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

Dear Sir /Madam,

ADVANCE PAYMENTS AGAINST IMPORTS

Attention of the Authorized Dealers is invited to FE Circular No. 16 dated 1st November 2004, EPD Circular Letter No. 13 dated 10th November 2004 and FE Circular No. 12 dated 13th August 2005 in terms of which advance payments were allowed subject to the terms and conditions mentioned therein.

In order to further liberalize foreign exchange regime and to facilitate importers, it has been decided to allow advance payments against letters of credit and firm registered contracts upto 100% of the FOB or CFR value of the imported goods subject to the following terms and conditions:

a) The bank will take all possible measures to verify the bonafides and genuineness of the transaction while processing advance payment request and may get the credit worthiness report of the foreign supplier before allowing advance payment.

b) In order to secure advance payment, the bank may also ask the importer to obtain performance guarantee from the supplier’s bank.

c) The bank will obtain an undertaking from the importer that in case goods are not received for any reason within the period of four months, the bank as well as the customer will ensure repatriation of the advance payment back.

d) In case the importer is unable to import goods against advance payment and underlying contract is cancelled, the bank will impose and recover a penalty @0.25% per month or part thereof on the amount of advance payment from the date of remittance till date of repatriation of advance payment. Bank would deposit the penalty amount with the State Bank of Pakistan. A monthly consolidated statement of all such cases will be submitted by Head Office of each bank to the Director, Exchange Policy Department, State Bank of Pakistan, Karachi.

e) If a consistent behavior as mentioned at d) above is observed where actual imports do not take place against advance payments, Authorized Dealers may debar the concerned importer from making any future advance payment under intimation to Exchange Policy Department, State Bank of Pakistan.

Authorized Dealers are advised to bring the above to the notice of their constituents.