“If people like you, they will listen to you; but if they trust  you, they will do business with you”

In the fast changing trade scenario across the globe, Imports are no more a sign of deficiency. Imports are made to add value and export to earn the precious foreign exchange. In the process, employment is generated on value addition. The United States of America is the largest importer in the world, importing goods worth USD 2.35 trillion dollars in 2019. China is next having imports worth USD 1.89 trillion. Two other top economies of the world, Germany imported worth USD 1.10 trillion and Japan worth USD 625 million. Most of the imports were reprocessed and exported worldwide, proving the value of imports as game changers in the world economy.

In supply chain management involved in production of quality products across geographies, critical parts are mostly imported to produce goods of international quality. Coming to the Indian scenario, the US is the largest importer of Indian products worth USD  43.78 billion, followed by UAE (USD 30.03 billion) and China, (USD 16.75 billion), showing affluent countries are engaging aggressively in imports. India imports 6000 commodities from 140 countries and exports 7500 commodities to other nations. For the FY ended 31.03.2021, the country's exports stood at USD 493.19 billion and imports at USD 506 billion. Among the top commodities imported into India are Crude petroleum, gold, coal, coke, precious stones , electronic goods, telecom equipment and industrial machinery. 

Imports are free except when regulated by ‘prohibition’, ‘restriction’ or ‘exclusion’. Important thing to understand is that only new goods are permitted to be imported. For old goods to be brought into the country the guidelines are very strict.  Domestic laws, rules, orders, regulations and environmental, safety and health norms as applicable to domestically produced goods are also applicable to imported goods. 

All imports into India as per RBI Circular 17/2015-16 dated 01.01.2016 should conform to Foreign Trade Policy, FEMA Rules 2000 and RBI directions on FEMA. As such extreme care has to be exercised while handling imports. Beginning with KYC verification of customers, the first document to refer while dealing in imports is the Negative List, which contains names of items that are not permitted to be imported. The importer must have an Importer/ Exporter code. Obtain A1 Form  as an application for remittance for imports (or any other equivalent format as per guidelines of the respective banks) 

Indians entering the country from abroad can import any amount of currency, drafts and travellers cheques provided they declare the same in the Currency Declaration Form at the Customs Counter at the airport. CDF is not necessary when FCN does not exceed USD 5000. All payments for import of physical goods should be done within 180 days. However no limit for payment of imported books has been stipulated in FEMA. In case an exporter based overseas insists on advance payment to manufacture and supply the goods to India, then advance remittance above USD 200,000 can be done only against an unconditional irrevocable Standby Letter of Credit and Bank Guarantee. For import of Services the limit is USD 500,000.

In order to closely monitor submission of documents for evidence of imports all Authorised Deals bankers are required to create Outward Remittance Message (ORM). Multiple ORMs can be settled against a single Bill of Entry and also multiple BoE can be settled against one ORM. 

A returning Indian can bring gold but after selling it locally in India, the sale proceeds can be deposited in NRO account and not the NRE account. Gold can be imported for retail and wholesale on paid as well as consignment basis by nominated agencies. 

India is likely to overtake the United Kingdom to become the world’s third largest domestic aviation market by 2024-25. Advance remittance with Bank Guarantee can be done to the extent of USD 50 million if the applicant holds approval from DGCA. A number of Indian jewellers import rough diamonds from across the African continent for processing and re-exports. The diamond should be extracted from GJEPC approved mines and should not be a conflict diamond. Business Processing Outsourcing Units ( BPOs) set up communication equipment outside India for setting Call Centres. Banks can remit funds for deemed imports of BPOs. The applicant must possess approval from the Ministry of Communication & Information Technology for this activity.

Mercantile Trade is progressing fast where traders in imports and exports play a major role. Mercantile Traders import a critical amount of goods and sell to retailers across the country. As per FEMA, the entire transaction of Merchant Imports and payments should be completed within 9 months. Defaulting Merchant traders , whose outstanding reach 5% of their annual export earnings are caution listed. 

Import bills should be directly received at branches. In case of reputed importers the bills upto USD 300,000 can be directly received by the importer. Pre contracted interest can be paid for overdue payments. But overdue interest beyond 3 years can not be paid. All in cost per annum should not exceed LIBOR+350 basis points towards overdue interest payment. 

No third party should be paid for imports and payment should be made strictly as per sale contract and made directly to the ultimate beneficiary and not through numbered accounts. 

Import Data Processing & Management System (IDPMS) has been developed as an online portal by RBI in conjunction with Customs authorities and Banks for displaying primary import transaction data. The step has obviated the need for paper BoEs and banks can see the status of submission of BoEs online. Postal import payment requests must accompany a Postal Appraisal Form or Customs Assessment Certificate. 

Second hand personal computers, laptops, photocopier machines, digital print and copying machines, old air conditioners and diesel generating sets are not permitted to be imported into India . Only refurbished capital goods and their spares can be imported.

Imports are a crucial part of the economy of a nation, especially the developing ones. The imports can be game changers if exported back after value additions. The imports are risky and need special attention while handling. Rightly said,” Adventure is the life of Commerce, but caution is the life of Banking”.

Written by Mr Hargovind Sachdev, Ex GM, State Bank of India & Head of Central European Credit Desk of SBI, Frankfurt, Germany. The article is based upon the lecture delivered by Mr Hargovind Sachdev in the Foreign Exchange Training Program conducted by Banking Quest.