EPD Circular Letter No. 02 of 2021
The Presidents/Chief Executives of all
Authorized Dealers in Foreign Exchange
Exportersí Special Foreign Currency Accounts
Attention of the Authorized Dealers is invited to Para 12(ii), Para 35 (iii) & Para 36, Chapter 12 of the Foreign Exchange Manual.
2. The above paras set out the regulations for retention of prescribed percentage of export proceeds into exportersí special foreign currency account and their utilization for making payments abroad for specified purposes. In order to facilitate the exporters in meeting their foreign expenses to boost their export business abroad, it has been decided to broaden the scope of utilization of export proceeds retained in Exportersí Special Foreign Currency Account.
3. Accordingly, the existing paragraphs 12(ii), 35(iii) and 36 have been replaced and a new paragraph 40 has been inserted at the end of Chapter 12 of the Foreign Exchange Manual. Authorized Dealers may allow remittances abroad to the exporters from the export proceeds retained in their Special Foreign Currency Account for expenses or payments abroad, as per instructions given below:
- Para 12(ii), Chapter 12 – Export of Software
“(ii) Further, it is permissible for exporters of software to retain amounts up to 35% of their export earnings in Exporters’ Special Foreign Currency accounts opened with the Authorized Dealers. The funds available in these accounts may be utilized for making different types of payments abroad, as prescribed at Para 40 of this chapter.
- Para 35(iii), Chapter 12 – Remittance of Export Commission, Brokerage and Discounts
“(iii) In cases where the exporter is not required to pay any commission or where the amount of commission required to be paid is less than the prescribed limit of FOB value of goods realized, as stated in para 35(i), such amounts of commission/ differential can be retained in Exporter’s Special Foreign Currency Account with the Authorized Dealers in Pakistan. The funds available in these accounts may be utilized for making different types of payments abroad, as prescribed at Para 40 of this chapter.
Any other deposits, whatsoever the nature, will not be accepted for credit to such foreign currency accounts. The facility is also available where export proceeds are realized under ACU Arrangement.
Authorized Dealers shall ensure that the aforesaid special foreign currency accounts are only opened by genuine exporters. In this respect, Authorized Dealers must follow their standard operating procedures for opening and maintenance of such accounts and ensure compliance of all related KYC and CDD requirements/ foreign exchange regulations. Further, such accounts shall be fed with prescribed portion of export proceeds and utilized by the exporters for permissible/legitimate purposes related to exports only. Therefore, the balances held in such accounts cannot be utilized for any other purpose.”
- Para 36, Chapter 12 – Export of Services
“Exporters of all types of legitimate services including inter alia financial, wholesale and retail distribution, logistics and transportation, storage and communications, tele-communication, information technology (IT) and IT enabled services (ITeS), medical, educational, engineering, real estate development, tourism, technical testing and consultancy etc. are authorized to retain 35% of their net foreign exchange earnings in foreign currency accounts with Authorized Dealers in Pakistan. The funds available in these accounts may be utilized for making different types of payments abroad, as prescribed at Para 40 of this chapter.
- Para 40 of Chapter 12 – Utilization of Funds held in Exporters’ Special Foreign Currency Account
“Authorized Dealers may allow exporters of goods and services to retain prescribed percentage of their export proceeds in Exporters’ Special Foreign Currency Account, as enunciated in Paras 12 (ii), 35 (iii) and 36 of this chapter. Authorized Dealers may allow the exporters to utilize the funds available in this account for the purposes stated below, without prior approval of SBP, except where specifically mentioned otherwise:
- Payment of commission/discount to the overseas agents/buyers;
- Shortfall in realization up to 10% of the FOB value of export proceeds realized, subject to submission of sufficient documentary evidence for short realization to the satisfaction of concerned AD. Any shortfall exceeding 10% limit may also be adjusted through this account subject to the adjudicating process in terms of Section 23B of FERA.
- Payment abroad against collection of commercial intelligence, purchase of designs/patterns, market studies, bonafide export claims.
- Payment for fee/expenses related to advertisement, promotion, publicity, marketing, brand building, shelf spacing etc. of products abroad through third party agent, e-commerce platforms or through company’s own subsidiary/liaison/marketing office abroad.
- Subscription fee for participation in foreign exhibitions, fairs for promotion/marketing of company’s products;
- Payment to foreign consultant for acquisition of services from abroad in relations to enhancing exports of goods/services;
- Payments for hotel booking and other travel expenses abroad, in lieu of official visits of company’s employees;
- Payment for warehousing services including insurance of goods warehoused through third party agent or through company’s own subsidiary/liaison/marketing office abroad;
- Payment of lab testing charges, audit/inspection/certification charges, logistics/other charges for clearance of goods at destination port, as per the terms of contract;
- Payment of debit notes to importer for chargebacks / penalties or any other charges incurred by the importer on behalf of the exporter;
- Refund of advance payment received against goods/ services on account of cancellation of the underlying contracts within one year from date of receipt of advance payments.
- Payments for registration of patents, copyrights, drug registration, license fee etc.
- Payment for import of IT equipment and software by software exporters, subject to compliance with applicable Import Policy Order and related laws/regulations issued by any government department and SBP;
- Payment for acquisition of digital services from abroad in accordance with the provisions of Para 14A, Chapter 14 ibid;
- Operational expenses of liaison/ marketing/ representative offices abroad of local companies in accordance with the provisions of Para 13, Chapter 20 ibid;
- Investment abroad by residents in accordance with the provisions of Para 13, Chapter 20 ibid;”
4. It is reiterated that Authorized Dealers must verify the genuineness of transactions, seek necessary documentary evidences from the applicant, exercise due diligence and ensure compliance with AML/CFT laws, regulations and guidelines while effecting outward remittances through Exportersí Special Foreign Currency Account.
5. All other instructions on the subject shall remain unchanged. Authorized Dealers are advised to bring the same to the knowledge of all the concerned and ensure meticulous compliance of the above & other applicable regulations on the subject.
(Arshad Mehmood Bhatti)
Back to Circular Page