QA Series No 29 - Imports - Part 2

 

The Banking Tutor

Question Answer Series 2025

S No 29                                                                   27-07-2025

Imports – Part 2 

27. What is the follow up action suggested by RBI for BoE ? 

In case an importer does not furnish any documentary evidence of import  within 3 months from the date of remittance involving foreign exchange irrespective of value, the AD  I Bank should rigorously follow-up for the next 3 months, by using various modes of communications. It should, however, be ensured that at least one communication with the importer in this regard is by issuance of registered letter. 

28. What are the guidelines related to Import of Gold ? 

Nominated banks and nominated 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. 

The import of gold coins and medallions is permitted. 

29. Whether Banks can sell Gold Coins ? 

No. Prohibition on Sale of gold coins and medallions by banks continues pending further review. 

30. What are guidelines related to Advance payment by Qualified Jewellers for import of Gold? 

AD banks may allow Qualified Jewellers to remit advance payments for eleven days for import of gold through IIBX in compliance to the extant Foreign Trade Policy and regulations issued under IFSC Act. 

31. What is IFSCA ? 

IFSCA stands for International Financial Services Centres Authority. It is a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centres. 

32. Who are Qualified Jeweller ? 

Qualified jewellers are entities that meet specific criteria to participate in bullion trading, particularly for importing gold and silver through the India International Bullion Exchange (IIBX). These jewellers can be Bullion Trading Members, clients, or Limited Purpose Trading Members. 

33. What is IIBX ? 

IIBX stands for India International Bullion Exchange IFSC Limited. It is promoted by India’s leading market infrastructure institutions like NSE, INDIA INX (subsidiary of BSE), NSDL, CDSL and MCX. 

It is established at GIFT IFSC, Gandhinagar, Gujarat, India. It  is regulated by International Financial Services Centres Authority (IFSCA) 

IIBX has been conceptualised to provide a gateway to import bullion into India and provide world class bullion exchange ecosystem to promote bullion trading, investment in bullion financial products and vaulting facilities in IFSCs. 

34. What is Import Factoring ? 

Import factoring is a financial service where an importer's accounts receivable (invoices from suppliers) are sold to a factoring company, enabling the importer to receive immediate payment and manage cash flow more effectively. The factoring company then handles the collection of the full invoice amount from the importer at a later date, often including interest and fees. 

35. What is Merchanting Trade ? 

A merchanting trade transaction (MTT) is a type of international trade where an intermediary, like an Indian company, buys goods from a supplier in one foreign country and sells them to a buyer in another foreign country, without the goods ever physically entering the intermediary's home country. Essentially, it's a two-leg trade (export and import) with the intermediary coordinating the transaction through their home country (e.g., India). 

36. What are the guidelines related to MTT ? 

a) For a trade to be classified as merchanting trade, goods acquired shall not enter the Domestic Tariff Area. 

b) The entire MTT shall be completed within an overall period of nine months and there shall not be any outlay of foreign exchange beyond four months. 

c) The entire merchanting trade is to be routed through the same AD bank. 

d) Merchant traders with outstanding of 5% or more of their annual export earnings shall be liable for caution listing. 

e) Third party payments for export and import legs of the MTT are not allowed. 

f) Agency commission is not allowed in MTTs.

37. What is OPGSP ? 

OPGSP stands for Online Payment Gateway Service Provider. It refers to entities that facilitate online payments, particularly for international transactions, between buyers and sellers, and are regulated by the Reserve Bank of India (RBI). OPGSPs act as a bridge between businesses and their customers, enabling secure and efficient online transactions. They play a crucial role in processing payments, handling currency conversion (especially for exports), and routing funds to the appropriate accounts. 

38. What are the guidelines related to Settlement of Import transactions in currencies not having a direct exchange rate ?

Settlement of import transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate,  AD I Banks may permit settlement of such import transactions (excluding those put through the ACU mechanism), subject to conditions as under: 

(a) Importer shall be a customer of the AD Bank, 

(b) Signed contract / invoice is in a freely convertible currency, 

(c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (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 Cooperative Jurisdictions on which FATF has called for counter measures. 

39. What is Harmonized System (HS) code ? 

The Harmonized System (HS) code is a standardized, internationally recognized system for classifying traded products. It acts as a universal language for customs authorities, businesses, and governments to identify and categorize goods, facilitating efficient and transparent international trade. 

40. What is BCD in the context of Imports ? 

BCD in customs duty stands for Basic Customs Duty.  It is the primary duty levied on goods imported into a country. 

BCD is calculated as a percentage of the goods' assessable value  which includes the cost of the goods, freight charges, and insurance. 

BCD rate is not fixed and depends on various factors such as the type of goods, their HSN (Harmonized System Nomenclature) code, and the country of origin.

 41. What is CVD in the context of Imports ? 

In customs, CVD stands for Countervailing Duty. It's a type of import duty imposed by a country to offset the negative impact of subsidies provided by the exporting country to their producers. Essentially, it's a tax on imported goods designed to level the playing field for domestic industries by counteracting the price advantage that subsidized imports might have. 

42. What is Duty Drawback in the context of Imports? 

Duty Drawback is a  refund of duties paid on imported inputs that are used in the manufacture of exported goods. 

43. What is Advance Authorisation ? 

The Advance Authorization scheme is a program that allows exporters to import inputs (raw materials, components, etc.) duty-free, provided these inputs are physically incorporated into products that are then exported. It aims to boost exports by reducing the cost of production for exporters. 

44. Who is Implementing Agency of Advance Authorisation ? 

The Directorate General of Foreign Trade (DGFT) is the implementing authority for the Advance Authorization scheme. 

45. What is SION in the context of Imports ? 

In customs, SION stands for Standard Input Output Norms. These norms, published by the Directorate General of Foreign Trade (DGFT), specify the quantity of inputs required to produce a specific export product. They are crucial for exporters using schemes like Advance Authorization, allowing duty-free import of raw materials needed for production. 

46. Who / what is Authorised Economic Operator ? 

An Authorised Economic Operator (AEO) is a business entity involved in international trade that has been certified by customs authorities as complying with supply chain security standards. Essentially, it's a program that recognizes and rewards businesses with secure and efficient trade practices, fostering safer and more efficient global trade. 

47. Who has developed AEO Program ? 

The AEO program is a globally recognized standard developed by the World Customs Organization (WCO). 

48. In India who oversees AEO Program ? 

In India, the AEO program is overseen by the Central Board of Indirect Taxes and Customs (CBIC), and the certification is valid for 5 years. 

49. What are the benefits of AEO Program? 

AEO status brings benefits like faster clearance of goods, reduced inspections, and priority treatment in customs procedures. 

50. What is the main aim of AEO Program ? 

AEOs are entities that demonstrate compliance with supply chain security standards, ensuring the integrity of goods throughout the international movement. The AEO program fosters a partnership between customs authorities and businesses, promoting cooperation and trust to enhance supply chain security.

 

Next Issue  will be shared on 29^rd July 2025.

Sekhar Pariti

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