A.P. (Dir Series) (2000-2001) Circular No. 9, dated 24-8-2000
Attention
of authorised dealers is invited to the Government of India Notification No.
GSR 381(E), dated May 3, 2000, notifying the Foreign Exchange Management
(Current Account Transactions) Rules, 2000, in terms of which drawal of
exchange for certain current account transactions has been prohibited and
restrictions have been placed on certain other transactions. In terms of Rule 4
ibid., the transactions specified in Schedule II to the said Notification
require prior approval of the Government of India and in terms of the Rule 5,
the transaction specified in Schedule III to the Notification require prior
approval of the Reserve Bank. Authorised dealers may follow directions
contained in Annexure while dealing with applications relating to import
of goods and services into India.
2. Import
trade is regulated by the Directorate General of Foreign Trade (DGFT) and its
regional offices, functioning under the Ministry of Commerce and Industries,
Department of Commerce, Government of India. Policies and procedures required
to be followed for imports into India are announced by the DGFT from time to
time. Authorised dealers may, therefore, sell foreign exchange or transfer
rupees to non-resident account towards payment for imports into India, from any
foreign country, in conformity with the Export-Import Policy in vogue and the
Rules framed by the Government of India and the Directions issued by Reserve Bank
from time to time under the Act.
3. Authorised
dealers should follow normal banking procedures and the provisions of Uniform
Customs and Procedures for Documentary Credits (UCPDC), etc., while opening
letters of credit for import into India on behalf of their customers. In
respect of import of drawings and designs, importers may be advised to submit
certificate or undertaking regarding compliance with the Research and
Development Cess Act, 1986. An undertaking, in the prescribed format, regarding
payment of Income-tax or a No Objection Certificate from Income-tax
authorities, wherever required under the extant provisions of the Act, should
be obtained in case of remittances relating to import of services and drawings
and designs into India.
4. It is further
clarified that the Directions contained in the Annexure should be read
with the Rules notified by the Government of India, Ministry of Finance, vide
Notification dated May 3, 2000, referred to earlier.
5. The
Directions contained in the Annexure, supersede the instructions
contained in Part A, Part C and Part D of Chapter 7 of the Exchange Control
Manual, 1993 edition.
6. Authorised
dealers may bring the contents of this circular to the notice of their
constituents concerned.
7. The
Directions contained in this circular have been issued under section 10(4) and
section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Any
contravention or non-observance of these Directions is subject to the penalties
prescribed under the said Act.
For
Exchange Control purposes, rupee accounts maintained in India by citizens of
India, Nepal and Bhutan, residents in Nepal and Bhutan, as well as Indian,
Nepalese and Bhutanese firms, companies or other organisations, including
banks functioning in these countries, are regarded as resident accounts and
rupee transfers to such accounts, for imports into India (or for any other purpose),
may be made freely, without reference to the Reserve Bank. In terms of Rule 3
of the Government of India Notification No. GSR 381(E), dated May 3, 2000, sale
of foreign exchange for current account transactions with persons resident in
Nepal and/or Bhutan, or against import into these countries made by residents
in India, is prohibited.
Authorised
dealers should not open letters of credit or allow remittances for import of
goods included in the negative list unless the importer submits a licence
marked ‘For Exchange Control Purposes’. Special conditions, if any, attached
to such licence should strictly be adhered to while opening letters of credit
or making remittances.
(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 under
section 10(5) of the Act or to use it for any other purpose for which
acquisition of exchange is permissible under the said Act, or Rules or
Regulations framed thereunder.
(ii) Where
foreign exchange acquired has been utilised for import of goods into India the
authorised dealer should ensure that importer furnishes an evidence of import
to his satisfaction, as laid down in paragraph A.17.
(iii) In
case payment for import is made by way of credit to non-resident account of the
overseas exporter or by way of credit to resident account of a non-resident
bank, authorised dealer should ensure compliance with sub-paragraph (i) above.
(iv) The
Directions contained in this paragraph are also applicable where payment for
imports into India is made through ACU mechanism.
Payments
for retirement of bills drawn under letters of credit as well as bills received
from abroad for collection against imports into India, must be received by
authorised dealers irrespective of amount, by debit to the account of the importer
maintained with themselves or by means of a crossed cheque drawn by the
importer on his other bankers. Payments against bills under no circumstances
should be accepted in cash.
Authorised
dealers may open letters of credit or make remittances where the Exchange
Control (EC) copy of the relative import licence has been issued in the name of
a party other than the applicant, provided the applicant produces a letter of
authority obtained from the import licence holder in his favour authorising
him, inter alia, to open letters of credit or make remittances for payment
towards import under the licence (subject to the terms and conditions, if any,
stipulated in this regard in the Import Policy in force). Authorised dealers
may also open letters of credit or make remittances towards imports permitted
without licences on behalf of authorised agents of importers, after satisfying
themselves by reference to the Import Policy in force that the importers are
permitted to utilise services of agents for the imports in question. In all
such cases, the responsibility for production of the Customs Bill of Entry,
wherever required, will rest on the letter of authority holder or agent.
Applications
by persons, firms and companies for making payments towards imports into India
must be made on form A1. Variants of this form have been devised in different
colours to be used for—
(i) remittance in foreign currency,
(ii) transfer of rupees to non-resident bank
accounts, and
(iii) remittance through Asian Clearing Union.
Care should be taken to
ensure that duly filled in A1 form in appropriate format has been obtained.
Directions
contained herein are also applicable to imports which are financed in rupees
and payment for which is made by crediting rupees to a non-resident account in
India or to a rupee account maintained by a non-resident bank.
(i) Authorised
dealers should note to endorse on the ‘Exchange Control Copy’ of import
licences, under their stamp and signature, the details of letters of credit
opened or forward contracts booked or remittances made in foreign currency as
also the amount of insurance and freight paid by the importer locally in
rupees, wherever licences have been obtained by importers.
(ii) Authorised
dealers may likewise endorse on the ‘Exchange Control Copy’ of the import
licence the value of the back-to-back inland letters of credit opened by them
on behalf of duty free licence holders (including transferees) as required in
terms of the relevant provisions of the Export-Import Policy in force.
(i) Import
licences are normally issued for the c.i.f. value of the goods to be imported.
Import licences cannot be used to the full amount in cover of f.o.b. cost of
the goods leaving insurance and freight to local agent of the supplier, as additional
charges to be paid in rupees over the amount specified in the import licence.
(ii) Importers
sometime enter into contracts on f.o.b. terms and agree to the suppliers paying
for the freight to be reimbursed to them along with the cost of the goods.
Authorised dealers in such cases should, before making the remittance of
freight charges, ascertain the actual freight amount paid with reference to the
original freight bill or memo issued by the shipping company or the amount
stated on the relative bill of lading.
Exchange
Control copy of the import licence submitted by importer for opening of L/C or
making remittance when fully utilised, should be retained by authorised dealers
and may be preserved till scrutiny by the internal audit or inspection is
completed.
Authorised
dealers may allow advance remittance for import of goods without any ceiling
subject to the following conditions:
(a) the importer should hold the EC copy of a valid import licence
if the goods to be imported are those included in the negative list of imports
in the Export and Import Policy in force;
(b) remittance
is made direct to the suppliers;
(c) if the amount of advance remittance exceeds U.S. $ 25,000 or
its equivalent, a guarantee from an international bank of repute situated
outside India or a guarantee of an authorised dealer in India, if such a
guarantee is issued against the counter-guarantee of an international bank of
repute situated outside India, should be obtained. An unconditional standby L/C
from an international bank of repute situated outside India may also be
accepted in lieu of bank guarantee provided it is irrevocable, non-transferable
and lists out full particulars of the transactions and there is a clear
provision for prompt payment being received in convertible currency in an
approved manner. The validity of the guarantee/letter of credit should
adequately cover the period for the purpose of enforcing payment;
(d) physical import of goods into India should be made within
three months (twelve months in case of capital goods) from the date of
remittance and the importer should give an undertaking to furnish documentary
evidence of import within fifteen days from the close of the relevant period.
Authorised dealers, if satisfied with the request, may allow extension of time
for import not exceeding one month (three months in case of capital goods). In
cases where the advance remittance has been made against a bank guarantee, the
guarantee should be suitably amended, if need be, to cover the extended period
for import of goods into India; and
(e) authorised dealer should ensure that in the event of
non-import of goods, the amount of advance remittance is repatriated to India
or is utilised for any other purposes for which release of exchange is
permissible under the Act, Rules or Regulations made thereunder, to the
satisfaction of the authorised dealer.
(i) In
terms of the extant Rules, remittances against imports should be completed not
later than six months from the date of shipment. Accordingly, deferred payment
arrangements involving payments beyond a period of six months from the date of
shipment are treated as external commercial borrowings which require prior approval of the Reserve
Bank/Government of India There would, however, be no objection to importers
withholding amounts not exceeding 15 per cent of the cost of goods towards
guarantee of performance, etc. Authorised dealers may make remittances of
amounts so withheld, provided the earlier remittance had been made through
them. No payment of interest is permissible on such withheld amounts.
(ii) Sometimes,
settlement of import dues may be delayed due to disputes, financial
difficulties, etc. Authorised dealers may make remittances in such cases even
if the period of six months has expired, provided—
(a) authorised dealer is satisfied about the genuineness of the
circumstances leading to the delay in payment; and
(b) no payment of interest is involved for the additional period.
However, in cases where the overseas supplier insists on payment of
interest, it may be allowed in
accordance with the provisions contained in paragraph A.13, upto a maximum
period of 60 days beyond 180 days from the date of shipment provided the import
bill is paid within that period.
Notes : A.
In case of import bills negotiated under letter of credit and retired by
importer after expiry of six months from the date of shipment of relative
goods, settlement of the payment would be deemed to be completed within six
months from the date of shipment if reimbursement was made to the overseas bank
within that period,
B. Remittances
against import of books may be allowed without restriction as to time limit,
provided no interest payment is involved nor has the importer forgone any part
of the discount/rebate normally allowed to importers towards compensation for
delay in settlement of dues.
(i) Authorised
dealers may make remittances on account of interest accrued on usance bills
under ‘normal interest clause’ or of overdue interest payable on sight bills
for a period not exceeding six months from the date of shipment in respect of
imports without prior approval of Reserve Bank.
Note : Interest under ‘normal interest clause’ would mean interest
at the ‘prime’ rate (or its equivalent) of the
country in the currency of which the goods are invoiced or LIBOR for the currency.
(ii) In
case of pre-payment of usance import bills, remittances may be made only after
reducing the proportionate interest for the un-expired portion of usance at the
rate, according to the contract, at which the interest has been claimed for
the usance period or the prime rate or LIBOR of the currency in which the goods
have been invoiced, whichever is applicable. Where interest is not separately
claimed, remittances may be allowed after deducting the proportionate interest
for the un-expired portion of usance at the prevailing ‘prime’ rate/LIBOR of
the currency of invoice.
War Risk Insurance/Bunker/Congestion Surcharge/Premium for Extended Insurance
Authorised
dealers may make remittances towards war risk insurance premium,
bunker/congestion surcharge at foreign ports, premia for extended insurance
cover, etc., which are incidental to imports.
Authorised
dealers may make remittances against goods imported without authority, but
later allowed to be cleared by the Customs Authorities against payment of
penalty, to the extent of c.i.f. value of the goods indicated on the relative
Exchange Control copy of the Customs Bill of Entry evidencing imports of goods
to India.
(i) In
case import of an item does not require licence under the Export-Import Policy
in force and there is a need for remittance of foreign exchange for import of
replacement goods for a defective item imported earlier, the remittance should
be made after ensuring that there is no double payment for the same import.
(ii) Where
goods are short-supplied, damaged, short-landed or lost in transit, the
procedure laid down below should be followed for payment against replacement
goods:
(a) In cases where no letter of credit has been opened or
remittances made, Exchange Control copy of the import licence may be automatically
treated as valid for the replacement consignment, provided it is shipped within
the validity period of the licence.
(b) If the Exchange Control copy 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 authorised dealers without reference to the Reserve
Bank, provided the insurance claim relating to the lost goods has been settled
in favour of the importer by remittance from abroad through an authorised
dealer, if insurance was covered abroad and by local payment in rupees if
insurance was covered in India. Payment for the replacement goods may then be
made against suitable endorsement on the import licence subject to the
conditions that the replacement consignment is shipped within the validity
period of the licence.
(c)
If replacement goods are to be shipped after the expiry of
import licence, the importer should be asked to apply to DGFT for replacement
or for revalidation of the expired licence.
A Guarantee for Replacement Import
In
case replacement goods for a defective import are being sent by the overseas
supplier before the defective goods imported earlier are dispatched out of
India, authorised dealers may issue guarantees at the request of importer
clients for the despatch/return of defective goods, according to their
commercial judgment.
(i) Obligations
of purchaser of foreign exchange as contained in sub-section (6) of section 10
of Foreign Exchange Management Act, 1999 are indicated in paragraph A.3 ibid.
(ii) In
case of all imports, except import through couriers, where value of foreign
exchange remitted/paid for import into India exceeds US $ 5,000 or its equivalent,
it is obligatory on the part of authorised dealers through whom the relative
remittance was made to ensure that the importer submits :
(a) the Exchange Control
copy of the Bill of Entry for home consumption, or
(b) in case of 100% Export Oriented Units the exchange control
copy of the Bill of Entry for warehousing, or
(c) Customs Assessment Certificate or Postal Appraisal Form as
declared by the importer to the custom authorities, where import has been made
by post, as an evidence that the goods for which the payment was made have
actually been imported into India.
(iii) 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.
Note: Authorised dealers
should advise importers to keep Custom authorities informed of the imports made
by them under this clause.
(iv) In
respect of remittances for imports through courier services, authorised dealers
should ensure submission of the Exchange Control copy of the Bill of Entry in
case of imports valued at Rupees one lakh or more. Where the value of import is
less than Rs. one lakh, authorised dealers may obtain from the importer, a copy
of the Bill of Entry, in the prescribed form issued by the Customs in the name
of registered courier, duly certified by the courier company indicating thereon
the particulars of the consignment for which the copy has been issued.
(v) Authorised
dealers should ensure that in all cases, including cases of advance remittance
permitted in terms of paragraph A.11 above, evidence of import is submitted by
their importer customer and is duly verified. In respect of imports on D/A
basis, since goods would normally be cleared before the due date of payment,
authorised dealers should insist on production of evidence of import at the
time of effecting remittance of import bill. Authorised dealers should advise
this requirement to their importer customer while delivering the documents
against acceptance.
Note: A. In respect of
imports on D/A basis 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., authorised dealers may, if satisfied with the
genuineness of request, allow reasonable time not exceeding three months from
the date of remittance to the importer to submit the evidence of import.
(vi) Authorised
dealers should in all cases 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 the following particulars:
(a) importer’s full name and address with code number;
(b) import licence number and date (wherever
applicable);
(c) bank’s reference of letter of credit
number, etc., if any;
(d) number and date of Exchange Control copy of the Bill of
Entry/Postal Appraisal Form or Customs Assessment Certificate and the amount of
import; and
(e) particulars of goods imported.
(vii) Internal
inspectors or auditors (including external auditors appointed by authorised
dealers) should carry out 100 per cent verification of the documents evidencing
import, e.g., Exchange Control copies of Bills of Entry or Postal Appraisal
Form or Customs Assessment Certificate, etc.
(viii) Documents
evidencing import into India received in terms of paragraph A.17 above should be
preserved by authorised dealers for a period of one year from the date of its
verification as required under sub-paragraph (vii) above. However, in respect
of cases which are under investigation by investigating agencies, the documents
should be destroyed only after obtaining clearance from the investigating
agency concerned.
(i) In
case an importer does not furnish the document of evidence of import, as
required under paragraph A.17, within 3 months from the date of remittance
involving foreign exchange exceeding US $ 5,000, the authorised dealer should
rigorously follow-up for the next 3 months, including issue of registered
letters to the importer, for submission of an appropriate document as evidence
of import.
(ii) Authorised
dealers should forward to the Reserve Bank a statement on half yearly basis as
at the end of June and December of every year, in form BEF (format enclosed)
furnishing details of import transactions, exceeding US $ 5,000 in respect of
which importers have defaulted in submission of an appropriate document
evidencing import within 6 months from the date of remittance. The said
half-yearly statement should be submitted to the Regional Office of the
Reserve Bank under whose jurisdiction the authorised dealer is functioning,
within 15 days from the end of half year to which the statement relates.
Note :
A. In cases where at the time of advance remittance purpose of
remittance was indicated as import and subsequently the exchange has been used
for a purpose for which sale of exchange is permissible, and a document to the
satisfaction of authorised dealer has been produced, such cases should not be
treated as default and hence be excluded from the BEF statement.
B. Authorised dealers may accept into Bond Bill of Entry as a
provisional evidence of import into India. However, they may ensure submission
of Exchange Control copy of the Bill of Entry for Home consumption within a
reasonable period of time. Wherever into Bond Bill of Entry has been submitted
such cases need not be reported in BEF statement.
Authorised
dealers should exercise due care while handling import documents on collection
basis on behalf or importer customers with reference to their line of business,
financial standing, frequency of import, etc., to establish the genuineness of
the import. In the case of bills involving large values, authorised dealers
should satisfy themselves that the importer is known to be trading in items
mentioned in the shipping documents or that the items are required for his
actual use. In case of importers who are not their constituents, authorised
dealers should, at the time of acceptance of the documents/making payment,
call for detailed Certificate-cum-Report from their bankers in support of the
genuineness of imports.
(i) Import
bills and documents should be received from the banker of the seller by the
banker of the buyer in India. Authorised dealers should not, therefore, make
remittances where import bills have been received directly by the importers
from the overseas seller, except in the following cases:
(a) Where the value of import bill does
not exceed U.S. $ 10,000.
(b) Import bills received by wholly-owned Indian subsidiaries
of foreign companies from their principals.
(c) Import bills received by Super Star Trading Houses, Star
Trading Houses, Trading Houses, Export Houses, 100% Export Oriented
Units/Units in Free Trade Zones, Public Sector Undertakings and Limited Companies.
(d) Where the value of import bill does
not exceed U.S. $ 25,000 in respect of import of—
(i) books and magazines;
(ii) life saving drugs/equipments by
Hospitals, etc.; and
(iii) imports by reputed research and other development institutions
like Tata Institute of Fundamental Research, C-DOT, Indian Institute of
Technology, Indian Institute of Science and Universities.
(e) Import bills received by all limited companies viz.,
public limited and private limited companies.
(ii) In all other cases, at the request of importer clients,
authorised dealers may receive bills direct from the overseas seller up to U.S.
$ 25,000 (U.S. Dollars Twenty-five thousand only), provided the authorised
dealer is fully satisfied about the financial standing/status and track record
of the importer customer. Before extending the facility, authorised dealer
should obtain report on each individual overseas seller from the overseas
banker or reputed credit agency.
Remittances
against bills received for collection in respect of imports by post parcel may
be made by authorised dealers, provided the goods imported are such as are
normally despatched by post parcel. In these cases, the relative parcel
receipts must be produced as evidence of despatch through the post and an
undertaking to submit Postal Appraisal Form or Customs Assessment Certificate
as evidence of import within three months from the date of remittance should be
furnished by importers. If the parcel has already been received in India Postal
Appraisal Form or Customs Assessment Certificate should be produced in support
of the remittance application. Where goods to be imported are not of a kind
normally imported by post parcel or where authorised dealer is not satisfied
about the bona fides of the application, the case should be referred to the
Reserve Bank for prior approval with full particulars together with relative
parcel receipt/s and Postal Appraisal Form or Customs Assessment Certificate.
Note : Authorised dealers may make remittances towards import of
books by post parcel by book-sellers/publishers against bills received for
collection, irrespective of the amounts involved, without prior approval of the
Reserve Bank against endorsement on the import licence wherever applicable in
the normal course. They may also make remittances even if import licences
covering the imports have been issued subsequent to the date of import subject
to endorsement on such licences.
(i) Import of
Gold on Consignment basis - Gold may be imported by the nominated
agencies/banks on consignment basis where the ownership of the goods will
remain with the supplier and the importer (consignee) will be acting as an
agent of the supplier (consignor). Remittances towards the cost of import shall
be made as and when sales take place and in terms of the provisions of
agreement entered into between the overseas supplier and nominated
agency/bank.
(ii) Import of
gold on unfixed price basis - The nominated agency/bank may import gold on
outright purchase basis subject to the condition that although ownership of the
gold shall be passed on to the importer at the time of import itself, the price
of gold shall be fixed later, as and when the importer sells the gold to the
users.
Note : Instructions
contained in this paragraph would also apply to import of platinum and silver.
Authorised
dealers may allow remittance of rent, royalty, licence fee, profit, etc., in
connection with import of cinematograph feature films and video films subject
to the following conditions:
(i) a ‘No Objection Certificate’ from Central
Board of Film Certification, wherever required, has been submitted;
(ii) a Chartered Accountant’s certificate is
produced indicating that the payment to overseas supplier is due and the
amount sought to be remitted is in conformity with the terms of contract; and
(iii) an undertaking/Certificate regarding payment
of income-tax has been submitted.
Authorised
dealers may enter into arrangements with international factoring companies of
repute, preferably members of Factors Chain International, without approval of
the Reserve Bank. However, authorised dealers will have to ensure compliance
with the extant exchange control directions relating to imports, Import Trade
Control Policy in force and any other guidelines/directives issued by the
Reserve Bank in this regard.
Gold
brought by an NRI in accordance with the Export and Import Policy in vogue, is
permitted to be sold to residents against payment in rupees. Authorised dealers
should credit the amounts so received only to ordinary non-resident rupee (NRO)
accounts of the concerned NRI seller.
Authorised
dealers may take necessary precautions in handling merchant trade transactions
or intermediary trade transactions to ensure that (a) goods involved in the
transaction are permitted to be imported into India, (b) such transactions do
not involve foreign exchange outlay for a period exceeding three months, and
(c) all Rules, Regulations and Directions applicable to export out of India are
complied with by the export leg and all Rules, Regulations and Directions
applicable to import are complied with by the import leg of merchanting trade
transactions. Authorised dealers are also required to ensure timely receipt of
payment for the export leg of such transactions.
(i) Import
of 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
the Reserve Bank vide Notification No. FEMA 6/RB-2000, dated May 3, 2000.
(ii) All
imports of currency not covered by the general permission granted under the
Regulations require prior permission of the Reserve Bank.