International Toll Manufacturing¹ under Export Facilitation Scheme (EFS) 2021 (SRO 957(I)/2021)

       Attention of the Authorized Dealers (ADs) is hereby invited towards SRO 957(I)/2021 dated July 30, 2021, and its subsequent amendments issued by Federal Board of Revenue (FBR) vide SRO 1093(I)/2023 dated August 23, 2023, in terms of which a new Chapter-XL “Export Facilitation Scheme (EFS)-2021” has been added to Customs Rules 2001. As per Rule 885, a procedure of International Toll Manufacturing (ITM) has been rolled-out for import of input goods directly or indirectly from the foreign principals without involving any remittance of foreign exchange subject to the terms and conditions mentioned therein.

2.     In this regard, a module has been developed by Pakistan Customs/WeBOC to facilitate EFS including import-cum-export transactions under ITM. A checkbox “EFS toll manufacturer” has been added in GD type “Export Facilitation Scheme”. After completion of relevant formalities, the license holder can avail EFS ITM facility. Accordingly, following instructions are being disseminated to ADs:

1. The import and export of goods under ITM shall be undertaken through single Authorized Dealer for reconciliation and reporting purposes.

2. At the time of import, ADs shall be required to provide a financial instrument (FI) on ‘remittance not involved from Pakistan’ basis in PSW (in terms of Para 6B, Chapter 13 of Foreign Exchange Manual) before filing of ‘EFS import GD’ availing Toll Manufacturing facility by the local importer-cum-exporter, for import of raw material/ input goods from the principal abroad.

3. At the time of export, ADs shall provide FI in PSW equivalent to the service charges/value added, before filing of ‘EFS export GDs availing Toll Manufacturing facility by the local importer-cum-exporter. These ‘service charges’ shall be received as foreign remittance from abroad.

4. ADs shall submit bank credit advice (BCA) against respective FI in PSW confirming receipt/ realization of service charges from abroad for release of security submitted to Customs by local importer-cum-exporter at import stage.

5. ADs are advised to report realization of foreign exchange equivalent to the service charges, as per the contract, to SBP on Form-R on code ‘9236 - Processing fees on goods owned by others’ in Schedule J/O-3 of ITRS. In case of non-realization or delay in realization of export proceeds, ADs shall report such cases as overdue as per the existing procedures defined in Paras 33 and 33A of Chapter 12 of FE Manual.

6. ADs shall continue to perform the KYC/CDD of the applicants and ensure compliance of the EFS scheme parameters and all other applicable rules and regulations including the Framework for Managing Risks of Trade Based Money Laundering and Terrorist Financing, as amended from time to time.

3.     In order to operationalize the above arrangement, ADs, as part of their due diligence exercise, shall obtain, inter alia, the following documents from the local importer-cum-exporter:

1. EFS license/ authorization from Pakistan Customs.
   
   
2. Certified copy of application for authorization under EFS Scheme submitted to Pakistan Customs.
   
   
3. Contract/supply order for services between the principal and applicant.
   
   
4. Export Invoice regarding service charges/value added.
   
   
5. Periodic Reconciliation Statements, as required under EFS rules (Para 892).
   

4.     ADs are advised to bring the above instructions to the knowledge of all their constituents and ensure meticulous compliance thereof.

¹"International Toll Manufacturing" means an arrangement wherein a foreign principal provides input goods to an exporter to produce finished goods for subsequent export.