Salient Features of from Master Circular on Import of Goods and Services

Salient Features of from Master Circular on Import of Goods and Services
RBI/2007-2008/24 Master Circular No. / 08 /2007-08 July 2, 2007

The circular is organised into five parts as under :
Part I : Introduction
Part II : General guidelines for imports.
Part III: Operational guidelines for imports.
Part IV : Annex (notifications and the forms for imports)
Part V : List of all circulars consolidated in the Master Circular.

And will stand withdrawn on July 1, 2008

Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry
imports into India are in conformity with the
Foreign Trade Policy
Foreign Exchange Management (Current Account Transactions) Rules, 2000
Government of India Notification No. G.S.R.381 (E) dated May 3, 2000
Provisions of Uniform Customs and Practices for Documentary Credits (UCPDC), for LCs
Provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and designs.
Compliance with the provisions of Income Tax Act, wherever applicable.
adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Operations & Development)

Form A-1
Applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent, towards imports into India must be made on the appropriate Form A-1.
Remittances not involving movement of goods will be covered by A-2

Import Licenses
Excepting for goods included in the negative list requiring licence under the Foreign Trade Policy no Licence is required
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.
Banks preserve the Licence copies for verification by the internal auditors or inspectors.

Obligation of Purchaser of Foreign Exchange
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 AD 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
Where foreign exchange acquired has been utilised for import of goods into India, the AD 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 that value of goods are equivalent to the value of remittance.
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 and as per Notification No.FEMA14/2000-RB dated 3rd May 2000,

Time Limit for Settlement of Import Payments

· 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, banks may permit settlement of import dues delayed due to disputes, financial difficulties,
· 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.
· Remittances against import of books may be allowed without restriction as to time limit,
· Bank may allow payment of interest on usance bills or overdue interest at maximum of 6 months LIBOR 50 / 125 basis points


Import of Foreign Exchange / Indian Rupees
No person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Importing 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 and Notification No. FEMA 6/RB- 2000 dated May 3, 2000

Import of Indian currency and currency notes
person resident in India who had gone out of India on a temporary visit, may bring into India 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 notes up to an amount not exceeding Rs.5,000/- per person.
Person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank notes other than notes of denominations of above Rs.100 in either case.

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 travelers 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 in Currency Declaration Form (CDF) (shall not be necessary to make such Declaration by such person if aggregate value of the foreign exchange at any one time does not exceed USD10,000 and/or the aggregate value of foreign currency does not exceed USD 5,000 )


PART III Operational Guidelines for Imports

Advance Remittance for import of goods:
bank may allow advance remittance for import of goods without any ceiling subject to
If the amount of advance remittance exceeds USD 100,000 or its equivalent, an unconditional, irrevocable standby Letter of Credit or a guarantee from an international bank of repute
situated outside India guarantee of AD bank in India, issued against the counter-guarantee
of an international bank
Importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/State Governments) is unable to obtain bank guarantee from overseas suppliers and the A D bank is satisfied about the track record and bonafides of the importer, bank guarantee / standby Letter of Credit banks may frame their own internal guidelines to deal with such cases and may not be insisted upon for advance remittances up to USD 1,000,000
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 for remittance exceeding USD 100, 000.
The remittance is made directly to the supplier or manufacturer of the goods and not to any third party or to a numbered account.
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
In the event of non-import of goods, AD bank should ensure that 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 FEMA,

Advance Remittance for Import of Rough Diamonds
AD bank are permitted to allow advance remittance without any limit and without bank guarantee or standby letter of credit, by an importer (other than a Public Sector Company or a
Department / Undertaking of the Government of India / State Government/s), for import of rough diamonds into India from the under noted mining companies, viz. a) Diamond Trading Company Pvt. Ltd., UK, b) RIO TINTO, UK, c) BHP Billiton, Australia, d) ENDIAMA, E. P. Angola, e) ALROSA, Russia, and f) GOKHARAN, Russia, provided., importer should be a recognized processor of rough diamonds as per a list to be approved by Gems and Jewellery Export Promotion Council, bank should undertake the transaction based on their commercial judgment and after being satisfied about the bonafides of the transaction; 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, KYC and due diligence exercise should be done by the AD bank for the Indian importer entity and the overseas company; AD bank should follow up submission of the Bill of Entry / documents evidencing import of rough diamonds into the country by the importer, AD banks are required to submit a report of all such advance remittances made without a bank guarantee or standby letter of credit, where the amount of advance payment is equivalent to or exceeds USD 5,000,000/- (USD Five million only), to The Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Trade Division, Central Office, Amar Bhawan, Sir. P. M. Road, Fort, Mumbai – 400 001, on a half yearly basis,


Advance Remittance for Import of Aircrafts, Helicopters and other Aviation Related purchases
Airline companies whom the Directorate General of Civil Aviation has permitted to operate as a schedule air transport service, can make advance remittance without bank guarantee, up to USD 50 million for direct import of each aircraft, helicopter and other aviation related purchases, banks should undertake the transactions based on their commercial judgment and after being satisfied about the bonafides of the transaction, KYC and due diligence exercise for Indian importer entity and the overseas manufacturer. bank may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors. 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. 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. Bank 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
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.

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.

Interest on Import Bills
Bank 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 prescribed rates. The current all-in-cost
ceilings, over 6 months LIBOR of respective currency of credit , are as under: Maturity period Up to one year 50 basis points and Maturity period More than one year but less than three years 125 basis points
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. remittances may be allowed after deducting the proportionate interest for the
unexpired portion of usance at the prevailing LIBOR

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 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 and 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 the defective goods imported earlier are reshipped out of India, AD banks may issue guarantees at the request of importer client for dispatch/return of the defective goods


Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites
Banks may allow remittances towards the cost of equipment to be imported and
installed at their overseas sites in connection with the setting up of their International Call Centres (ICCs) subject to : BPO company should have obtained necessary approval from the Ministry of Communications and InformationTechnology, remittance should be allowed based on commercial judgment, the bonafides of the transactions and strictly in terms of the contract, remittance is made directly to overseas supplier, 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.

Receipt of import documents by the importer 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.
AD should not, make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases: value of import bill does not exceed USD 100,000, bills received by wholly-owned Indian subsidiaries of foreign companies from their principals. bills received by Status Holder Exporters, Export Oriented Units / Units in Free Trade Zones, Public Sector Undertakings and Limited Companies

Receipt of import documents by the AD Bank directly from overseas suppliers
At the request of importer clients, AD bank may receive bills directly from the overseas supplier, provided the AD is fully satisfied about the financial standing/status and track record of the importer customer. AD bank should obtain a report on each individual overseas supplier from the overseas banker or a reputed credit agency. (Need not be obtained in cases where the invoice value does not exceed USD 100,000)

Evidence of Import - Physical Imports
Where value of foreign exchange remitted / paid for import into India exceeds USD 100,000 or its equivalent, it is obligatory for AD, to ensure that the importer submits; Exchange Control copy of the Bill of Entry for home consumption, Exchange Control copy of the Bill of Entry for warehousing, in case of 100% Export Oriented Units, Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Authorities
In respect of imports on D/A basis, AD should insist on production of evidence of import at the time of effecting remittance of import bill. 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., bank may, allow reasonable time, not exceeding three months from the date
of remittance, to the importer to submit the evidence of import.

Evidence of import in lieu of Bill of Entry
AD 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 ; amount remitted is less than USD 1,000,000 , company listed on a stock exchange in India and whose net worth is Rs.100 crores + , importer is a public sector company or an undertaking of the Government, 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).

Evidence of Import - Non Physical Imports
For 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, and importers to keep Customs
Authorities informed of the imports made.

Issue of acknowledgement
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.

Verification & Preservation
Internal inspectors or auditors (including external auditors appointed by AD 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, and preserved by bank for a period of one year from the date of its verification or if applicable till clearance from the investigating agency concerned.

Follow up for Import Evidence
If Documentary evidence of import not submitted within 3 months from the date of remittance involving foreign exchange exceeding USD100, 000, the AD bank should rigorously follow-up for the next 3 months, including issuing registered letters to the importer.
Bank should forward a statement on half-yearly basis 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
Banks 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, based on suitable policy framed by the bank's Board of Directors

Issue of Bank Guarantee
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,

Import Gold/Platinum/Silver by Nominated Banks/Agencies on consignment basis
Gold, platinum and silver may be imported by the nominated agencies/banks on consignment basis where the ownership 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

Import Gold/Platinum/Silver by Nominated Banks/Agencies on unfixed price basis
The nominated agency/bank may import gold, platinum and silver 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.

Direct Import of Gold/Platinum/Silver by Nominated Banks/Agencies
Bank can open Letters of Credit and allow remittances on behalf of EOUs, units in SEZs in the Gem & Jewellery sector and nominated agencies, for direct import of gold, subject to, strictly in accordance with the Foreign Trade Policy. , Suppliers’ and Buyers’ Credit, including the usance period, should not exceed 90 days, Banker's prudence should be strictly exercised for all transactions, due diligence is undertaken and all Know-Your-Customer (KYC) norms and the Anti- Money-Laundering guidelines, the credentials of the supplier should also be ascertained before opening the LCs and The financial standing, line of business and the net worth of the importer customer should be commensurate with the volume of business turnover and all documents pertaining to such transactions must be preserved for at least five years.
Banks undertaking gold import transactions are required to submit as per the format , a monthly statement thereof, to the Trade Division, FED RBI Mumbai

Gold Loans
Nominated agencies / approved banks can import gold on loan basis for on lending to exporters of jewellery under this scheme.
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.
The maximum tenor of gold loan would be as per the Foreign Trade Policy (I year)
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.
SBLC can be opened only on behalf of entities permitted to import gold on loan basis and in favour of internationally renowned bullion banks only.
Banks must maintain adequate documentation with them to uniquely link all imports with the SBLC issued for the import of gold on loan basis


Import factoring
bank may enter into arrangements with international factoring companies of repute, preferably members of Factors Chain International and have to ensure compliance with the extant foreign exchange and any other guidelines/directives

Merchanting Trade
bank may take necessary precautions in handling bonafides merchanting trade transactions or intermediary trade transactions to ensure that: goods involved in the transactions are permitted to be imported into India, all rules, regulations and directions applicable to export (except Export Declaration Form) and import (except Bill of Entry) are complied with for the export leg and import leg, respectively, the entire merchant trade transaction is completed within a period of 6 months, do not involve foreign exchange outlay for a period exceeding three months. And Where the payment for export leg of the transaction precedes banks should ensure that the liability for the import leg of the transaction is extinguished by the payment received for the export leg.
Short-term credit either by way of suppliers' credit or buyers' credit is not available for merchanting trade or intermediary trade transactions.