The Head /Principal Offices of all
Authorized Dealers in Foreign Exchange



Dear Sirs/ Madam,

Advance Payments Against Imports

Attention of Authorized Dealers is invited to the provisions of F. E. Circular No. 16 dated November 01, 2004. In order to accommodate the genuine needs of some importers for payments in advance to the foreign suppliers outside those permitted under F.E. Circular 16, bona-fide requests shall be considered for approval by the Exchange Policy Department, State Bank of Pakistan on a case to case basis. Related requests, to be forwarded through Authorized Dealers, must be based on:

1. Evidence of the bona-fides of the underlying transaction
2. Bank guarantee from suppliers abroad covering the amount of advance payment to be made

Accordingly, Para 30 (i) Chapter XIII of the Foreign Exchange Manual ( 8th Edition- 2002 ) is amended and replaced as under:
“Authorized Dealers may consider applications for advance remittance against imports up to the extent of 50% of the estimated C & F value of the capital goods to be imported only against irrevocable Letters of Credit, covering import of industrial capital goods; plant, machinery and equipment for manufacturing, excluding spare parts. Applications for such advance remittance should be made to Authorized Dealer on Form “I” and should be accompanied by the original contract entered into between the importer and the foreign manufacturer or supplier and a copy of the irrevocable Letter of Credit. The applications should also be supported by an undertaking in the prescribed form (Appendix V-29) duly signed by the importer.
For imports other than capital goods, advance payment up to the extent of 50% of the estimated value will be considered by Exchange Policy Department, State Bank of Pakistan, upon submission of evidence of bona-fides of the import transaction alongwith a bank guarantee from the supplier for the amount to be paid in advance”
Further, Para 17 (i), Chapter XIII of the Foreign exchange Manual (8th Edition, 2002) stands amended and replaced as under:

“ (i) In terms of the Import Policy, importers are permitted imports without opening of letters of credit or registering the indents/proforma invoices or orders with the Authorized Dealers, and effect remittances thereagainst, through demand draft/telegraphic transfer/mail transfer etc. In cases where remittances are made after receipt of goods in Pakistan, the importers can approach the Authorized Dealers for remittances on the basis of invoices and original bills of lading or airway bill. The Authorized Dealers have general permission to arrange remittances against the prescribed documents on receipt of goods in Pakistan.

In cases where the importers intend to make payment in advance against such imports, they may apply, through Authorized Dealers, to Exchange Policy Department, State Bank of Pakistan, for approval on a case to case basis in advance. Such requests must be based on evidence of bona-fides of import transaction alongwith a bank guarantee for the amount to be paid in advance.

Importers will be required to furnish to Authorized Dealers at the time of making a request for remittance, an undertaking to produce invoice and bills of lading/airway bill within a period of four months from the date of advance payment. The Authorized Dealers will pursue the matter with the importers and report those cases to the area offices of Foreign Exchange Operations Department, SBP-Banking Services Corporation, where the requisite documents are not produced within the prescribed time limit.”

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