RBI allowed third-party payment for Export and Import Transactions
The RBI has allowed third party payment for the export and import transactions taking into account the evolving international trade procedure.
The Reserve Bank of India (RBI) on 8 November 2013 has allowed third party payment for the export and import transactions. The procedure relating to payments for exports or imports was liberalized taking into account the evolving international trade procedure. Banks are allowed to receive the payments for export of goods/software from the third party.
The order of RBI also permits the banks to make payments to the third party for imports of goods. The third party refers to an entity other than the buyer or the seller. The procedure was liberalised taking into account the evolving international trade practices.
However, banks would have to follow certain conditions in case of export transaction:
• Firm irrevocable order backed by a tripartite agreement should be in place
• Third party payment should come from a Financial Action Task Force (FATF) compliant country and through the banking channel only
• The exporter should declare the third party remittance in the Export Declaration Form;
• It would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF
• Reporting of outstandings, if any, in the XOS would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realised, the name of the declared third party should appear in the XOS
• In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country
The banks have been allowed to make payments for import transactions to a third party for import of goods, subject to conditions as under:
• Firm irrevocable purchase order / tripartite agreement should be in place
• Third party payment should be made to a Financial Action Task Force (FATF) compliant country and through the banking channel only
• The Invoice should contain a narration that the related payment has to be made to the (named) third party
• 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
• Importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods
• The amount of an import transaction eligible for third party payment should not exceed USD 100,000. This limit will be revised as and when considered expedient