foreign trade, nris and international business

8/14/2019 Foreign Trade, Nris and International Business

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5 DECEMBER 09 www.afterschoool.tk 1

FOREIGN TRADE, NRIs ANDINTERNATIONAL BUSINESS

by :

DR. T.K. JAIN

AFTERSCHOOL

centre for social entrepreneurship

sivakamu veterinary hospital road

bikaner 334001 rajasthan, [email protected]

mobile : 91+9414430763


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IMPORTANT INFORMATION

DOCUMENTS

EXIM POLICY

HANDBOOK OF IMPORT AND EXPORTPROCEDURE

FEMA

EXCHANGE CONTROL MANUALSFEDAI DOCUMENTS


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IMPORTANT DOCUMENTS AT

THE TIME OF IMPORT

IMPORT LICENSE

FOREIGN EXCHANGE CONTROL COPY

BILL OF ENTRY FOR HOMECONSUMPTION

CUSTOMS ASSESSMENT CERTIFICATEOR POSTAL ASSESSMENT FORM


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OPENING L/C

Importer will approach his bank for opening anL/C

L/C = Letter of credit

the bank of the importer will give a guaranteeabout payment to the bank of the exporter

under L/C. When the exporter exports, he can

obtain immediate payment from his bank onproducing L/C of the importer's bank. The

banks will have transaction betweenthemselves.


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Difference between packing credit

and L/CPacking credit is issued to exporter, but L/C is

issued to importer. Packing credit covers all the

expenditure till export, L/C covers the price ofimport = and as per this the exporter gets

payment as soon as he exports. The bank of the

importer provides this facility to the importeragainst some charges.


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Foreign exchange requirements

Importer requires foreign exchange forimports. The banker / authorised dealer

provides foreign exchange after looking at thenecessary documents like import licence etc.The foreign exchange must be used for the

purpose for which it has been obtained. The

banker / authorised dealer has to ensure thatonly that amount is released which is actually

required.


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Mode of payment

Authorised dealers will ensure that paymentregarding impor is made in account. Cash

payments are not permitted.In case advance payment is made, physical

goods must come in 3 months. If the amount ismore than $25000 then there must be a

guarantee from some international bank.Proper EC copy must be submitted by the

importer


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Time limit for settlement

Import payments must be settled within 6months from the date of import. If it is morethan 6 months, then it will be treated as ECB

(external commercial borrowing) and willrequire prior permission of RBI/ Government


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Export remittances

The exporter has to declare exports to RBI andhas to ensure that payments are received withintime and as per approved methods of

payments. Payments can be collected through

bank account / international credit card / FCNR/ NRE account / escrow account etc


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Exports that dont require

declarations....

Demonstrations / sales promotions (UPTO 2%OF TOTAL EXPORTS ONLY) , gifts (upto 1lakhs), exports for reimports only, goods sentfor repairs, goods less than 25000 rupees in

value, samples, publicity material, personalgoods of travellers.


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What is consignment export ?

Consignment means you are sending goods tosomeone for trade on your responsibility andif goods are not sold, they are your property

and you may get it back. Consignment export

means sale or return back. It has to be settledin 6 months.


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Exports requiring RBI approval

Examples : project exports, export as contractagainst imports, elongated payment period,

exports relating to agrements of government of

India or other governments


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Remittances relating to exports...

These include : agency commission, exportclaims etc.


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SEZ

If you are operating from SEZ you arepermitted to have foriegn currency account

with an authorised dealer


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Authorised dealers

These are listed with RBI as per FEMA, theyhave to obtain RBI permission for somespecified business transactions. Example: theycannot give guarantee in favour of exporters

without RBI permission unless that exporter islisted as non-caution exporter.


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Forfaiting

Factoring and forfaiting can be undertaken byEXIM bank / authorised dealers. Under this

they collect payments regarding export

receivables against commission.


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New trends....

Indian companies are now permitted to have

foreign exchange accounts in other countriesand to have properties in other coutnries (with

prior approval from RBI) and they can acquire

businesses / firms in other countries also as pertheir business requiremetns (as per govt.Policies) .


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PEM

PEM stands for Project Export memorandum when companies are entering into projectexports, they have to follow guidelines relatingto this. Project exports generally has deferred

payments - therefore prior permission mustobtained before enteringi into PEM.


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Other provisions

Authorised dealers have to ensure that they getcopesof GR Form and other documents

required andforeign currency is used for acutal

import / export and all required documents aresubmitted.


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FDI

Upto 100% Foreign Direct Investment is

permitted under automatic route in manysectors. Investors will have to inform regionaloffice of RBI in 30 days of remittances. In

some sectors industrial licence is required and

in some sectors, FDI is not permitted. But inmost of the sector, now it is permitted

including atomic energy etc.


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Shares issue to NRIs

Within 30 days of share issue to Non-residents,FC GPR form has to be submitted. They have

to submit all the details like they have

implemented all the provisions of companiesact & FEMA for this purpose.


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Transfer from NR

Now non residents can transer shares to other

non-residents / residents and such transfer canbe for consideration / as a gift. This tranfercan be only to an NRI / resident Indian. They

can also sell it in stock exchanges throughbrokers. They will have to take NOC fromincome tax department


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Tranfer by residents

As per RBI notification of 2000, residents can

also tranfer to non-residents as per FEMA so long as it is in automatic route. You have tokeep in mind SEBI (Substantial acquisition of

shares and takeover) regulation 1997 +required regulations under IRDA or other suchlaws.


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Permission from RBI

If it is not falling in automatic route, apply for

permission to RBI with a copy of FIPBapproval and details like pric, mode of

payment etc. Price must not be lower than the

higher of the average weekly high / low of last6 months. FC-GPR form with details ofexisting shareholding must also be submitted.


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FDI in different modes

FEMA regulations 2000 give schedule I which

gives list of industries for which automaticroute is there. It doesnt requre prior RBIpermission, for othe industries, take prior

permission from RBI. Rate of dividend should

not exceed SBI prime lending rate + 300 basispoints. For other sectors take permission from

SIA / FIPB/ RBI for investments.


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PORTFOLIO INVESTMENT

FIIs including asset management companies,mutual funds, hedge funds etc. Are permittedto invest in shares in India. FII have to investin ratio of 70:30 in equity and debt when they

invest in India, they are also permitted to investas 100% debt.


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Limits for FII investment

An NRI / PIO can buy upto 5% in a company.

All NRI/PIO/OCB can invest upto 10% in acompany. A single FII can invest upto 10% ina company and all FIIs together can invest upto

24% in a company. Companies can raise this

limit by passing board resolution and specialresolution in general meeting subject to

sectoral cap (like 49'% or 74% etc.)


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FII dealings

FII can deal through stock exchanges withoutRBI permission, but if they are dealing without

stock exchanges, they have to obtain

permission from RBI.


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NRI dealings

NRIs have to deal through NRE /FCNRaccount only. Sometimes they are permitted to

deal in NRO account also when they are

investing on non-repatriation basis.


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PERMITTED FIIs

FOLLOWNG CAN REGISTER AS FII WITHRBI & SEBI:

banks, pension funds, hedge funds, mutual

funds, insurance companies, investment fundsetc.


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ECB

External commercial borrowings : Indiancomapnies can raise loans from other countriesthrough various routes like : FRN (floating rate

note), ECP (euro commercial paper), FCCB

(foreign currency convertible bond), NIF (noteissue facility), syndicate loan, etc.


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ECB MECHANISMS

Companies engage in many ECB mechanisms

like :arbitrage

hedging

underwritingfund raising etc.


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ADR /GDR

American depository receipt / Globaldepository receipt are permitted by RBI as per

scheme of 1993, companies can also sponsorissue of ADR / GDR. Infosys, Wipro etc. Aresome of the companies which went for ADR /

GDR during 1990s. After ADR/ GDR

company will have to submit return inproforma as per annexure C of RBI

notification 2000.


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Royalty / technical fees

Upto $2million of royalty upto 5% ofdomestic sale or 8% of export sale is permitted

as royalty.


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EEFC account

Exchange Earners Foreign Currency account

a person who has earned foreign currency canretain 50% of the foreign currency earned inEEFC account with authorised dealers. This

account can be used for current accounttransactions or for permitted capital accounttransactions.


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RFC account

Resident foreign currency account if an NRIis returning India for ever, he can keep his

foreign currency in RFC account and there are

no restriction on use of funds in RFC account.


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RFC (DOMESTIC) ACCOUNT

A Resident who lives in India but receivesforeign exchange payments / honorarium canopen RFC (Domestic) account for retaining

such payments.


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Liberalised Remittance Scheme

Residents can use upto $25000 for paymentsfor permitted transactions per annum in this

scheme Foreign Exchange Management

(current account transactions) rules 2000schedule I and II.


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foreign trade, nris and international business

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