of payments for imports.
of Credit to be opened only against Firm Contracts.
of Payment under Letters of Credit.
of/extension in letters of credit - time frame/change of beneficiary
and commodity/other amendments.
on which Letters of Credit may be opened.
of Old Ships for Scrapping.
of Credit for Shipment by Country Craft, Motor Launch or Truck.
in Excess of the Amount of Letter of Credit.
of Letters of Credit not permitted.
to open Letters of Credit for Import from Certain Countries.
on the basis of registration of contracts.
without letter of credit/registration of the indent/proforma
on Usance Basis.
by public sector agencies to which special allocation is made
by the Government.
of Bank Charges in respect of imports.
of Proceeds of Dishonored Bills.
involving Violation of I.T.C. Regulations.
Authority for Remittances against Imports.
of Freight on Imports on F.O.B. basis in the Private Sector.
of Freight on F.O.B. Imports by the Public Sector.
of Public Sector cargo through PNSC vessels/PIA.
of Freight on Import of Trade Samples.
on Private Account.
by PICIC/NDLC under Foreign Currency Lines of Credit.
of Foreign Exchange acquired for Imports.
of Form 'I'.
utility of the various copies of Form 'I'.
on Form 'I' for Government Import.
of Authorised Dealers for imports under Special Arrangements.
of Commission to be charged by Banks.
features of various Aid, Loans and Credits.
Currency Loans and Credits negotiated by the Government of
Loans and Credits.
Loans and Credits.
of Counter-Part Rupee Funds with the State Bank in respect
of Foreign Non-Project Commodity Loans.
on delay in deposit of Counterpart Funds.
Merchanting Business by Pakistan Intermediaries.
Scope of Chapter.
chapter sets out the regulations relating to sale of foreign exchange
by the Authorised Dealers against import of goods into Pakistan
from any country.
Import Trade Control.
of goods into Pakistan is regulated by the Ministry of Commerce,
Government of Pakistan, under the Imports and Exports (Control)
Act, 1950 and the notifications issued thereunder. No import is
permissible from Israel or from any other country, which
may be notified by the Ministry of Commerce. Import of goods originating
from any of these countries/ sources is also prohibited. Imports
from India are regulated as notified by the Ministry of Commerce,
Government of Pakistan from time to time.
Registration of Importers.
No person can import goods into Pakistan unless he is registered
with the Export Promotion Bureau, under the Registration (Importers
and Exporters) Order, 1993 or exempted from the provisions of
the said Order. Authorised Dealers should, therefore, verify that
the importer is registered or otherwise exempted before any letter
of credit is opened/contract registered or remittance made on
his behalf for imports into Pakistan. Authorised Dealers should
ensure that the registration number of the importer is invariably
furnished on Form 'I'. Where the importer
has been granted an exemption, a suitable mention of this fact
should be made on Form
Classification of Imports.
establishing any letter of credit/registering contracts, Authorised
Dealers should take all precautions to ensure that the goods to
be imported under it are clearly classifiable under the Import
Trade Control Schedules. In all cases of doubt, reference should
be made either by the Authorised Dealer or the importer direct
to the Export Promotion Bureau. Failure to do so may result in
confiscation of goods or imposition of penalty for violating the
provisions of the I.T.C. regulations. In all such cases establishment
of letter of credit/registration of contract and/or making of
remittance will also constitute infringement of the Foreign Exchange
Terms of Imports.
to the provisions of this Chapter, imports can be made on FOB
basis, CFR liner terms basis or CFR free out basis. However, prior
permission of the State Bank shall be obtained for import of sugar
and food grains (cereals) on CFR free out basis.
Modes of payments for imports.
Payment for imports may be made either through letters
of credit, without letters of credit against documents received
for collection on the basis of registration of contracts, or as
clean remittance without opening of letter of credit and without
registration of contract, as described in detail in the subsequent
Letters of Credit to be opened only against Firm Contracts.
Dealers should ensure before opening a letter of credit that in
each case a firm commitment exists. For this purpose, they should
ensure that an invoice, order or indent has been issued by an
indentor duly registered as importer under Registration (Importers
and Exporters) Order, 1993 and it bears registration number of
the indentor concerned. It is also permissible to open a letter
of credit on the basis of proforma invoice/order issued/accepted
by the foreign supplier.
Authorised Dealers should also ensure that while opening
letters of credit, full description of the goods to be imported
is given in each credit alongwith their prices. In all cases where
the amount of the letter of credit is Rs.1,500,000/- or over,
Authorised Dealers should obtain a confidential report on the
exporter from their branches or correspondents abroad or in their
discretion satisfy themselves as to the standing of the shipper
by consulting standard books of reference issued by international
credit agencies such as Seyds, Dunn and Bradstreet. Such reports
should be obtained by the Authorised Dealers themselves and the
reports if submitted by the importers should not be accepted.
Even in the case of imports of the value of less than Rs.1,500,000/-,
it is important that the Authorised Dealers satisfy themselves
about the bonafides of the transactions before opening letters
Methods of Payment under Letters of Credit.
Letters of credit may be established providing for payment
to beneficiary either in the country of origin of goods or in
the country of shipment of goods.
Authorised Dealers may also establish letters of credit
providing for payment to the beneficiary in a third country, not
being the country of origin of goods or the country of shipment
provided they are satisfied that the payment to the beneficiary
in a third country does not involve extra expenditure. This facility
is, however, not admissible for the import of goods which are
directly shipped from the ACU member countries.
Authorised Dealers may also establish letters of credit
providing for shipment of goods of the origin of more than one
country provided the beneficiary remains the same and the shipment
does not involve extra expenditure.
of credit established as per (i), (ii) and (iii) above should
provide for payment in any of the following manners:
in Rupees for credit to the non-resident bank account of
the country of the beneficiary or of the country of origin/shipment
Clearing Arrangement where letters of credit envisage shipment
directly from ACU member countries.
Opening of letters of credit providing for payment in any
other manner requires prior approval of the State Bank. Such requests
giving full facts of the case alongwith their recommendations
should be forwarded by the Authorised Dealers to the State Bank.
is not permissible to establish letters of credit providing for
alternate countries of origin of goods unless prior approval of
the State Bank is obtained. Letters of credit providing for goods
of ‘European Union’ origin may, however, be opened.
Opening of/extension in letters of credit—time frame/change
of beneficiary and commodity/other amendments.
Authorised Dealers can open letters of credit and extend
their validity for a period allowed by the import policy announced
by the Ministry of Commerce subject to compliance with all the
conditions laid down therein.
If the import policy does not lay down any instruction
in this regard, they may open letters of credit for a period upto
12 months. However, in respect of machinery and mill-work which
are required to be specifically manufactured and the period of
manufacture is more than 12 months, the letter of credit may be
opened for a period upto 24 months. The validity of a letter of
credit may be extended by the Authorised Dealers for further periods
not exceeding 12 months at a time on payment of fee, if so prescribed
in the import policy, provided there has been no change in the
Import Policy/exchange regulations in relation to the importability
of the goods, the country of origin/shipment, and the method of
payment/and if approached within its validity. An expired letter
of credit may also be similarly revalidated subject to the same
Authorised Dealers are also allowed to amend the letters
of credit envisaging change of the beneficiary/goods at the request
of the importers provided the importers approach the Authorised
Dealers for the change within the validity of the letter of credit
and import of the goods covered by the letters of credit are still
(iv) Authorised Dealers should also ensure to make endorsement
of L/C opened for items (other than freely importable items) whose
import is subject to certain conditions, in the original Category
Pass Book. In
case an importer opens letters of credit with more than one bank,
the Authorised Dealer holding the original category Pass Book
will make out photostat copies thereof, authenticate the same
and furnish other concerned Authorised Dealers with it and will
keep record thereof.
Authorised Dealers may also make other amendments in the
letters of credit without reference to the State Bank provided
the amendments are not in conflict with the provisions of this
Manual or the Import Trade Control Regulations.
of credit may provide for negotiation of documents within a period
not exceeding 30 days from the date of shipment.
Terms on which Letters of Credits may be opened.
letters of credit and similar undertakings covering imports must
provide for payment to be made against full set of clean on board
(shipped) bills of lading, air consignment notes, railway receipts,
post parcel receipts (or in the case of bulk import of books from
U.K. against "Statement of Dispatches" in lieu of post
parcel receipts) showing dispatch of goods to a place in Pakistan.
Sea-way bills should not be accepted. All letters of credit must
specify submission of invoices certifying the country of origin
in addition to any other certificate prescribed in the import
Import of Old Ships for Scrapping.
of credit for import of old ships for scrapping may be opened
by the Authorised Dealers in accordance with the normal procedure
after scrutiny of the following documents:
Memorandum of agreement or contract of sale; and
Confidential reports on buyers and sellers.
Dealers will satisfy themselves that the ship is free from all
encumbrances and that the seller has a legal title to the ship.
Letters of Credit for Shipment by Country Craft, Motor
Launch or Truck.
it is not permissible to open letters of credit providing for
shipment by means of country craft, motor launch or truck except
by public sector agencies or by well established and reputable
firms in the private sector, provided in the latter case the Authorised
Dealers are satisfied about their financial and business integrity
and they have no doubt that the goods covered by such letters
of credit will be received in Pakistan.
the case of other importers in the private sector, letters of
credit for import of goods by means of country craft, motor launch
or truck may be opened by the Authorised Dealers subject to the
The supplier abroad furnishes guarantee of a bank in the
country of export for an equivalent amount to the effect that
should the goods be lost or damaged or pilfered in transit, the
above guarantee can be invoked and the amount remitted against
the letters of credit recovered.
Alternatively, the letter of credit provides that payment
will be made to the foreign suppliers after the goods have been
received and cleared by the Customs in Pakistan.
respect of importers in the private sector who are unable to fulfill
the conditions at (i) and (ii) above, the Authorised Dealers should
refer their cases to the State Bank with full particulars.
Remittances in Excess of the Amount of Letter of Credit.
cases where the value of documents exceeds the amount of the letter
of credit and the foreign correspondent negotiates the documents
because of the excess amount being small or sends them on collection
basis, Authorised Dealers may allow remittance of the excess amount
subject to the condition that the amount does not exceed 5 percent
of the amount of credit subject to a maximum of US $500/-. The
bill of entry/certified invoice in respect of the consignment
will be required to cover the increased amount.
Types of Letters of Credit not permitted.
is not permissible to open clean, revolving, transferable or packing
credits. Applications for opening such letters of credit should
be referred to the State Bank with full particulars.
Prohibition to open Letters of Credit for Import from Certain
is not permissible to open letters of credit for imports into
Pakistan in favour of beneficiaries in Israel or of goods originating
from that country.
Imports on the basis of registration of contracts.
undernoted procedure will be adopted for making imports of goods
not subject to authorisation from the Export Promotion Bureau/Ministry
of Commerce as also not subject to minimum margin restrictions,
if the importer wants to make the import on the basis of registration
of contract without opening letter of credit: -
The importer will
submit a copy of the contract/purchase order/proforma invoice/indent
etc. to the Authorised Dealer for registration.
The Authorised Dealer
registering the contract etc. will issue to the importer, a registration
certificate in the format appearing at Appendix V-25.
In case the documents covering imports are received by
the branch of the Authorised Dealer which had registered the contract/purchase
order/indent/proforma invoice, directly from the bankers of the
suppliers abroad, the remittance may be effected in terms of the
instructions laid down in paragraph 23 (i) of this chapter provided
the documents conform to the terms of the relative contract/purchase
order/indent or proforma invoice.
In case the shipping documents are received by the importers directly,
or by the Authorised Dealer from the overseas supplier instead
of the bankers of the suppliers, remittance should be made in
accordance with the instructions contained in para 23 (ii) of
In case of imports from ACU member countries, remittances
will be effected through ACU Clearing Arrangements.
Forward cover will be available to the importers in accordance
with the terms and conditions laid down in Chapter IV of this Manual.
Authorised Dealers will incorporate the figures of the contracts
registered by them/ remittances made thereagainst in the statements
as per appendices V-131, V-132 V-133 and V-134 (para 15-Chapter XXII).
Imports without letter of credit/registration of the indent/proforma
In terms of the import policy, registered importers are
permitted to make imports upto
specified value ( US$ 5,000/- as per Import Trade and Procedure
Order 2000) without opening of letters of credit or registering
the indents/proforma invoices or orders with the Authorised Dealers,
and make remittances thereagainst. The registered importers are
free to make remittances in respect of such imports either in
advance or after receipt of the goods in Pakistan. The remittances
can be made through demand draft/telegraphic transfer/mail transfer.
In such cases where the registered importers make advance payments
for such imports, they will be required to furnish to the Authorised
Dealer at the time of making a request for remittance, an undertaking
to produce invoices and bills of lading/airway bill within a period
of four months from the date of advance payment. The Authorised
Dealers will pursue the matter with the importers and report those
cases to the area office of the Exchange Policy Department where
the requisite documents are not produced within the prescribed
time limit. In cases where remittances are made after receipt
of goods in Pakistan, the registered importers can approach the
Authorised Dealers for remittance on the basis of invoices and
original bills of lading or airway bill. The Authorised Dealers
have general permission to make advance payments or arrange remittances
against the prescribed documents on receipt of goods in Pakistan.
(ii) At the request of industrial
establishments registered as importers, Authorised Dealers may
issue foreign currency demand draft upto the value prescribed
in the Import Policy (currently US$ 15,000 per fiscal year for
2000-2001) for import of spare parts/machinery, without opening
of letter of credit, provided such import is made by air or by
courier. Authorised Dealers will maintain a record of all such
drafts issued by them. They will obtain from the applicant a declaration
showing the amount already remitted by him during the current
fiscal year and issue demand draft only upto the extent of the
balance entitlement. They will also obtain Exchange Control copy
of Bill of Entry and evidence to the effect that the import was
made by air/courier. These records will be retained till the next
inspection of the concerned bank branch by the State Bank’s Inspectors.
Import on Usance Basis.
Authorised Dealers may open letters of credit or register
contracts for imports into Pakistan providing for payment on usance
basis subject to the condition that such letters of credit/contracts
do not stipulate payment of any amount by way of interest separately.
The usance should commence from the date of issue of Bill of Lading/Air
Way Bill etc. or the acceptance of Bill of Exchange by the drawees
as the case may be. The letters of credit opened on usance
basis cannot subsequently be converted on sight basis. Similarly
the terms of the contracts covering payments on usance basis registered
by the Authorised Dealers cannot subsequently be changed to sight
basis. It is not permissible to effect payments of usance bills
Imports by public sector agencies to which special allocation
is made by the Government.
Sector agencies like WAPDA, Karachi Electric Supply Corporation
Limited, Pakistan State Oil Co. Ltd., OGDC, etc. which are allocated
foreign exchange for their import requirement or the private parties
who are allowed to import on Defence/Railway's account shall make
applications to the area Exchange Policy offices of State Bank
of Pakistan for permission to get the contracts registered with
the Authorised Dealer/open letters of credit, on Appendix
V- 26. Authorised Dealers will register contract/open
letter of credit in these cases on the basis of clearance issued
by State Bank on Appendix V- 26.
Remittance of bank charges in respect of imports.
Dealers can make remittance of the following bank charges on account
of imports. The particulars of the charges should be specifically
mentioned on the relevant forms.
L.C. Advising Commission.
L.C. Amendment Commission.
L.C. Confirmation Commission.
Un-utilized letter of credit Commission.
Acceptance Commission (Usance Drafts).
Postage and Cable Charges.
of bank charges other than the items mentioned above in respect
of imports will be subject to the prior approval of the State
Remittance of Proceeds of Dishonored Bills.
those cases where the original drawee dishonors the bill and the
foreign shipper or his local agent finds another buyer, the Authorised
Dealers may make remittance not exceeding the value of such bills
without the prior permission of the State Bank if there are no
restrictions in the import policy issued by Ministry of Commerce.
Remittance involving Violation of I.T.C. Regulations.
Dealers may allow remittance of the value of imports made in contravention
of the import policy if the Federal Government has condoned the
contravention and the Customs have released the goods. Such remittance
may be allowed on submission of the invoice, bill of lading and
Exchange Control copy of Customs Bill of Entry.
General Authority for Remittances against Imports.
Dealers may approve, on behalf of the State Bank, applications
for remittance against imports into Pakistan provided the documents
covering imports, whether under letters of credit or otherwise,
are received through them and the conditions set out in this chapter
are complied with. The relative Form
'I' should be certified accordingly when reporting
the sale to the State Bank. In the case of imports by post, Authorised
Dealers may make remittances without the prior approval of the
State Bank, only if the post parcels are addressed directly to
them. In cases, where the parcels are addressed direct to the
individuals or care of the Authorised Dealers, applications should
be forwarded to the State Bank for prior approval. Authorised
Dealers should invariably attach a copy of the relative invoice
with the original or quadruplicate 'I'
Form, as the case may be, submitted by them to the
State Bank with their monthly return of sale in terms of para
33 of this chapter.
Where the shipping documents are received by the importers
directly, or by the Authorised Dealer from the overseas supplier
instead of the bankers of the suppliers, remittance should be
approved only after the goods have been cleared from the Customs
and the Exchange Control copy of Bill of Entry or Customs certified
invoices in the case of imports by post, relative invoices, Non-negotiable
copies of the Bill of Lading/Airway Bill/Railway Receipt/Truck
Receipt etc. and 'I'
Form duly completed and signed have been submitted.
Collection of Freight on Imports on F.O.B. basis in the
following procedure will be followed for imports on FOB basis
in the private sector:
The importers desiring to make imports on FOB basis will
get the letters of credit opened/contracts for imports on consignment
basis registered through/with their bankers provided the importers
fulfill other instructions issued by the Government of Pakistan/State
Bank of Pakistan with respect to imports.
The shipping lines/airlines will
obviously issue Bills of Lading/Airways Bills in connection with
FOB imports on "Freight to Collect" basis. As and when
freight is required to be paid in Pakistan rupees, the importers
will approach the Authorised Dealers who had opened letter of
credit/registered the contract for import on consignment basis
alongwith a copy of Bill of Lading/Airway Bill indicating the
amount of freight payable together with the freight invoice issued
by the carrier, where available, for issuance of a certificate
in the format appearing at Appendix V-27 which will bear the name/address
of the issuing Authorised Dealer and a running serial number.
The importers will then pay the freight amount to the carriers
in Pakistan rupees and will also surrender the "certificate"
referred to in the preceding sub-para to the concerned carrier.
Airlines/shipping companies and their agents will not accept
freight on FOB imports without Authorised Dealers' certificate
mentioned in sub-para (ii) above. The airlines/shipping companies
will invariably attach the said "certificate" (Appendix
V-27) in original alongwith the applications to be made for allowing
remittance of surplus freight collections.
Collection of Freight on F.O.B. Imports by the Public Sector.
the case of imports by the public sector on FOB basis the carriers
should not accept freight in Rupees without the approval of the
State Bank. Approval will be given by the State Bank after charging
the full amount of the freight to the foreign exchange allocation
of the respective Government/Semi-Government agency. While applying
for approval, the carrier company will produce with the application
a letter in the prescribed form (Appendix V-28) from the concerned
Department/Agency authorising the State Bank to debit its foreign
exchange allocation with the freight amount. As an exception,
it will be in order for the carriers to accept freight in Rupees
on account of F.O.B. imports by the Ministry of Defence only subject
to post-facto approval. Application for permission to pay freight
in Rupees in respect of imports by the Ministry of Defence will
be made by the Controller of Military/Naval/Air Force Accounts
in triplicate in the above proforma. Approval will be accorded
by the State Bank on the original copy of the application with
the following narration.
of freight in Rupees as indicated above allowed".
the triplicate copy of the application will be retained by the
State Bank, the original and duplicate will be returned to the
Controller of Military/Naval/Air Force Accounts. The latter will
furnish the original copy to the carrier concerned.
Shipment of Public Sector cargo through PNSC vessels/PIA.
an exception to the provision of paragraph 25 ibid it will be
in order for the PNSC and PIA to accept freight in Pak Rupees
on FOB imports by the Public Sector agencies (Ministries/Departments,
autonomous and semi-autonomous public sector organizations) provided
the goods are carried by them on freight to pay basis. PIA will,
however, accept cargo only for the sectors covered by it. Authorised
Dealer's Certificate mentioned in Para 24 (ii) will not be required
to be produced to PNSC/PIA by the importing agencies.
Payment of Freight on Import of Trade Samples.
companies can accept freight in Rupees upto Rs. 2,000/- per year
per registered importer for import of bonafide trade samples.
While accepting freight the airlines/shipping companies should
obtain a certificate from the registered importer to the effect
that the total amount of freight already paid including the amount
to be paid during the calendar year on account of trade samples
received by him, does not exceed the limit of Rs. 2,000/- The
certificate should be submitted by the airlines/shipping companies
alongwith their application for remittance in which the collection
of such freight is included.
Imports on Private Account.
categories of imports are exempted from the Import Trade Control
Regulations. For example, in transit imports, imports by diplomatic
officials in Pakistan, imports in bond, imports of gift parcels
upto the exempted limit and imports by private parties for their
personal use upto prescribed limits. Authorised Dealers should
not allow any remittance against such imports except as laid down
Imports by PICIC/NDLC under Foreign Currency Lines of Credit.
PICIC/NDLC can open letters of credit under the foreign
currency lines of credit contracted by them with the approval
of the Government of Pakistan, and the foreign currency loans
contracted by the Government of Pakistan and placed at their disposal
for on-lending to their customers.
In all the cases of imports against letters of credit issued
by PICIC/NDLC, it should be ensured that import is made on C&F
basis unless shipment is made on Pak flag vessels and in that
case letters of credit may provide for imports on FOB basis on
payment of freight in Pakistan rupees.
State Bank may consider applications for advance remittance
against imports where the goods are of a specialized or capital
nature. Applications for such advance remittance should be made
to the State Bank on Form
'I' and should be accompanied by the original contract
(with a spare copy) entered into between the importer and the
foreign manufacturer or supplier. The applications should also
be supported by an undertaking in the prescribed form (Appendix
V-29) duly countersigned by the Authorised Dealer. In special
cases advance remittance may be allowed upto 33 1/3% of the estimated
C & F value of the total quantity of the goods to be imported.
the case of import of books and subscription to journals and magazines
etc., by Government and Semi-Government agencies, Authorised Dealers
may allow direct advance remittance upto the amount of the relative
letter of credit/contract. In the case of subscription to magazines/journals
etc., there will be no Customs Bill of Entry/certified invoice.
In such cases, Authorised Dealers will attach the relative debit
note with the duplicate of Form
‘I’ giving on both a suitable remark indicating that the remittance
has been allowed in advance. As regards import of books, there
will be usual Customs Bill of Entry/certified invoice which will
be processed in the normal course.
Authorised Dealers may allow advance remittances for import
of books, journals and magazines etc., by commercial importers
upto the amount of relative proforma invoices. Since magazines
and journals are imported in bulk by the commercial importers
in their own names, there will be usual Bills of Entry/certified
invoices as in the case of import of books.
Use of foreign exchange acquired for Imports.
all cases of remittances against import into Pakistan, the importers
shall not use the foreign exchange so acquired other than for
Processing of Form ‘I’.
for remittance against imports into Pakistan should be made on
'I' (Appendix V-30) which should be signed by the importer
or his authorised agent. The signatory should disclose his status/capacity
in the concerned firm/company etc., i.e. Director/Partner/Proprietor/Manager
etc. In case the form is signed by the agent of the importer,
it should be ensured by the Authorised Dealers that he holds a
valid legal power of attorney from the importer and the terms
of the power of attorney are such that the importer as well as
the attorney can be held responsible jointly & severally under
the Foreign Exchange Regulation Act, 1947. The form should be
submitted to an Authorised Dealer who must sign the certificate
as provided therein under his stamp and signature. In cases where
the Authorised Dealers are empowered to approve remittances on
behalf of the State Bank, they will do so by recording their approval
on the form. In all other cases, the forms together with the required
supporting documents should be forwarded to the State Bank for
Functional Utility of the various copies of Form ‘I’.
consists of four copies. The original copy of the form duly signed
by the importer is required to be sent to the State Bank by the
Authorised Dealers with their monthly return of sales. In cases
where the importers do not retire the documents and the Authorised
Dealers fail to get the original copies of the form signed by
them, they should themselves sign the quadruplicate copy of the
form and send it with the monthly return to the State Bank. All
cases where the importers fail or refuse to sign the Form 'I' should be specifically
reported to the State Bank.
Indication on Form ‘I’ for Government Import.
the case of remittances against imports by Government Departments
or in cover of imports by private parties which are marked "ON
GOVERNMENT ACCOUNT", Authorised Dealers should mark Forms 'I' with a bold letter
'G' to indicate that the remittance is on Government account.
Loss of Goods.
the event of total or partial loss of goods, it will be the responsibility
of the importers to recover claim from insurance company/shipping
company/supplier, as the case may be.
Designation of Authorised Dealers for imports under Special
The State Bank designates Authorised Dealers for handling
imports under Foreign Loans/credits and barter agreements including
PL-480 programme. Letters of credit for import under these arrangements
are required to be established through the designated Authorised
Dealers only. Importers are, however, free to approach the designated
banks either directly or through their bankers.
In the case of US AID Loans, PL-480 and KFW (German) Loans,
the State Bank designates banks in U.S.A. and West Germany also
for claiming payment or reimbursement from the loan/aid giving
agencies. Similar designation of banks in the country of other
aid giving agencies may also be made, if necessary, under the
Rates of Commission to be charged by Banks.
Authorised Dealers may recover from the importers following
Bank charges specified
in and remittable under the provisions of para 20 of this chapter
and the amount of interest, where authorised under loans like
US AID Loans and others, payable to the foreign banks handling
the transactions at the other end. The amounts of bank charges
and interest as mentioned above may be remitted to the foreign
banks without the prior approval of the State Bank subject to
report on Form 'M'.
Their own commission
at rates allowed by the Banking Supervision Department from time
to time, if applicable.
respect of imports under Aids/Loans/Credits/Barters where the
business is handled through Authorised Dealers who are not designated
banks, the commission will be shared equally between the designated
bank and the bank handling the business on behalf of its customers.
Authorised Dealers may recover commission at the following
rates on letters of credit covering imports by the Government
routed through State Bank:
In respect of cash/reimbursable loans/barters expressed in U.S.
Dollar or any other foreign currency including L/Cs under A.C.U.
1/8 % if the value of the letter of credit is less than
1/16 % if the value of the letter of credit is Rs 250,000/-
In respect of non-reimbursable
credits and Rupee Barters: 3/8 % irrespective of the value of
the letter of credit.
above charges are inclusive of foreign correspondents charges.
However, in addition to the above, Authorised Dealers may recover
actual cable/telex charges where L/Cs are desired to be established
through cable/telex and confirmation charges of foreign bank if
foreign bank's confirmation is also to be added on opener's request.
Special Features of various Aid, Loans and Credits.
U.S. AID LOANS: After the signing of the loan agreement,
U.S. AID, Washington issues letters of commitment which indicate
the salient features of the loan as also the names of designated
Pakistani and American banks. U.S. AID loans stipulate minimum
monetary limits for the opening of each letter of credit as well
as the value of each shipment. They may, however, issue one letter
of commitment under each U. S. AID Loan. Goods are required to
be shipped on U.S./Pakistan flag vessels in accordance with the
shipping requirements laid down in respect of each loan. U.S.
Liner Services are available on some ports from where shipments
can be made only on U.S. flag vessels. In cases U.S. flag vessels
are not available on these ports, shipments can be made on Pakistan
flag vessels or on the vessels of any other country which is included
in the AID Geographic Code 941 after obtaining waiver from the
U.S. AID. From ports where U.S. Liner Services are not available,
shipments can be made on Pakistan flag vessels or vessels of other
countries included in AID Geographic Code No.941. Two percent
or ten percent of the freight amount under U.S. AID Loans on 'Free-Out'
and 'Non-Free-Out' basis respectively, which is not financed by
AID authorities, is paid from Pakistan's own resources.
PL-480 PROGRAMME: Major food items like wheat, soyabean
oil, tobacco and non-fat dry milk are imported under Public Law
480. Banks are not designated for import of wheat which is directly
handled by the Ministry of Food. For the remaining items, banks
in Pakistan and the U.S.A. are designated for handling imports.
Payment to the suppliers is made directly by the Commodity Credit
Corporation (C.C.C.) of U.S.A. for which Procurement Authorisation
(P.A) is issued. Shipments are required to be made on Pakistan
and U.S. flag vessels on 50:50 basis. In the event of non-availability
of U.S./Pakistan flag vessels, shipments can be made on vessels
of any other country at the discretion of Commodity Credit Corporation.
In case of shipments by Pakistan flag vessels, Pakistani Shipping
Companies can accept payment of freight in Rupees without approval
of the State Bank. In case of shipment on U.S. flag vessels, permission
of the State Bank for opening of freight letter of credit/making
remittance of freight is required in each individual case.
CREDITS: Imports under I.D.A. Credits can be made from member
countries of I.B.R.D. (International Bank for Reconstruction and
Development) and Switzerland. Shipment is also required to be
made on the vessels of member countries of I.B.R.D. and Switzerland.
There are different case procedures for payments under I.D.A.
OTHER LOANS AND CREDITS: In respect of loans and
credits other than those mentioned above, which are provided by
various countries, specific instructions are issued by the State
Bank from time to time for handling imports and claiming reimbursements
ACU CLEARING ARRANGEMENT: ACU Clearing Arrangement
provides a clearing system through which all eligible payments
for current international transactions among the member countries,
other than payment relating to travel, are compulsorily settled
through the ACU mechanism which allows payment in the AMU or the
currency of the participating country in which one party to the
transaction resides. However, there is no bar to any contract
or letter of credit or invoice being denominated in Non-ACU Currency,
provided such contract/letter of credit invariably contains a
clause to the effect that payment of equivalent amount in ACU
Currency/AMU shall be made through the Clearing Arrangement and
also specifies the manner in which the currency of the contract/letter
of credit will be converted into the currency of actual payment/AMU.
Payments for exports to member countries against letters of credit
established under loans/credits taken by the importing country
from the international financial institutions like World Bank,
Asian Development Bank etc., can be realised in convertible currency
outside the Clearing Arrangement.
Foreign Currency Loans and Credits Negotiated by the Government
currency loans and credits negotiated by the Government of Pakistan
with the international institutions and other agencies are utilised
for import of machinery, capital goods, technical know-how, commodities
etc. Such credits negotiated for import of machinery, capital
goods etc., are normally placed at the disposal of public sector
agencies (who use it by opening letters of credit through the
banks designated by State Bank of Pakistan or by arranging direct
disbursement by the lending agency) and the Development Finance
Institutions e.g. PICIC, NDLC and IDBP who in turn disburse them
to their constituents. The credits for import of commodities,
raw materials, spares etc., are normally disbursed through banks
designated by the State Bank against the allocations made by the
Economic Affairs Division, Government of Pakistan. Any other foreign
currency credits negotiated privately would require approval of
the Federal Government/State Bank.
Project Loans and Credits.
respect of imports under Project loans, banks are also designated.
Normally, Authorised Dealers are advised to deliver shipping documents
to the importing agencies free of payment.
Reimbursable Loans and Credits.
case of reimbursable loans and credits, imports are financed in
the first instance from Pakistan's own foreign exchange resources
and reimbursement is obtained from the loan giving agency. In
some cases imports are also financed from Pakistan's cash foreign
exchange resources pending signing of the relevant loan agreement.
As and when the loan agreement is signed, reimbursement is to
be sought expeditiously from the relevant Loan/Credit giving agency.
The procedures for obtaining reimbursement from the loan giving
agencies are worked out on loan to loan basis.
Deposit of Counter-Part Rupee Funds with the State Bank
in respect of Foreign Non-Project Commodity Loans.
designated Authorised Dealers will observe the following procedure
for deposit of counter-part Rupee funds:
Appropriate Rupee amounts in respect of imports under all
foreign non-project commodity loans and credits on non-reimbursable
basis will be deposited with the regional office/branch of the
State Bank within three working days of the receipt of documents
by the designated banks in Pakistan or within 10 days from the
date of negotiation by the bank abroad, whichever happens to be
earlier, at the rate of exchange prevailing on the date of lodgement
of documents in cases where no forward exchange is booked. Where
forward cover has been booked, the booked rate is applied for
the purpose of depositing Rupee funds.
The designated Authorised Dealers will submit, to the concerned
area Chief Manager of the State Bank, a statement of Rupee deposits
at the time such deposits are made against foreign non-project
commodity loans and credits in the prescribed form (Appendix V-31).
Copies of these statements will also be sent to various Government
Fine on delay in deposit of Counterpart Funds.
the event of delay in depositing counterpart funds with the State
Bank within the prescribed period, the concerned Authorised Dealer
will pay to the State Bank fine at the rate of Rs 4 per day per
Rs 10,000 or part thereof for the period of delay.
Documents received on Collection Basis due to Discrepancy/Documents
drawn on usance basis.
In cases where the overseas negotiating bank does not make
payment to the supplier but sends the documents to the bank in
Pakistan on collection basis due to discrepancy in the documents,
the Authorised Dealers will deposit counterpart funds with the
State Bank on retirement of the documents by the importers concerned.
The prescribed period for deposit of counterpart funds will be
reckoned as from the date of retirement of bill by the importer.
If the funds are held back by the Authorised Dealers beyond the
prescribed period, fine would be charged as per paragraph 43 ibid.
In those cases where the negotiating
banks make payment to the suppliers under reserve or guarantee
due to minor discrepancies in documents, either the documents
should be sent back to the negotiating bank or the counterpart
funds deposited with the State Bank within a maximum period of
one week from the date of the receipt of the documents. In case,
however, the designated bank in Pakistan chooses to retain the
documents beyond the prescribed period of one week, a statement
of all such cases should be sent to the Director of Accounts,
Economic Affairs Division, Government of Pakistan, Islamabad and
the concerned Chief Manager of the State Bank showing the particulars
of shipping documents and indicating names and addresses of the
importers, letters of credit numbers and dates, vessel, commodity
and foreign currency amount specifying the detailed reasons for
not depositing the amount within the prescribed period of one
week. The cases in which deposits are made within a week need
not be reported.
The designated Authorised Dealer is required to deposit
counterpart funds with the State Bank within the period specified
in paragraph 42 ibid. The letters of credit opened by the Authorised
Dealers for imports under Aid/Loans and Credits should not, therefore,
provide for documents to be drawn on usance basis. Documents with
usance clause if received by an Authorised Dealer will not be
accepted by the State Bank as sufficient reason for waiver of
fine on account of delayed deposit of counterpart funds.
Deposit of Funds Received under Reimbursable Loans/Credits.
case of loans and credits on reimbursable basis, the designated
banks are required to deposit funds in the State Bank's Account
with the Federal Reserve Bank, New York or with such other banks
as may be specified from time to time. The deposits should be
made immediately on reimbursement by the foreign loan/credit giving
agencies but not later than the date following that on which reimbursement
is received. Late deposits will be subject to payment of fine
at rates given in paragraph 43 ibid. The Authorised Dealers designated
to open letters of credit for imports under loans and credits
should, therefore, make necessary arrangements in advance with
their correspondents abroad to effect the transfers within the
stipulated period. Late receipt or non-receipt of reimbursement
advice by the designated banks in Pakistan would not be accepted
as sufficient reason for waiver of fine.
Exchange Facilities for Merchanting Business by Pakistan
(i) Residents of
Pakistan and firms and companies functioning in Pakistan are allowed
to engage themselves in three way merchanting trade through back-to-back
letters of credit providing for payment in convertible currency
or advance payments excluding payments under bilateral/multilateral
accounts, in respect of the following commodities:
Dealers are permitted to open letters of credit in favour of third
country exporters either against an irrevocable letter of credit
on sight basis or against advance remittance in convertible currency
received from the ultimate importer subject to the following conditions:
The price differential includes intermediary's commission
at not less than one percent, plus actual charges incurred on
account of opening of back-to-back letter of credit, buying and
selling rates differential etc.
The letters of credit to be established by Pakistani intermediary
in favour of third country supplier will carry sufficient usance
so that payment becomes due only after receipt of payment from
the importer. In case where letters of credit are to be opened
against advance remittance, the condition of usance will not be
The amount of foreign exchange representing the price differential
including commission will be converted into Pak rupees.
No commission or any other claim of whatsoever nature will
be allowed to be remitted from Pakistan.
No credit line such as export finance etc. will be available.
Goods will be shipped directly from the country of supply
to the country of import.
No forward cover facility will be available for trade under
this arrangement. However, if desired, the intermediary Pakistani
trader can open a "Special Foreign Currency Account"
with an Authorised Dealer in Pakistan for deposit of the proceeds
of the letters of credit/advance remittances received from the
third country buyer pending (i) eventual payment to the third
country suppliers under the back-to-back letter of credit stipulating
reimbursement to the third country suppliers out of Special Foreign
Currency Account and (ii) conversion into Pakistan rupees of the
amount left out after making payment to the third country supplier
against back-to-back letters of credit.
permission has been accorded to the Authorised Dealers for opening
and maintaining Special Foreign Currency Accounts for merchanting
trade which will be subject to the following terms, conditions
and the procedure:
The account will be fed exclusively through remittances
emanating either from the realisation of proceeds under an irrevocable
letter of credit opened by an overseas buyer for third country
goods or advance remittance made by such buyer for supply of third
The account will be kept outside the scope of Foreign Currency
Accounts Scheme as embodied in paragraph 3 of Chapter VI of this
Manual. In other words the foreign currency received in such accounts
will not be required to be surrendered to the State Bank. Authorised
Dealers can hold such foreign currency abroad in addition to the
normal balances held abroad.
Interest accruing on the balances held in the account will
be converted into and paid in Pak rupees.
The exemption of interest income from levy of taxes etc.
shall not be admissible.
payment for import under the back-to-back letter of credit, the
Authorised Dealer will prepare a statement in the format appearing
at Appendix V-32 matching the receipt and payment for each merchanting
transaction individually and will submit the same to the concerned
area office of the Exchange Policy Department. The reporting of
inward and outward remittances would be as indicated in the format
appearing at Appendix V-33.
It is also permissible to conduct three-way merchanting
trade in commodities other than those mentioned in sub-para (i),
subject to the same terms and conditions, except that the margin
to be retained by the Pakistani intermediary which includes his
commission and expenses, is not less than (a) 10%, if the sale
price is to be received from the foreign buyer before remittance
of the purchase price is made to the overseas supplier of the
goods, and (b) 15% if back-to-back letter of credit provides for
payment to be made to the overseas supplier of the goods before
receipt of remittance from the overseas buyer.