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 & 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, supercede 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.

Yours faithfully,
B. MAHESHWARAN
Chief General Manager

Annexure

1. 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 there under.
   
   
2. 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.
   
   
3. 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.
   
   
4. The Directions contained in this paragraph are also applicable where payment for imports into India is made through ACU mechanism.

1. remittance in foreign currency,
   
2. transfer of rupees to non-resident bank accounts, and
   
3. remittance through Asian Clearing Union.
   
   Care should be taken to ensure that duly filled in A1 form in appropriate format has been obtained.

1. 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.
   
   
2. 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.

1. 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.
   
   
2. 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.

1. 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;
   
   
2. remittance is made direct to the suppliers;
   
   
3. 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;
   
   (Simplifying and liberalising the procedure for import, it hasbeen decided to raise the limit of USD 25,000 to USD 100,000 or its equivalent. Authorised Dealers may, therefore, allow advance remittances for import of goods upto USD 100,000 without prior approval of Reserve Bank
   
   For above sub-para (c) refer Cir. No. 49/2002-03-RB, Dt. 16/11/2002)
   
   
4. 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
   
   
5. 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 there under, to the satisfaction of the authorised dealer.

1. 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 {cf: Regulation 5 (3) of Reserve Bank Notification No. FEMA 3/2000-RB dated May 3, 2000}. 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.
   
   
2. 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 -
   
   
   1. authorised dealer is satisfied about the genuineness of the circumstances leading to the delay in payment; and
      
      
   2. 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.

1. 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.
   
   
2. 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.

1. 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.
   
   
2. 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:
   
   
   1. 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.
      
      
   2. 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.
      
      
   3. 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.

1. 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.
   
   
2. In case of all imports, except import through couriers, where value of foreign exchange remitted/paid for import into India exceeds US $ 5000 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 the Exchange Control copy of the Bill of Entry for home consumption, or in case of 100% Export Oriented Units the exchange control copy of the Bill of Entry for warehousing, or 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.
   
   
3. 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.
   
   
4. 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.
   
   
5. 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.
   
   
6. 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:
   
   
   1. importer's full name and address with code number ;
      
      
   2. import licence number and date (wherever applicable);
      
      
   3. bank's reference of letter of credit number ,etc., if any;
      
      
   4. 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
      
      
   5. particulars of goods imported.
   
   
7. 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.
   
   
8. 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.

1. 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.
   
   
2. Authorised dealers should forward to the Reserve Bank a statement on half yearly basis as at the end of June & 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.

1. 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:
   
   
   1. Where the value of import bill does not exceed U.S.$ 10,000.
      
      
   2. Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.
      
      
   3. 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.
      
      
   4. Where the value of import bill does not exceed U.S.$ 25,000 in respect of import of -
      
      
      1. books and magazines
         
         
      2. life saving drugs/equipments by Hospitals, etc. and
         
         
      3. 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.
      
      
   5. Import bills received by all limited companies viz. Public limited, public limited and private limited companies.
   
   
2. 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.

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.

1. 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.
   
   
2. 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.

1. a 'No Objection Certificate' from Central Board of Film Certification, wherever required, has been submitted;
   
   
2. 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
   
   
3. an undertaking/Certificate regarding payment of income-tax has been submitted .

1. 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.
   
2. All imports of currency not covered by the general permission granted under the Regulations require prior permission of the Reserve Bank.