stating that the software/data/drawing/design has been received by the
importer to be obtained.

d) Issuance of acknowledgement
Bank is required to acknowledge receipt of import documents from the importers by issuing
suitable slips with particulars.
e) Verification and preservation


Import evidence documents should be verified by inspectors or auditors and they should be
preserved by the bank for a period of one year from the date of its verification except for
matters under investigation by concerned agencies.

f) Follow up for import evidence

In case the importer does not furnish evidence of import for remittance exceeding USD 0.10
Mn. within the first 3 months of remittance, bank is required to pursue for further 3 months and
forward a statement on half-yearly basis as at the end of June & December of every year, in
form BEF furnishing the details of the import wherein the importer has defaulted in providing
the documentary evidence to the respective R.O., RBI,

Import of Gold / Platinum / Silver by Nominated Banks / Agencies

Import on consignment basis

Gold/Platinum/Silver can be imported by nominated banks/agencies where the ownership
remains with the supplier and the importer (consignee) will be acting as an agent of the supplier
(consignor). Bank is authorized to remit the cost of import as and when sales take place as per
the terms of agreement entered with overseas supplier.

Import on unfixed price basis
The import being on outright purchase basis, the ownership passes on to the importer at the time
of import itself. Remittance on the basis of price fixed as and when the sale takes place can be
made.

Direct Import of Gold

Bank can open LC and allow remittance on behalf of EOUs, units in SEZs in the Gem &
Jewellery Sector and nominated agencies/banks for direct import of Gold subject to:-

a) Import should be strictly as per Foreign Trade Policy (FTP);

b) Suppliers and buyers credit including the usance period of LCs should not exceed 90 days;

c) Compliance of due diligence, guidelines on KYC, AML and to satisfy bonafides of the
transactions;

d) Obtaining evidence of import (Bill of entry) within the stipulated period, etc.

Gold Loans

Nominated agencies/authorized banks can import gold on loan basis for on lending to
exporters of jewellery. EOUs and units in SEZ who are in the Gem and Jewellery sector can

also import gold on loan basis for manufacturing and export of jewellery on their own
account only. The maximum tenor of the gold loan should be as per FTP 2009-2014.

Bank is authorized to open Standby LC (SBLC) for import of gold on loan basis as per
FEDAI guidelines. The tenor of SBLC should be in line with the tenor of the gold loan.
SBLC should be in favour internationally renowned bullion banks, list of which is available
with Gem & Jewellery Export Promotion Council.

Import of Platinum, Palladium, Rhodium, Silver and rough, cut & polished diamonds

Suppliers and Buyers credit including usance period of LC for the import not to exceed 90
days for the date of shipment. Bank should ensure compliance of KYC norms/AML guidelines
of RBI as also 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.

Import Factoring

Bank can enter into arrangements with international factoring companies of repute, preferably
members of Factors Chain International, without the approval of RBI. Bank may also ensure
compliance with extant foreign exchange directions relating to imports, FTP in force and other
guidelines/directives issued by RBI in this regard.

Merchanting Trade

Bank should ensure that the goods involved in the transactions are permitted to be imported
and compliance of all rules, regulations, and directions applicable to export (except Export
Declaration Form) and import (except Bill of Entry) for export leg and import leg
respectively. The entire transaction to be completed within a period of 6 months;

Payment is received in time for the export leg. Where the payment for export leg of the
transaction precedes the payment for import leg, banks should ensure that the terms of
payment are such that the liability for the import leg of the transaction is extinguished by the
payment received for the export leg of the transaction, without any delay. Suppliers' credit
or Buyers' credit is not available for merchanting trade or intermediary trade transactions.

Crystallization of Import bills

In case of failure on the part of the importers in honoring the obligation under the export, the
liability should be converted into rupee terms so as to avoid the exchange variance.

(Source: RBI M. Circular)



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