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Master Direction Import of Goods and Services (Updated as on October 20 2016)

FEMA - 17/2015-16 - Dated:- 1-1-2016 - RBI/FED/2016-17/12 FED Master Direction No. 17/2016-17 January 1, 2016 (Updated as on October 20, 2016) (Updated as on March 31, 2016) (Updated as on February 4, 2016) To All Authorised Dealer Category - I banks and Authorised Banks Madam / Dear Sir, Master Direction - Import of Goods and Services Import of Goods and Services into India is being allowed in terms of Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No .....

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eign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 3. Instructions issued on import of goods and services into India have been compiled in this Master Direction. The list of underlying circulars/ notifications which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated January 01 .....

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es INDEX Section I - Introduction Section II - General Guidelines for imports B.1. General Guidelines B.2. Remittances for Import Payments B.3. Import Licenses B.4. Obligation of Purchaser of Foreign Exchange B.5. Time Limit for Settlement of Import Payments B.6. Import of Foreign exchange / Indian Rupees B.7. Third Party Payment for Import Transactions B.8. Issue of Guarantees by an Authorised Dealer Section III - Operational Guidelines for Imports C.1. Advance Remittance C.2. Interest on Impor .....

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ing C.14. Merchanting Trade C.15. Import Payments through Online Payment Gateway Service Providers 1C.16 Settlement of Import transactions in currencies not having a direct exchange rate Consolidated List of Circulars in the Master Direction Section I - Introduction (i) Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry, Department of Commerce, Government of India. Authorised Dealer Category - I (AD Category - I) banks shoul .....

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entary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of their constituents. (iii) Compliance with the provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and designs. (iv) AD Category - I banks may also advise importers to ensure compliance with the provisions of Income Tax Act, wherever applicable. (v) Any reference to the Reserve Bank should first be made to the Regional Office of the Foreign Exchange Department .....

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ng import payment transactions on behalf of their clients are set out in the following paragraphs. Where specific regulations do not exist, AD Category - I banks may be governed by normal trade practices. AD Category - I banks may particularly note to adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Regulation) in all their dealings. B.2. Remittances for Import Payments AD Category I Banks may allow remittance for making payments for imports .....

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called for and adherence to special conditions, if any, attached to such licences should be ensured. After effecting remittances under the licence, AD Category - I banks may preserve the copies of utilised licence /s till they are verified by the internal auditors or inspectors. B.4. Obligation of Purchaser of Foreign Exchange (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 ment .....

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or Customs Assessment Certificate, etc., and satisfy himself that goods equivalent to the value of remittance have been imported. AD bank should ensure that all import remittances outstanding on the notified date of IDPMS are uploaded in IDPMS. (iii) In addition to the permitted methods of payment for imports laid down in Notification No.FEMA14/2000-RB dated 3rd May 2000, payment for import can also be made by way of credit to non-resident account of the overseas exporter maintained with a bank .....

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ormity with the extant provisions and the import is in conformity with the Foreign Trade Policy in force. (iv) Any person resident in India may also make payment as under : (a) In rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India ; (b) By means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such per .....

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expenses to and from and within India, in accordance with the provisions contained in the company s Memorandum of Association or Articles of Association or in any agreement entered into it or in any resolution passed by the company in general meeting or by its Board of Directors, provided the requirement of any law, rules, regulations, directions applicable for making such payments are duly complied with. B.5. Time Limit for Settlement of Import Payments B.5.1. Time limit for Normal Imports (i) .....

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nd may be permitted in terms of the directions in para C.2 of Section III below. B.5.2. Time Limit for Deferred Payment Arrangements Deferred payment arrangements (including suppliers and buyers credit) upto five years, are treated as trade credits for which the procedural guidelines as laid down in the Master Circular for External Commercial Borrowings and Trade Credits may be followed. B.5.3. Time Limit for Import of Books Remittances against import of books may be allowed without restriction .....

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re importer has filed suit against the seller. In cases where sector specific guidelines have been issued by Reserve Bank of India for extension of time (i.e. rough, cut and polished diamonds), the same will be applicable. ii) While granting extension of time, AD Category -I banks must ensure that: (a) The import transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies; (b) While considering e .....

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concerned Regional Office of Reserve Bank of India. iv) The above shall be reported in IDPMS as per message Bill of Entry Extension and the date up to which extension is granted will be indicated in Extension Date column. B.6. Import of Foreign Exchange / Indian Rupees (i) Except as otherwise provided in the Regulations, no person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Import of foreign currency, including cheques, .....

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port 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 travellers cheques; (ii) Bring into India from any place outside India, without limit, foreign exchange (other than unissued notes), subject to the condition that such person makes, on arrival in India, a declaration to the Custom Authorities at the Airport in the Currency Declaration Form (CDF) annexed to these Regulations; provided further .....

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ency and Currency Notes (i) Any 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 of India notes up to an amount not exceeding ₹ 25,000 (Rupees twenty five thousand only). (ii) A person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India for any amo .....

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has been produced. (b) AD bank should be satisfied with the bonafides of the transactions and should consider the Financial Action Task Force (FATF) Statement before handling the transactions; (c) The Invoice should contain a narration that the related payment has to be made to the (named) third party; (d) Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party; (e) Importer should comply with the related exta .....

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thorised dealer may give guarantee, Letter of Undertaking of Letter of Comfort in respect of any debt, obligation or other liability incurred by a person resident in India and owned to a person resident outside India (being an overseas supplier of goods, bank or a financial institution), for import of goods, as permitted under the Foreign Trade Policy announced by Government of India from time to time and subject to such terms and conditions as may be specified by Reserve Bank of India from time .....

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Government of India / State Government: Provided further that where the service importer is a Public Sector Company or a Department / Undertaking of the Government of India / State Government, no guarantee for an amount exceeding USD 100,000 or its equivalent shall be issued without the prior approval of the Ministry of Finance, Government of India. B.8.4 An authorised dealer may, subject to the directions issued by the Reserve Bank of India in this behalf, permit a person resident in India to .....

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uidelines for Imports C.1. Advance Remittance C.1.1. Advance Remittance for Import of Goods (i) AD Category - I 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 200,000 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 Category - I bank in India, if such a guaran .....

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pon for advance remittances up to USD 5,000,000 (US Dollar five million). AD Category - I 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 .....

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ng companies to whom an importer (other than Public Sector Company or Department / Undertaking of Government of India / State Government) can make advance payments, without any limit / bank guarantee/ stand-by letter of Credit. Banks must ensure the following: i. The overseas mining company should have the recommendation of GJEPC. ii. The importer should be a recognised processor of rough diamonds and should have a good track record. iii. AD Category - I banks should, undertake the transaction b .....

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cised to ensure that remittance is not permitted for import of conflict diamonds (Kimberly Certification). vi. KYC and due diligence exercise should be done by the AD Category - I banks as per the existing guidelines. vii. AD Category - I banks should follow-up submission of the Bill of Entry / documents evidencing import of rough diamonds into the country by the importer, in terms of the Act / Rules / Regulations / Directions issued in this regard. viii). Based on the AD code declared by the im .....

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r customer as per the message format BOE Settlement xi) Multiple ORMs can be settled against single BoE and also multiple BoEs can be settled against one ORM. b) In case of an importer entity in the Public Sector or a Department / Undertaking of the Government of India / State Government/s, AD Category - I banks may permit the 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 .....

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n-Scheduled Air Transport Service (including Air Taxi Services), can make advance remittance without bank guarantee or an unconditional, irrevocable Standby Letter of Credit, 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. 2. Importers of Aircrafts/ Helicopter .....

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the Indian importer entity and the overseas manufacturer company as well. ii. Advance payments should be made strictly as per the terms of the sale contract and directly to the account of the manufacturer (supplier) concerned. iii. AD Category - I banks may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors. iv. In the case of a Public Sector Company or a Department / Undertaking of Central /State Governments, the AD Category - I bank shal .....

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ayments, the date of last remittance made in terms of the contract will be reckoned for the purpose of submission of documentary evidence of import. vii. Prior to making the remittance, the AD Category - I bank may ensure that the requisite in principle approval of the Ministry of Civil Aviation in case of Scheduled Air Service Operators and in other cases approval of the Director General of Civil Aviation / other agencies in terms of the extant Foreign Trade Policy has been obtained by the comp .....

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lines. C.1.4. Advance Remittance for the Import of Services AD Category - I bank may allow advance remittance for import of services without any ceiling subject to the following conditions: (a) Where the amount of advance exceeds USD 500,000 or its equivalent, a guarantee from a bank of international repute situated outside India, or a guarantee from an AD Category - I bank in India, if such a guarantee is issued against the counter-guarantee of a bank of international repute situated outside In .....

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ttance fulfils his obligation under the contract or agreement with the remitter in India, failing which, the amount should be repatriated to India. (d) AD Category - I banks should ensure generation of ORMs and marking off in the IDPMS etc. as per extant IDPMS guidelines. C.2. Interest on Import Bills (i) AD Category - I bank may allow payment of interest on usance bills or overdue interest on delayed payments for a period of less than three years from the date of shipment at the rate prescribed .....

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ce at the prevailing LIBOR of the currency of invoice. (iii) In case of change in value due to (i) or (ii) above, the respective AD bank should ensure proper remark/indicator is entered for ORM mark off in IDPMS etc as per extant IDPMS guidelines. C.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 o .....

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dicator is entered for ORM mark off/closure of Bills in IDPMS etc as per extant IDPMS guidelines. C.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 Category-I banks may issue guarantees at the request of importer client for dispatch/return of the defective goods, according to their commercial judgment. C.5. Import of Equipment by Business Process O .....

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or setting up of the ICC. (ii) 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. (iii) The remittance is made directly to the account of the overseas supplier. (iv) 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 impo .....

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banker of the importer in India. AD Category - I 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 300,000. (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 Orie .....

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er of rough diamonds, rough precious and semi-precious stones has received the import bills / documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. Status holder importers as defined in the Foreign Trade Policy dealing in the import of rough diamonds, rough precious and semi- precious stones can receive import bills directly from the suppliers without any ceiling. AD Category - I banks may undertake such tran .....

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ndividual overseas supplier from the overseas banker or reputed overseas credit rating agency. C.6.1.3. Receipt of import documents by the AD Category - I bank directly from overseas suppliers (i) At the request of importer clients, AD Category - I bank may receive bills directly from the overseas supplier as above, provided the AD Category - I bank is fully satisfied about the financial standing/status and track record of the importer customer. (ii) Before extending the facility, the AD Categor .....

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e of foreign exchange remitted / paid for import into India, it is obligatory on the part of the AD Category- I bank through which 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) The Exchange Control Copy of the Bill of Entry for warehousing, in case of 100% Export Oriented Units, or (c) Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Author .....

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r SEZ Unit warehouses or Customs bonded warehouses, etc. (ii) In respect of imports on Delivery against acceptance basis, AD Category - I 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 genuineness of request, allow reasonable t .....

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xchange 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 or its equivalent and (b) The importer is a company listed on a stock exchange in India and whose net worth is not less than ₹ 100 crore as on the date of its last audited balance sheet, o .....

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dited by CAG. (iii) Outward Remittance Message has to be created & BoE has to be downloaded from BoE Master in IDPMS (in case of EDI ports). In case of Non-EDI ports duplicate copy/customs certified copy have to be submitted or BoE waiver obtained from RBI. C.7.3. 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 soft .....

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(ORM) for all outward remittance/s for import payments on behalf of their importer customer for which the prescribed documents for evidence of import have not been submitted. (ii) Creation of ORM for all outstanding outward remittance/s for import payments need to be completed on or before October 31, 2016. Settlement of ORM with BoE (iii) Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BoE) issued by EDI ports from BOE Master in IDPMS. For non-EDI port .....

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ormat BOE settlement . (vi) Multiple ORMs can be settled against single BoE and also multiple BoE can be settled against one ORM. Extension and Write Off (vii) AD Category I banks shall give extension for submission of BoE beyond the prescribed period in terms of the extant guidelines on the matter, and the same will be reported in IDPMS as per the message Bill of Entry Extension and the date up to which extension is granted will be indicated in Extension Date column. (viii) AD Category I banks .....

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delines on the matter subject to submission of satisfactory documentation by the importer irrespective of the amount involved. AD Bank shall settle and close ORM/BoE with appropriate Adjustment Indicator in IDPMS. (x) The above operational guidelines for extension and write off are meant to facilitate closure of bills in IDPMS and will be subject to extant guidelines on the matter and not absolve the importer from remitting / receiving the amount in case of change in circumstances. (xi) While al .....

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check / percentage check of write-off of import bills; (xii) Extension and write off cases not covered by the extant guidelines may be referred to the concerned Regional Office of Reserve Bank of India for necessary approval. Follow-up for Evidence of Import (xiii) AD Category - I banks are required to follow up for submission of prescribed documents for evidence of import in terms of extant guidelines on the subject. C.9. Verification and Preservation (i) Internal inspectors or auditors (inclu .....

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royed only after obtaining clearance from the investigating agency concerned. C.10. Follow-up for Import Evidence (i) In case an importer does not furnish any documentary evidence of import, as required under paragraph C.7. of Section III, within 3 months from the date of remittance involving foreign exchange irrespective of value, the AD Category - I bank should rigorously follow-up for the next 3 months, including issuing registered letters to the importer. (ii) On operationalization of IDPMS, .....

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agencies, as notified by DGFT, are permitted to import gold on consignment basis. All sale of gold domestically will, however, be against upfront payment. Nominated banks are free to grant gold metal loans. (iii) Star and Premier Trading Houses (STH/PTH) can import gold on Document against Payment (DP) basis as per entitlement without any end use restrictions. (iv) The import of gold coins and medallions is permitted. However, prohibition on sale of gold coins and medallions by banks continues .....

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s (other than the nominated banks)/ EOUs/ SEZs in Gem & Jewellery sector during the month under report as well as the cumulative position as at the end of the said month beginning from the 1st month of the Financial Year. Both the statements shall be submitted, even if there is 'Nil' position, by the 10th of the following month / half year, to which it relates. C.11.2. Import of Gold Jewellery Including Jewellery Made of Precious Metals or/and Studded With Diamonds / Precious Stones .....

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a) Suppliers and Buyers Credit, including the usance period of Letters of Credit opened for import of Platinum, Palladium, Rhodium and Silver and rough, cut and polished Diamonds, Precious and semi-precious stones; should not exceed 90 days from the date of shipment. However for Clean Credit i.e. credit given by a foreign supplier to its Indian customer/ buyer, without any Letter of Credit (Suppliers Credit)/ Letter of Undertaking (Buyers Credit)/ Fixed Deposits from any Indian financial institu .....

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he Reserve Bank. Such extension by AD banks may be subject to the conditions such as: (i) AD banks being satisfied of the genuineness of the reason and bonafides of the transaction and also that no interest payment is involved for the additional period; (ii) reasons for such extension are due to financial difficulties and/ or quality disputes; (iii) importer is not under investigation and is not a frequent offender. AD banks may submit a half yearly report of such extensions allowed customer-wis .....

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interest / currency arbitrage. C.12.2. Import of Platinum / Silver on Unfixed Price Basis The nominated agency/bank may allow import of platinum and silver, on outright purchase basis subject to the condition that although ownership of the same shall be passed on to the importers at the time of import itself, the price shall be fixed later as and when the importer sells to the user. C.12.3. Import of Silver on consignment basis Silver may be imported by the nominated banks/agencies on consignme .....

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tions relating to imports, Foreign Trade Policy in force and any other guidelines/directives issued by Reserve Bank in this regard. C.14. Merchanting Trade C.14.1. For a trade to be classified as Merchanting Trade following conditions should be satisfied: a. Goods acquired should not enter the Domestic Tariff Area, and b. The state of the goods should not undergo any transformation. C.14.2. AD Category - I bank may handle bonafide Merchanting Trade Transactions and ensure that: (a) Goods involve .....

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sport documents and insurance documents (if originals are not available, non-negotiable copies duly authenticated by the bank handling documents may be taken) and satisfy itself about the genuineness of the trade. (c) The entire Merchanting Trade Transactions should be completed within an overall period of nine months and there should not be any outlay of foreign exchange beyond four months. (d) The commencement of Merchanting Trade would be the date of shipment / export leg receipt or import le .....

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leg is received by the Merchanting Trader before payment of the import leg, AD bank should ensure that the same is earmarked for making payment for the respective import leg. However, AD bank may allow short-term deployment of such funds for the intervening period in an interest bearing account; (g) Merchanting Traders may be allowed to make advance payment for the import leg on demand made by the overseas seller. In case where inward remittance from the overseas buyer is not received before the .....

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order keeping in view the outlay and completion of the transaction within nine months; (i) Payment for import leg may also be allowed to be made out of the balances in Exchange Earners Foreign Currency Account (EEFC) of the Merchant Trader. (j) AD bank should ensure one-to-one matching in case of each Merchanting Trade transaction and report defaults in any leg by the traders to the concerned Regional Office of RBI, on half yearly basis within 15 days from the close of each half year, i.e. June .....

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obligations under the order. The overall Merchanting Trade should result in reasonable profits to the Merchanting Trader. C.14.3. Merchanting trade to Nepal and Bhutan As Nepal and Bhutan are landlocked countries, there is a facility of transit trade whereby goods are imported from third countries by Nepal and Bhutan through India under the cover of Customs Transit Declarations in terms of the Government of India Treaty of Transit with these two countries. In consultation with Government of Indi .....

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s of goods and software of value not exceeding USD 2,000 by entering into standing arrangements with the OPGSPs subject to the following:- (a) The balances held in the Import Collection account shall be remitted to the respective overseas exporter's account immediately on receipt of funds from the importer and, in no case, later than two days from the date of credit to the collection account. (b) The AD Category -I bank will obtain a copy of invoice and airway bill from the OPGSP containing .....

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verseas exporters in permitted foreign currency; (ii) payment to Indian importers for returns and refunds; (iii) payment of commission at rates/frequencies as defined under the contract to the current account of the OPGSP; and (iv) bank charges 3C.16. Settlement of Import transactions in currencies not having a direct exchange rate To further liberalize the procedure and facilitate settlement of import transactions where the invoicing is in a freely convertible currency and the settlement takes .....

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iginal (freely convertible) currency of the invoice/ contract, Letter of Credit as full and final settlement, (d) AD bank is satisfied with the bonafides of the transactions, and (e) The counterparty to the importer of the AD bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures. Appendix Consolidated List of Circulars on Import of Goods and Services Sr. No AP (DIR Series) Ci .....

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ia - Evidence of Import February 20, 2004 8 2 Import of Gold by (i) Export Oriented Units (EOUs), (ii) Units in SEZ/EPZ, and (iii) Nominated Agencies July 9, 2004 9 34 Import of Gold on Loan Basis - Tenor of Loan and Opening of Stand-By Letter of Credit February 18, 2005 10 1 Import of Goods of Value USD 100,000 and Less -Clarification on Follow up for Evidence of Import July 12, 2005 11 33 Liberalisation of Export and Import procedures February 28, 2007 12 34 Import of Goods of Value USD 100,00 .....

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Remittance for Import of Rough Diamonds August 4, 2008 18 08 Advance Remittance for Import of Rough Diamonds August 21, 2008 19 09 Foreign Exchange Management Act, 1999- Advance Remittance for Import of Goods - Liberalisation August 21, 2008 20 12 Foreign Exchange Management Act, 1999 - Import of Platinum / Palladium / Rhodium / Silver August 28, 2008 21 13 Direct Receipt of Import Bills / Documents - Liberalisation September 1, 2008 22 15 Foreign Exchange Management Act, 1999 - Advance Remitta .....

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- Modification April 03, 2012 29 83 Import of precious and semi precious stones- Clarification February 20, 2013 30 103 Import of Gold by Nominated Banks/Agencies May 13, 2013 31 107 Import of Gold by Nominated Banks/Agencies June 4, 2013 32 122 Import of Gold by Nominated Banks/Agencies June 27, 2013 33 15 Import of Gold by Nominated Banks /Agencies/Entities July 22, 2013 34 39 Export import of Currency September 6, 2013 35 70 Third party payments for export / import transactions November 8 , .....

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