Reserve Bank of India Master direction No. 17/2015-16 dated January 1, 2016 (updated as on 28th Oct, 2020) states that all Imports into India should be in conformity with:-

• Foreign Trade Policy in force
• FEMA (Current Account Transactions) Rules, 2000
• RBI’s directions under FEMA

FEMA stipulates that Exports and Imports shall be ‘Free’ except when regulated by way of :-

• ‘prohibition’, 
• ‘restriction’ or 
• ‘exclusive trading through State Trading Enterprises (STEs)’ 

 While undertaking any import transaction on behalf of a customer, an Authorised Dealer (ie Bank) has to adhere to the KYC guidelines of RBI. The Importer has to submit an application with all the requisite details which should satisfy the AD about the bona fides of the transaction. Previously, RBI had prescribed the format of the application as “A1 Form”, but now RBI has left it to the discretion  of the bank to adopt any format.  For import of the restricted items which are included in the Negative List, the importer has to submit the Import Licence to the bank. 

Time limit for Import Payments:

 Generally, an Importer makes payment of imports once the goods arrive into the country unless otherwise provided in the contract between exporter and importer. But FEMA stipulates that all import payments should normally be made not later than six months from the date of shipment. However, certain EXCEPTIONS are provided under FEMA:-

1. Where amounts are withheld towards guarantee of performance, eg, import contract provides 90% payment on receipt of imported item and 10% after a certain period of time ascertaining performance of the imported item. 
2. During COVID 19 pandemic, RBI had allowed a six months extension of payments for imports made before July 31, 2020.
3. If payment is delayed due to disputes, financial difficulties etc up to the satisfaction of the Authorised Dealer.
4. No time limit has been prescribed under FEMA for Import of Books. 

 Note: Deferred Payment Arrangements (including Suppliers’ and Buyers’ Credit) up to five years are treated as TRADE CREDITS.

Bringing in  Foreign Exchange/INR Currency

• Any person can bring into India Foreign Currency Notes (FCN) and Foreign Currency Traveller Cheques (FCTC) without any limit subject to declaration in Currency Declaration Form (CDF) as applicable. 

CDF not necessary when FCN do not exceed USD 5000 and aggregate value of FCN & FCTC do not exceed USD 10000.

• Any person can bring into India Indian currency  from any place outside India (except Nepal & Bhutan) up to  Rs.25,000 per person. 

Indian currency notes can be brought from Nepal & Bhutan for any amount in denominations up to Rs.100/- and up to Rs. 25,000/- in denominations of 200/- and 500/-

 ADVANCE REMITTANCES for Goods - Limits

• Sometimes, an Importer is required to send advance remittance for imports of goods as per the contract. FEMA permits such importers to send advance remittance up to USD 200,000. However, if the advance remittance is required for an amount exceeding USD 200,000, the importer has to submit an unconditional irrevocable Standby Letter of Credit or Guarantee from a reputed overseas bank to the Authorised Dealer. 

 However, FEMA allows all the banks to formulate their internal guidelines for allowing importers with good track records advance remittances up to USD 5 mn without any Standby Letter of Credit and Bank Guarantee. 

• The limit for advance remittance on behalf of Public Sector Undertakings, GOI undertakings and State governments is USD 100,000.

 ADVANCE REMITTANCES for Services - Limits

• The limit of Advance Remittance for import of services is USD 500,000. However, if the advance remittance exceeds USD 500,000, a guarantee from a bank of International Repute is required to be submitted by the importer. 
• Limit for Public Sector Co. or Dept./ GOI Undertaking/State Govt, - USD 100,000

 ADs are required to ensure that the beneficiary of the funds (i.e., overseas exporter) fulfills his obligation under the contract/agreement, failing which amount to be repatriated back.

Evidence of imports:

 Whenever an importer makes payment of imports or sends advance remittance through a bank, it becomes an obligation on the importer to utilize the forex for the purpose mentioned in his application form or for any other purpose eligible under FEMA. Importers are required to furnish to the bank an evidence of import of goods into India. Generally, this evidence is submitted in the form of a Bill of Entry  issued by Customs Department. Importer has to upload the BOE number, port code and date of marking evidence of import on the IDPMS portal.

For postal imports - Custom Assessment Certificate or Postal Appraisal Form is required to be submitted. In case, imports are made by Courier - Courier BOE is required to be submitted.

 Goods imported in FTWZ, SEZ Unit Warehouse or Customs Bonded Warehouse - Exchange Control copy of  Ex-Bond Bill of Entry or Bill of Entry issued by Customs Authorities by any other nomenclature, the importer shall submit the BOE Number, port code and date of marking evidence of import on IDPMS.

In case of non-physical imports like software import, the importer is required to submit a  Certificate from  Chartered Accountant certifying  that the software  has been received by the importer. However, AD banks should advise importers to keep Customs Authorities informed of the imports made by them under this clause. 

 Evidence of imports – when to submit / verify

 FEMA stipulates the time limit when the importer should submit and the bank should verify the evidence of imports.

• If Imports on D/A basis – bank should verify  at the time of effecting remittance.
• In case of genuine reasons for delay in submission of Bill of Entry- AD Bank can allow 3 months time from date of remittance.
• Genuine reasons include non-arrival of consignment, delay in delivery / customs clearance of consignment etc.
• ORM to be created irrespective of value; matched with document submission and closing in IDPMS.

 Follow-up for Import Evidence 

 In case an importer does not furnish any documentary evidence of import  within 3 months from the date of remittance, the bank should rigorously follow-up for the next 3 months, including issuing registered letters to the importer. 

 Receipt of Import Bills/Documents

• Import bills should be received by the banker of the importer from the exporter’s banker.
• Importer can receive the bill directly from exporter if the bill amount is up to USD 300,000.
•  Exceptions: WOS of foreign companies, Status holders, 100% EOUs,  SEZ units, PSUs and Limited companies can receive import documents directly from overseas exporters up to any limit.
• Importer’s  bank can receive the import documents for value above USD 300,000 directly from overseas exporters provided the importer has a good track record and opinion report is sought from reputed agencies like Dun & Bradstreet etc.

 Merchanting Trade:

 In Indian Context, the trade is called Merchanting Trade when:- 

• The supplier of goods will be resident in one foreign country 
• The buyer of goods will be resident in another foreign country
• The merchant or the intermediary will be resident in India 

 FEMA Provisions on Merchanting Trade:

• Goods merchandised should conform to Foreign Trade Policy.
• Entire transaction to be completed within 9 months.
• No outlay of foreign exchange beyond 4 months.
• Payment is received in time for the export leg.
• Liability for the import leg of the transaction is extinguished  by the payment received for the export leg of transaction.
• Both legs of transactions should be completed from the same AD Bank
• Defaulting Merchanting Traders, whose outstandings reach 5% of their annual export earnings, would be caution-listed
• AD bank to ensure one-to-one matching in case of each Merchant Trade Transactions.
• Defaults in any leg to be reported to the concerned Regional Office of RBI, on HY basis within 15 days from close of each HY, i.e. June and December.