A.D.(M.A.Series) Circular No.25, July 31, 1999

Amendments to Exchange Control Manual (ECM)
To

All Authorised Dealers in Foreign Exchange

Dear Sirs,

It has been decided to modify/amend exchange control regulations as set out in following paragraphs:

1. Advance Remittance for Import

In terms of paragraph 7A.10(e) of ECM where advance remittance has been made, physical import of goods into India should be made within three months (twelve months in the case of capital goods) from the date of remittance. It has now been decided that in such cases, it will be in order for authorised dealers to allow extension of time for import not exceeding one month (three months in the case of capital imports) provided, the reasons for seeking extension of time are found convincing. In cases where the advance remittance has been made against a bank guarantee, the guarantee should be suitably amended, if need be, to cover the extended period for import of goods into India.

2. EEFC Accounts

Attention of authorised dealers is drawn to item 2 of A.D. (M.A. Series) Circular No.19 dated 2nd June 1999 regarding use of funds held in EEFC accounts for making payments for all bona fide payments of the account holders, in foreign exchange, connected with their trade and business related transactions which are of current account nature (besides certain permitted capital account transactions), without any restriction as also beyond the monetary or percentage ceiling if any, prescribed in ECM, except that rate of commission on export should not exceed 12.5% on invoice value. Accordingly, with reference to item III.B of Part B of Annexure I to Chapter 8, it is clarified that it will be in order for authorised dealers to remit royalty on reproduction of copyright music recorded by overseas companies, in excess of 20% from applicant's EEFC account. However, for remittance of royalty beyond 20% on duplication of music, the applicant should obtain specific approval from the Department of Electronics, Government of India, New Delhi, if the payment is not being made out of funds held in his EEFC account.

3. Signing of A2 forms

In terms of paragraph 3B.3(i) applications by persons other than authorised dealers for remittance abroad must be made on form A1 if the purpose of remittance is import into India and on form A2 in every other case. When an authorised dealer is making remittance at the request of the account holder by debit to his NRE/FCNR accounts, it is difficult, at times, to get form A2 signed by the account holder who is a non-resident. It is clarified that in such cases since forms A2 are required mainly for statistical purposes these may be completed by authorised dealers themselves without insisting on the signature of the account holder on the form so as to avoid inconvenience to the non-resident account holder.

4. PEM memorandum

Attention of authorised dealers is drawn to Part A of Annexure I of Memorandum PEM. It has been decided to include "Refractories for use in hot blast stoves, hot blast main and bustle pipes and blast furnace proper" in the list of capital and producer goods in respect of which Indian exporters may offer commercial export credit.

5. Following consequential amendments may be carried out in the Exchange Control Manual/Memorandum PEM.

Exchange Control Manual

Volume I

Existing item (e) of paragraph 7A.10 may be replaced by slip 1.

Item (iv) of documentation under item III.B of Part B of Annexure I to Chapter 8 may be substituted by slip 2.

Item (3) of special conditions under item III.B of Part B of Annexure I to Chapter 8 may be replaced by slip 3.

Volume II

Existing form MRR may be substituted by slip 4.

Memorandum PEM

In Part A of Annexure I, the item "Refractories for use in hot blast stoves, hot blast main and bustle pipes and blast furnace proper" may be inserted after the item "Railways rolling stock including locomotives, wagons, coaches and trolleys".

6. Authorised dealers may bring the contents of this circular to the notice of their constituents concerned.

7. The directions contained in this circular have been issued under Section 73(3) of the Foreign Exchange Regulation Act 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully,

B. MAHESHWARAN
Chief General Manager

Slip 1
[AD/MA/25/1999]

7A.10

(e) Physical import of goods into India should be made within three months (twelve months in case of capital goods) from the date of remittance and the importer should give an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period. Authorised dealers may allow extension of time for import not exceeding one month (three months in the case of capital goods) provided the reasons for seeking extension of time are found convincing. In cases where the advance remittance has been made against a bank guarantee, the guarantee should be suitably amended, if need be, to cover the extended period for import of goods into India.

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Slip 2
[AD/MA/ 25 /1999]

III.B

Documentation :

(iv) If the royalty exceeds 20% and remittance is not being made from funds held in EEFC account, the applicant may be advised to obtain specific approval from the Department of Electronics, Government of India, New Delhi.

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Slip 3
[AD/MA/ 25 /1999]

III. B

Special Conditions:

(3) Where the rate of royalty exceeds 20%, remittance may be allowed on verification of approval from the Department of Electronics, Government of India, New Delhi. A copy of the approval should be kept on record. This special condition, however, is not applicable if the remittance is being made out of funds held in the EEFC account of the applicant.

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