UPDATED F.E. CIRCULAR

All Authorized Dealers
In Foreign Exchange.

Dear Sirs,

IMPORTS ON USANCE BASIS

Attention of the Authorized Dealers is invited to Para 30-A(i) – Chapter XIII of the Foreign Exchange Manual (7^th Edition, 1992) in terms of which they can open letters of credit/register contracts envisaging imports into Pakistan against 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 and other conditions laid down therein.

2. It has now been decided to also permit usance imports on the basis of letters of credit/contracts envisaging prices quoted on spot basis and payment of interest separately at a rate not exceeding the relevant LIBOR + 1.5%. The payment of interest will be subject to deduction of Pakistan taxes, if livable. In the cases falling in this category, the overseas suppliers will draw separate bills of Exchange for the spot price of the goods shipped and for the interest amount. The Authorized Dealer will arrange remittance of the amounts of the Bills on maturity after deduction of the amount of taxes livable on the interest amount. To this end, the importer will furnish to the Authorized Dealer a certificate from the Income Tax Officer or Auditors showing the amount of tax payable on the interest amount.

3. As a consequence of the above, following amendment will be made in the Foreign Exchange Manual (7^th Edition, 1992):-

1. Para 30 A (ii) will be renumbered as 30 A (iii).

2. Following will be inserted as Para 30A(ii).
   
   Quote "Usance imports can also be made on the basis of letters of credit/contracts envisaging prices quoted on spot basis and payment of interest separately at a rate not exceeding the relevant LIBOR + 1.5%. The payment of interest will be subject to deduction of Pakistan taxes, if livable. In the cases falling under this category, the suppliers will draw separate Bills of Exchange for the spot price of the goods shipped and for the interest amount. The Authorized Dealer will arrange remittance of the amounts of the Bills on maturity after deduction of Pakistan taxes livable on the interest amount. To this end, the importer will furnish to the Authorized Dealer a certificate from the Income Tax Officer showing the amount of tax payable on the interest amount and quadruplicate copy of the receipted challan showing the deposit of the tax amount in the Government account. The Authorized Dealers will also maintain a register for recording details of such transactions in the following format:-

                                                                                                    "Unquote.

4. Please bring the above to the notice of your constituents.

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