¨Goods acquired should not enter the domestic tariff area ¨The state of goods should not under go any transformation. ¨Goods involved in the transaction should be as per prevailing Foreign trade policy and direction applicable to Export (except export declaration form) and Import (except bill of entry) respectively.
Directions for Handling Merchanting Trade
¨Both the legs of transactions are routed through same AD branch. ¨AD branch to verify all documents and satisfy itself for genuineness of trade. ¨The entire transaction should be completed within an overall period of nine months and no outlay of foreign exchange beyond four months. ¨The commencement of transaction would be the date of shipment/export leg receipt or import leg payment, which ever is first. The completion date would be the date of shipment/export leg receipt or import leg payment, which ever is last. ¨Short term credit by way of suppliers’/buyers’ credit is available. ¨The advance remittance received for export will be earmarked for import payment. However it may be deployed for intervening period in an interest bearing account. No credit facility against this deployment. ¨Advance payment for import may be allowed based on commercial judgment and as per advance payment guidelines. ¨Payment of import leg may also be made from EEFC account of the merchant trader. ¨AD branch to ensure one to one matching in case of each merchanting trade transaction and report defaults in any leg by the trader to RBI in prescribed formet.
Third Party Payments
Normally payment for export has to be received from the overseas buyer named in the EDF and currency appropriate to the place of final destination irrespective of the country of residence of the buyer. ¨
Similarly, the payments for the import should be made to the original overseas seller of the goods and the AD should ensure that the importer furnishes evidence of import to satisfy itself that goods equivalent to the value of remittance have been imported.
Third Party Payments Guidelines
Firm irrevocable purchase order backed by tripartite agreement should be in place. However this requirement may not be insisted upon in case where documentary evidence for circumstances leading to third party payment/ name of third party being mentioned in the irrevocable order/ invoice has been mentioned.
AD branches should be satisfied with the bonafides of the transaction and should consider the FATF statement before handling the transaction.
Invoice/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.
Reporting to outstanding, if any, in the XOS/BEF would continue to be shown against the name of exporter/importer. However instead the name of the declared third party should appear in XOS/BEF.