Merchanting Trade to Nepal and Bhutan

RBI/2014–15/580 A.P.(DIR Series) Cir­cu­lar No. 97

April 30, 2015

Atten­tion of Autho­rised Deal­er Category‑I (AD Category‑I) banks is invit­ed to A.P. (DIR Series) Cir­cu­lar No. 115 dat­ed March 28, 2014. In terms of the revised mer­chant­i­ng trade guide­lines stip­u­lat­ed there­in, for a trade to be clas­si­fied as mer­chant­i­ng trade, goods acquired should not enter the Domes­tic Tar­iff Area and the state of the goods should not under­go any trans­for­ma­tion. Fur­ther, the goods involved in the mer­chant­i­ng trade trans­ac­tion would be the ones that are per­mit­ted for exports / imports under the pre­vail­ing For­eign Trade Pol­i­cy (FTP) of India, as on the date of ship­ment and all the rules, reg­u­la­tions and direc­tions applic­a­ble to exports (except Export Dec­la­ra­tion Form) and imports (except Bill of Entry), should be com­plied with for the export leg and the import leg respectively.

2. As Nepal and Bhutan are land­locked coun­tries, there is a facil­i­ty of tran­sit trade where­by goods are import­ed from third coun­tries by Nepal and Bhutan through India under the cov­er of Cus­toms Tran­sit Dec­la­ra­tions in terms of the Gov­ern­ment of India Treaty of Tran­sit with these two coun­tries. In con­sul­ta­tion with Gov­ern­ment of India, it is clar­i­fied here­in that goods con­signed to the importers of Nepal and Bhutan from third coun­tries under mer­chant­i­ng trade from India would qual­i­fy as traf­fic-in-tran­sit, if the goods are oth­er­wise com­pli­ant with the pro­vi­sions of the India-Nepal Treaty of Tran­sit and Indo-Bhutan Treaty of Tran­sit respectively.

3. AD Category‑I banks may bring the con­tents of this cir­cu­lar to the notice of their con­stituents concerned.

4. The direc­tions con­tained in this cir­cu­lar have been issued under sec­tions 10(4) and 11(1) of the For­eign Exchange Man­age­ment Act (FEMA), 1999 (42 of 1999) and are with­out prej­u­dice to per­mis­sions / approvals, if any, required under any oth­er law.

Yours faith­ful­ly,

(A. K. Pandey)
Chief Gen­er­al Manager

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