Trade Transactions – Import & Export

I. Import of Goods & Services

The import of goods and services in India has to be in conformity with the Foreign Trade Policy and FEMA (Current Account Transaction) Rules, 2000.

Remittance for Import payments

Remittance for making payments for imports into India is allowed by AD Category-I bank for all bona fide trade transactions only after ensuring that the requisite details are made available.

Obligation of Purchaser of foreign exchange

1. For import of goods into India which shall be in conformity with the Foreign Trade Policy (FTP), a resident person may make payment through an international card held by him or through international credit/debit card in rupees against charged slip signed by the importer or as prescribed by Reserve Bank of India.
2. Any person resident in India may also make payment as under :
   1. In rupees towards meeting expenses on travel to and from and within India of a person resident outside India who is on a visit to India;
   2. By means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the laws in force;
   3. A company or resident in India may make payment in rupees to its non-whole time director who is resident outside India and is on a visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration, and travel expenses to and from and within India, in accordance with the provisions contained in the company’s Memorandum of Association or Articles of Association.

Time Limit for Settlement

1. For normal Profits – Remittance to be completed before six months from the date of shipment, except where amounts are withheld towards guarantee of performance. If payment is delayed due to disputes or financial problems, AD bank may permit for its settlement but interest thereon will be payable only for a period of up to 3 years from date of shipment.
2. For deferred payment arrangements – They are treated as trade credits up to 5 years for which guidelines in Master Direction for ECB and trade credit is to be followed.
3. For Import of Books – No restrictions on time limit.

Third party payment for Imports

Payment to third Party for import of goods is permitted subject to following conditions-

1. Firm irrevocable purchase order/tripartite agreement should be there
2. Payment should be made to the third party should be mentioned on the invoice and bill of entry.

Importer should comply with the related extant instructions including those on advance payment made for imports.

Import of foreign exchange/ Indian Rupees

General or special permission from Reserve Bank is required to bring foreign currency in India.

1. Import of Foreign Exchange
   • Foreign Exchange in any form other than currency notes, bank notes and travellers’ cheques can be sent into India without any limitation.
   • A person may bring into India foreign Exchange without any limitation provided the person makes declaration to the custom authorities if the aggregate value of currency notes, bank notes or travellers’ cheques brought in exceeds US $ 10,000 at any one time or the aggregate value of foreign currency notes brought in exceeds US $ 5,000.
2. Import of Indian currency
   • Any person resident in India may bring into India while returning from any place outside India except from Nepal and Bhutan up to an amount not exceeding ₹ 25,000.
   • From Nepal and Bhutan, a person may bring Indian rupees of any amount in denominations up to ₹100.

Advance Remittances

AD Category – I bank may allow advance remittance for import of goods without any ceiling subject to the following conditions:

1. 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 guarantee is issued against the counter- guarantee of an international bank of repute situated outside India needs to be obtained if advance remittance exceeds US $ 2,00,000.
2. The requirement of the bank guarantee / standby Letter of Credit may not be insisted upon for advance remittances up to US $ 5,000,000 (US Dollar five million) in cases where the importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/ State Government/s) is unable to obtain bank guarantee from overseas suppliers and the AD Category – I bank is satisfied about the track record and bona fides of the importer.
3. 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 US $ 100,000.

II. Export of Goods & Services

The DGFT announces various policies & procedures to be followed for exports from India, from time-to-time. AD Category – I banks shall conduct export transactions in conformity with the Foreign Trade Policy and the Rules framed by the Government of India and the Directions issued by Reserve Bank from time-to-time.

Realisation and repatriation of proceeds of export of goods / software / services

1. Period of Realisation and repatriation of export proceeds shall be 9 months from date of export for all exporters. (In light of the outbreak of pandemic COVID-19, the period of realization and repatriation of export proceeds is extended to 15 months from the date of export for all the exports made up to or on July 31, 2020)
2. 15 months - if the goods are exported to a warehouse established outside India.

Authorised Dealers are allowed to extend time up to a further period of 6 months beyond 9 months, if the exporter submits a declaration that the export proceeds will be realised within the extended time.

Manner of receipt and payment

1. The export proceeds shall be received through the AD Bank in the manner provided in FEM (Manner of Receipt and Payment) Regulations.
2. Online payment has been allowed by AD Category-I bank for repatriation of export related remittances. However export proceeds should not exceed US $ 10,000.

Third Party Payments for exports

Subject to following conditions, third party payments for exports is permitted –

1. Firm irrevocable order backed by a tripartite agreement should be in place.
2. It should be routed through banking channel only.
3. Remittance to third party should be declared in the export declaration form by the exporter.
4. Responsibility to realise and repatriate the export proceeds from such third party is of the exporter.
5. Invoice and bill of entry should contain that the related payment has to be made to (name) third party.
6. Payments may be received from an open cover country if the shipment is made to Group II Restricted Cover country like Sudan, Somalia.

Permission for Export Write-off by AD

Conditions

1. The relevant amount has remained outstanding for one year or more;
2. The aggregate amount of write off allowed during the financial year does not exceed 10% of the total export proceeds realised by the exporter through the concerned AD Category – I banks during the previous financial year;
3. Satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realise the dues;
4. The case falls under any of the undernoted categories:
   1. The overseas buyer has been declared insolvent and a certificate from the official liquidator indicating that there is no possibility of recovery of export proceeds produced.
   2. The overseas buyer is not traceable over a reasonably long period of time.
   3. The goods exported have been auctioned or destroyed by the Port/Customs/Health authorities in the importing country.
   4. The unrealised amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organisation.
   5. The unrealised amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remained outstanding and turned out to be unrealisable despite all efforts made by the exporter.
   6. The cost of resorting to legal action would be disproportionate to the unrealised amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute decree for reasons beyond his control.
   7. Proportionate exports incentives are surrendered and the exporter is not on RBI Caution List.

Export of Currency

Reserve Bank grants general permission for export of Indian currency in the following circumstances only: –

1. Any person resident in India may take outside India (other than Nepal and Bhutan) an amount not exceeding ₹ 25,000.
2. Any person resident outside India, not being a citizen of Pakistan or Bangladesh and also not a traveller coming from or going to Pakistan or Bangladesh, and visiting India may take outside India up to an amount not exceeding ₹ 25,000.

Advances against exports

1. The exporter is under an obligation to ensure that: a) the shipment of goods is made within one year if he receives advance payment from a buyer outside India and b) the document covering the shipment are routed through AD Category-I bank through whom the advance payment is received.
2. In case of exporter’s inability to make the shipment no refund of unutilized portion of advance received or towards payment of interest shall be made after the expiry of one year without the prior approval of RBI.