PART III

Operational Guidelines for Imports

1. Advance Remittance

A. Advance Remittance for import of goods:

(i) AD bank may allow advance remittance for import of goods without any ceiling subject to the following conditions:

a) 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 or a guarantee of an AD 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 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, the requirement of the bank guarantee / standby Letter of Credit may not be insisted upon for advance remittances up to USD 1,000,000 (US dollar one million). AD 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 the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100, 000.

(ii). The remittance is made directly to the supplier or manufacturer of the goods and not to any third party or to a numbered account.

(iii).  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.

(iv).  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, Rules  or Regulations made there under.

B. Advance Remittance for Import of Rough Diamonds

(i) 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.

(ii) While allowing the advance remittance, AD bank may ensure the following

(a)The importer should be a recognized processor of rough diamonds as per a 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 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  bank for the Indian importer entity and the overseas company; and
(e) AD bank should follow up submission of the Bill of Entry / documents evidencing import of rough diamonds into the country by the importer, in terms of FEMA / Rules / Regulations / Directions issued in this regard.

(iii) In case of an importer entity in the Public Sector or a Department / Undertaking of the Government of India / State Government/s, AD bank may permit advance remittance subject to the above conditions and a specific waiver of bank guarantee from the Ministry of Finance, Government of India where the advance payments is equivalent to or exceeds USD 100,000/- (USD one hundred thousand only).

(iv) AD banks are required to submit a report (Annex-2) 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, as at the end of September and March every year, in the format annexed (Annex-2).The report should be submitted within 15 days from  the close of the respective half year.

C. 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:

Prior approval of the concerned Regional Office of the Reserve Bank will be required in case of any deviation from the above stipulations.

2. Interest on Import Bills

(i) AD 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 are as under:

* for the respective currency of credit or applicable benchmark.
(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.

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, 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. It may be ensured that the consignment being replaced is shipped within the validity period of the licence.

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 banks may issue guarantees at the request of importer client for dispatch/return of the defective goods, according to their commercial judgment.

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

AD bank may, allow BPO companies in India to make 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 the following conditions:
(a) The BPO company should have obtained necessary approval from the Ministry of Communications and Information Technology, Government of India and other authorities concerned for setting up of the ICC.
(b) 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.
(c) The remittance is made directly to the account of the overseas supplier.
(d) 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.

6. Receipt of Import Bills/Documents

A. 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 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 100,000.

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 Free Trade 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.

B. Receipt of import documents by the AD Bank directly from overseas suppliers

(i) At the request of importer clients, AD bank may receive bills directly from the overseas supplier as above, provided the AD bank is fully satisfied about the financial standing/status and track record of the importer customer.
(ii) Before extending the facility, the AD bank should obtain a report on each individual overseas supplier from the overseas banker or a reputed credit agency. However, such a credit report on the overseas supplier need not be obtained in cases where the invoice value does not exceed USD 100,000 provided the AD bank is satisfied about the bonafides of the transaction and track record of the importer constituent.

7. Evidence of Import

A. 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 bank through whom the relative remittance was made, to ensure that the importer submits :-

      or

(ii) In respect of imports on D/A basis, A D 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 genuiness of request, allow reasonable time, not exceeding three months from the date of remittance, to the importer to submit the evidence of import.

B. Evidence of import in lieu of Bill of Entry

(i) 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 :-

(a) the amount of foreign exchange remitted is less than USD 1,000,000 (USD one million) or its equivalent,

(b) the importer is a company listed on a stock exchange in India and whose net worth is not less than Rs.100 crores 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 bank may insist on a declaration from the auditor/CEO of such institutions that their accounts are audited by CAG.

C. 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 bank should advise importers to keep Customs Authorities informed of the imports made by them under this clause.

8. Issue of acknowledgement

AD 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.

9. Verification & Preservation

(i) 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, etc.,
(ii). Documents evidencing import into India should be preserved by Authorised Dealer 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.

10. Follow up for Import Evidence

(i) In case an importer does not furnish any documentary evidence of import, as required under paragraph 7 of Part III, 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.
(ii) AD 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 bank is functioning, within 15 days from the close of the half-year to which the statement relates.
(iii) AD 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 bank may set their own internal guidelines to deal with such cases.

11. Issue of Bank Guarantee

AD 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.

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

A. Import on consignment basis

Gold 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 between the overseas supplier and nominated agency/bank. These instructions would also apply to import of platinum and silver.

B. Import 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. These instructions would also apply to import of platinum and silver.

C. Direct Import of Gold

AD 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 the following

D. Gold Loans

(i) Nominated agencies / approved 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 2004-2009, 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 import gold on loan basis, viz. nominated agencies and 100% EOUs/units in SEZ, which are in the Gem and Jewellery sector.

(vi) SBLC should be in favour of internationally renowned bullion banks only. AD bank can obtain a detailed list of internationally renowned bullion banks from the Gem & Jewellery Export Promotion Council.

(vii) All other existing instructions on import of gold and opening of Letters of Credit, with usance period not exceeding 90 days, will continue to be applicable.

(viii) AD banks must maintain adequate documentation with them to uniquely link all imports with the SBLC issued for the import of gold on loan basis.

13. Import factoring

(i) AD 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.

14. Merchanting Trade

AD bank may   take   necessary   precautions   in   handling bonafides merchanting trade transactions or  intermediary trade transactions to ensure that:

(b) The entire merchant trade transaction is completed within a period of 6 months.

(c)The transactions do not involve foreign exchange outlay for a period exceeding three months.

(d) Payment is received in time for the export leg.

(e) Where the payment for export leg of the transaction precedes the payment for import leg, AD 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.

ADs 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.