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FEDAI Rule 3, Import Transactions.


RULE 3- Import Transactions

  1. General
    1. “Bills” shall include all document/clean bills received under letter/s of credit, letter/ s of guarantee, letter/ s of authority, order/ s to negotiate, order/ s for payment and other document /s or undertaking/ s of a similar nature or on collection basis covering imports into India.
    2. Establishment and amendment of all import letters of credit shall be at the discretion of the Authorised Dealers.
    3. Commission shall be payable at the time of opening of the letter of credit or at the time of amendment thereof and no refund will be allowed under any circumstances whatsoever.
    1. Application of rates
        1. For the purpose of retirement of import bill whether received under letters of credit or otherwise, the bills selling rate ruling on the date of retirement or the forward sale contract rate as the case may be shall be applied.
        2. For the purpose of crystallisation vide para II. C.x. below, of importer’s liability into Rupees the bills selling rate ruling on the date of such crystallisation or the forward sale contract rate as the case may be shall be applied.
      1. . When local payments are required to be made out of the proceeds of foreign currency import bill the proceeds of foreign currency amount of the local payment shall be deducted from the bill amount at the time of remittance. The full amount of the bill shall be arrived at the bank’s appropriate bills selling rate and foreign currency amount of the local payment shall be converted into Rupees at the prevailing TT buying rate.
      2. For the purpose of determining stamp duty on import bills, the foreign currency amount of the bills shall be converted into Rupee at the exchange rates prescribed by government of India from time to time.
    2. Application of Interest
        1.  Bills negotiated under import letters of credit shall carry domestic commercial rate of interest as application to advances prescribed by Reserve Bank of India from time to time and shall be recovered from the date of crystallisation/ retirement whichever is earlier
        2. From the date of crystallisation upto the date of retirement the bills shall carry the penal rate of interest as specified by Reserve Bank of India from time to time.
      1. Interest remittable on interest bearing bills shall be subject to the directives of Reserve Bank India.
      2. Interest, if any on import bills shall be recovered in full and shall not be set off against interest, if any, payable on any margins which may be held against such bill or the relative letter of credit.
    3. Application of charges
      1. The following charges shall be recovered from the importers for establishing irrevocable letters of credit
        1. Commitment charges for the full validity of the credit (i.e. from the date of opening of the L/C to the last date of its validity) @ 0.15% for every quarter or part thereof and
        2. Usance charge according to the tenor of the bill as under :
          1.  0.15% for bills upto 10 days sight.
          2. 0.30% for bills 0ver 10 days and upto 3 months’ sight.
          3. 0.30% for the first three months plus 0.0750% per month in excess of three months for bills over 3 month’s sight.

            Note 1:
            The above scale of charges shall be collected by banks on letters of credit, as
            under :

            1.  Where the amount of a letter of credit does not exceed Rs. 8 crores (or in equivalent foreign currency) – Commission will be charged at rates as specified above.
            2.  Where the amount of a letter of credit does exceed Rs. 8 crores (or in equivalent foreign currency) – Commission will be charged as under :
              Table
              a. On the first Rs. 8 crores (or in equivalent foreign currency)
              At full rates specified in the Rule as above.
              b. On the amount which is in excess of Rs. 8 crores (or in equivalent foreign currency) upto Rs.16 crores. At one half of the rates specified in the Rule as above.
              c. On the balance amount, which is in excess of Rs. 16 crores (or in equivalent foreign At one fourth of the rates specified in the Rule as above.

              1 Note 2:
              i. Where the letter of credit amount is less than the equivalent of Rs. 10,000/- a minimum charge of Rs. 100/- will be collected. (AR 10/95 dated 20.12.95)
      2. If any extension of the validity of the letter of credit falls within a three month period for which commitment charge has already been collected a minimum, amendment commission of Rs. 250/- shall be recovered. However, for an amendment extending the validity of the letter of credit beyond a three month period (for which commitment charge has already been collected) a fresh commitment charge at 0.15% per quarter or part there of shall be recovered subject to a minimum of Rs. 250/-. (AR 10/95 dated 20.12.95)
      3. In case of enhancement of the value of a letter of credit, both the usance and commitment charge as applicable to establishing a letter of credit, would be recovered for the additional amount.
      4. In case of amendment altering the tenor of the Bill of Exchange appropriate additional usance charge shall be collected.
      5. Any amendment to a letter of credit, other than extension of its validity or enhancement of its value, shall attract an amendment commission of minimum Rs.250/- (AR 10/95 dated 20.12.95)
      6. Any revival or reinstatement of an expired letter of credit shall be at the option of the bank but within 3 months from the date of expiry and shall be subject to recovery of usance charge and commitment charge from the date of expiry upto the validity period of the revived letter of credit.
      7. For countersigning bills of exchange drawn on importers in India commission of 0.085% per month with a minimum of 0.25% for the tenor of the bill shall be collected.
      8. In case where revolving letters of credit are establishing as per the provision of the Exchange Control regulations and for restoration of the credit to the extent of drawings honoured, the charges shall be recovered as under :
        1. Commitment charge at 0.15% for every period of 3 month or part thereof :
          1. On the maximum amount of drawing permitted at any one time during the period from the date of establishment of the letter of credit to the last date of its validity;
          2. On each amount reinstated from the date of reinstatement to the date of subsequent reinstatement or the last date of the validity of the letter credit.
            And
        2. Usance charge for each drawing :
          1. 0.15% for bills upto 10 days sight
          2. @ 0.30% for bills over 10 days sight and upto 3 months sight
          3. @ 0.30% for the 3 months plus 0.075% for each month in exceed of 3 months for bills over 3 months sight.

            The minimum charges (both commitment charge and usance charge added together) for reinstatement shall be Rs. 100/-.
      9. Deferred imports
        The charges on letters of credit covering import of goods on deferred payment terms shall be as under : (AR 2/95 dated 31.3.95)
        1. On letters of credit covering import of goods deferred payment terms; commission shall be charged at the rate of 0.40% per quarter or part thereof calculated on the amount of liability under such credit at the beginning of every quarter. If the credit is valid for more than two years, the amount of the commission may, at the bank’s discretions, be collected in instalments subject to the following:
          1.  the size of the instalments shall be proportionate to the amount of outstanding liability at the beginning of each year;
          2. the first instalment shall be collected at the time of issuing the credit, and the subsequent instalments shall be collected thereafter annually, at the beginning of each year. The entire commission must be recovered by the commencement of the last year of validity of the credit.
          3. in the event of reduction or early cancellation of the credit, there shall be no reduction of commission and the uncollected instalments shall be collected immediately.
          4. the minimum commission to be charged annually will be Rs.250/-: adjustment in instalment, if any, to be done in the last instalment which could be less than this amount.
          5. in the event of default in payment of instalments, interest shall be recovered at domestic commercial rate as prescribed by Reserve Bank of India from time to time from the date of default to the date of actual payment.Where a letter of credit covered under this Rule contains a definite provision for the possibility of its becoming inoperative at a particular time or date, the period upto such possible time or date may be considered as the initial validity period for which the commission should initially be recovered. In the event the letter of credit does not become inoperative at the end of that period, the balance period may be considered as an extension of the initial period and commission would then be recovered for the balance period.However, for the purpose of considering whether commission may be collected in instalment s as above, the total commission must be taken to be that amount payable for the initial validity period only. If a letter of credit qualifies for that concession and if the concession is granted for the initial validity period the same concession may also be granted for the extended period irrespective of the total quantum of commission payable for the latter period.
          6. when the amount of an import letter of credit covering import on deferred payment terms is enhanced commission at the rate of 0.40% for a period of 3 months or part thereof shall be recovered on the amount so enhanced. (AR 2/95 dated 31.3.95)
          7. if the validity period of a letter of credit covering import on deferred payment terms is extended payment terms is extended, only a flat amendment commission of Rs. 400/- shall be charged if the last date of extended validity falls within the three month period for which commission has already been collected. However, for any amendment extending the validity of the letter of credit beyond a three month period commission at 0.40% per quarter or part thereof shall be recovered. (AR 2/95 dated 31.3.95)
      10. . Crystallisation
        1. All foreign currency import bills drawn under letters of credit shall be crystallisation into Rupee liability on the 10th day from the date of receipt of documents at the letter of credit opening branch of the bank in the case of demand bills and on the due date in the case of usance bills. In case the 10th day or the due date falls on a holiday or a Saturday, the importer’s liability shall be crystallized into Rupee liability on the next working day.
        2. if the crystallisation of the Rupee liability of an import of an import bill under the Forward Exchange Contract results in early/ late delivery, the bank shall recover swap charges and interest, if any, as per Rule 8.
        3. A commission of 0.15% shall be recovered on each foreign currency import bill received under a letter of credit at the time of retirement or crystallisation whichever is earlier.
        4. In case of each Rupee import bill drawn under a letter of credit commission of 0.25% shall be recovered.
        5. If the Rupee import bills are not retired within 10 days from the date of receipt of documents, in the case of demand bills or on the due date in the case of usance bills a late payment commission of 0.15% shall be recovered.
        6. A commission of 0.25% on the bill amount shall be recovered on foreign currency import bills received under letters of Credit on which no exchange benefit accrues to the opening bank. (Circular letter No:26/92 dated 10.7.92)
  2. Commission on bills (Not under Letter of Credit)
    1. On each bill drawn in foreign currency, on which the collecting bank earns exchange margin, collection commission will be charged at the rate of 0.25% with a minimum of Rs.50/-.
    2. On each bill drawn in Rupee and on each bill drawn in foreign currency on which the collecting bank does not earn exchange margin, commission of 0.50% with a minimum of Rs. 50/- shall be charged by the collecting bank.In case the value of Rupee import bills received on collection basis, exceeds Rupees One crore, bank shall charge collection commission on a graded scale as under:
      TABLE
      a. On the First Rs.One crore At full rates specified in the Rule as above.
      b. On the amount which is in excess of Rs.One crore At one half of the rate specified in the Rule as above.
    3.  On bills/document covering project imports under inter- governmental aid scheme (including those financed by international agencies like World Bank, IMF, ADB etc. where no letters of credit are opened, commission shall be collected at a flat rate irrespective of the amount of each drawing at 0.03125%.
    4.  Banks shall collect commission at half the rates applicable for import bills received for collection at the time of effecting remittance in case of document received by importers directly from the overseas exporters. (AR 10/95 dated 20.12.95)

      Proceeds of collection bills

      If the overseas remitting bank or the exporter abroad requests for the proceeds of collection bills under III(A) above, to be remitted in a currency other than the currency of the bill, addition commission of 0.25% will be charged.

      [The additional charge of 0.25% for handling payment in currencies other than the currency of the bill shall not be applicable, where the import bill is received in EMU member country currency but remittance is made in Euro or vice versa].
  3. On any local payment out of the proceeds of any import bill such as payments in connection with barter business, to cases of need, etc., a minimum charge of Rs. 250/- shall not be recovered in respect of genuine allowances in order to effect settlement of a dishonoured bill or in respect of commission payable to the drawee. (AR 10/95 dated 20.12.95)
  4. Where applicable, Stamp Duty payable on all imports bills shall recovered from the importer.
  5. All actual out of pocket expenses such as correspondent bank charges, postages,telex/telegram charges etc. shall be recovered from the importer.
  6. When the value of parcel relating to an import bill exceed Rs. 1 Lac, an advalorem charge based on rental value and insurance cost will be collected on a monthly basis.

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