Can an overseas third party make payment in export import other than actual buyer?
Bank procedures in India to account third party payment in lieu of actual overseas buyer
The buyer or consignee mentioned in Export invoice is one party. However payment is made by another party. Is it allowed by FEMA under international trade in India? If so, what are the procedures to get permission to effect export sale amount to Indian exporter by a third party instead of overseas buyer making payment?
What are the process required from an Exporter to be followed with his Authorized Dealer Bank to permit such payment transaction? How can Bank Realization accounted by obtaining Foreign Inward Certificate of electronic Bank Realization Certificate? How to prepare Export Declaration Form (EDF)? Can Financial Action Task Force (FATF) be considered to settle export payment by a third party? How to record Export Outstanding Statement XOS?
According to Reserve Bank of India, third payment in import and export trade explains as below:
(v) Third party payments for export / import transactions
Taking into account the evolving international trade practices, it has been decided to permit third party payments for export / import transactions can be made subject to conditions as under:
a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/ invoice has been produced subject to:
(i) AD bank should be satisfied with the bona-fides of the transaction and export documents, such as, invoice / FIRC.
(ii) AD bank should consider the FATF statements while handling such transaction.
b) Third party payment should be routed through the banking channel only;
c) The exporter should declare the third party remittance in the Export Declaration Form and it would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF;
d) It would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF;
e) Reporting of outstanding, 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 realized, the name of the declared third party should appear in the XOS;
f) 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; and
g) In case of imports, the Invoice should contain a narration that the related payment has to be made to the (named) third party, the 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 and the importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods.
The above details explains about third party payment in Import Export trade in India. The details includes about FEMA guidelines under export import business on third party payment with the process of accounting such transaction with EDF and XOS, FIRC/eBRC etc.
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