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24. Collection
of Freight on Imports on F.O.B. basis in the Private Sector.
The following procedure will be followed for imports on FOB basis in
the private sector:
(i) The importers desiring to make imports on FOB basis will get the letters
of credit opened/contracts for imports on consignment basis registered through/with
their bankers provided the importers fulfill other instructions issued by the
Government of Pakistan/State Bank of Pakistan with respect to imports.
(ii) The shipping lines/airlines will obviously issue Bills of Lading/Airways
Bills in connection with FOB imports on "Freight to Collect" basis.
As and when freight is required to be paid in Pakistan rupees, the importers
will approach the Authorised Dealers who had opened letter of credit/registered
the contract for import on consignment basis alongwith a copy of Bill of Lading/Airway
Bill indicating the amount of freight payable together with the freight invoice
issued by the carrier, where available, for issuance of a certificate in the
format appearing at Appendix V-27 which will bear the name/address of the issuing
Authorised Dealer and a running serial number.
(iii) The importers will then pay the freight amount to the carriers in
Pakistan rupees and will also surrender the "certificate" referred
to in the preceding sub-para to the concerned carrier.
(iv) Airlines/shipping companies and their agents will not accept freight on
FOB imports without Authorised Dealers' certificate mentioned in sub-para (ii)
above. The airlines/shipping companies will invariably attach the said "certificate"
(Appendix V-27) in original alongwith the applications to be made for allowing
remittance of surplus freight collections.
25. Collection of Freight on F.O.B. Imports by the Public Sector.
In the case of imports by the public sector on FOB basis the carriers
should not accept freight in Rupees without the approval of the State Bank.
Approval will be given by the State Bank after charging the full amount of the
freight to the foreign exchange allocation of the respective Government/Semi-Government
agency. While applying for approval, the carrier company will produce with the
application a letter in the prescribed form (Appendix V-28) from the concerned
Department/Agency authorising the State Bank to debit its foreign exchange allocation
with the freight amount. As an exception, it will be in order for the carriers
to accept freight in Rupees on account of F.O.B. imports by the Ministry of
Defence only subject to post-facto approval. Application for permission to pay
freight in Rupees in respect of imports by the Ministry of Defence will be made
by the Controller of Military/Naval/Air Force Accounts in triplicate in the
above proforma. Approval will be accorded by the State Bank on the original
copy of the application with the following narration.
"Payment of freight in Rupees as indicated above allowed".
While the triplicate copy of the application will be retained by the State Bank,
the original and duplicate will be returned to the Controller of Military/Naval/Air
Force Accounts. The latter will furnish the original copy to the carrier concerned.
26. Shipment of Public Sector cargo through PNSC vessels/PIA.
As an exception to the provision of paragraph 25 ibid it will be in
order for the PNSC and PIA to accept freight in Pak Rupees on FOB imports by
the Public Sector agencies (Ministries/Departments, autonomous and semi-autonomous
public sector organizations) provided the goods are carried by them on freight
to pay basis. PIA will, however, accept cargo only for the sectors covered by
it. Authorised Dealer's Certificate mentioned in Para 24 (ii) will not be required
to be produced to PNSC/PIA by the importing agencies.
27. Payment of Freight on Import of Trade Samples.
Airlines/shipping companies can accept freight in Rupees upto Rs. 2,000/-
per year per registered importer for import of bonafide trade samples. While
accepting freight the airlines/shipping companies should obtain a certificate
from the registered importer to the effect that the total amount of freight
already paid including the amount to be paid during the calendar year on account
of trade samples received by him, does not exceed the limit of Rs. 2,000/- The
certificate should be submitted by the airlines/shipping companies alongwith
their application for remittance in which the collection of such freight is
included.
28. Imports on Private Account.
Certain categories of imports are exempted from the Import Trade Control
Regulations. For example, in transit imports, imports by diplomatic officials
in Pakistan, imports in bond, imports of gift parcels upto the exempted limit
and imports by private parties for their personal use upto prescribed limits.
Authorised Dealers should not allow any remittance against such imports except
as laid down in Chapter XVI.
29. Imports by PICIC/NDLC under Foreign Currency Lines of Credit.
(i) PICIC/NDLC can open letters of credit under the foreign currency
lines of credit contracted by them with the approval of the Government of Pakistan,
and the foreign currency loans contracted by the Government of Pakistan and
placed at their disposal for on-lending to their customers.
(ii) In all the cases of imports against letters of credit issued by PICIC/NDLC,
it should be ensured that import is made on C&F basis unless shipment is
made on Pak flag vessels and in that case letters of credit may provide for
imports on FOB basis on payment of freight in Pakistan rupees.
30. Advance Remittances.
(i)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”
(ii) In the case of import of books and subscription to journals and magazines etc., by Government and Semi-Government agencies, Authorised Dealers may allow direct advance remittance upto the amount of the relative letter of credit/contract. In the case of subscription to magazines/journals etc., there will be no Customs Bill of Entry/certified invoice. In such cases, Authorised Dealers will attach the relative debit note with the duplicate of Form ‘I’ giving on both a suitable remark indicating that the remittance has been allowed in advance. As regards import of books, there will be usual Customs Bill of Entry/certified invoice which will be processed in the normal course.
(iii) Authorised Dealers may allow advance remittances for import of books, journals and magazines etc., by commercial importers upto the amount of relative proforma invoices. Since magazines and journals are imported in bulk by the commercial importers in their own names, there will be usual Bills of Entry/certified invoices as in the case of import of books.
31. Use of foreign exchange acquired for Imports.
In all cases of remittances against import into Pakistan, the importers
shall not use the foreign exchange so acquired other than for that purpose.
32. Processing of Form ‘I’.
Applications for remittance against imports into Pakistan should be
made on Form 'I' (Appendix V-30) which should be signed by the importer or his
authorised agent. The signatory should disclose his status/capacity in the concerned
firm/company etc., i.e. Director/Partner/Proprietor/Manager etc. In case the
form is signed by the agent of the importer, it should be ensured by the Authorised
Dealers that he holds a valid legal power of attorney from the importer and
the terms of the power of attorney are such that the importer as well as the
attorney can be held responsible jointly & severally under the Foreign Exchange
Regulation Act, 1947. The form should be submitted to an Authorised Dealer who
must sign the certificate as provided therein under his stamp and signature.
In cases where the Authorised Dealers are empowered to approve remittances on
behalf of the State Bank, they will do so by recording their approval on the
form. In all other cases, the forms together with the required supporting documents
should be forwarded to the State Bank for approval.
33. Functional Utility of the various copies of Form ‘I’.
Form 'I' consists of four copies. The original copy of the form duly
signed by the importer is required to be sent to the State Bank by the Authorised
Dealers with their monthly return of sales. In cases where the importers do
not retire the documents and the Authorised Dealers fail to get the original
copies of the form signed by them, they should themselves sign the quadruplicate
copy of the form and send it with the monthly return to the State Bank. All
cases where the importers fail or refuse to sign the Form 'I' should be specifically
reported to the State Bank.
34. Indication on Form ‘I’ for Government Import.
In the case of remittances against imports by Government Departments
or in cover of imports by private parties which are marked "ON GOVERNMENT
ACCOUNT", Authorised Dealers should mark Forms 'I' with a bold letter 'G'
to indicate that the remittance is on Government account.
35. Loss of Goods.
In the event of total or partial loss of goods, it will be the responsibility
of the importers to recover claim from insurance company/shipping company/supplier,
as the case may be.
36. Designation of Authorised Dealers for imports under Special
Arrangements.
(i) The State Bank designates Authorised Dealers for handling imports
under Foreign Loans/credits and barter agreements including PL-480 programme.
Letters of credit for import under these arrangements are required to be established
through the designated Authorised Dealers only. Importers are, however, free
to approach the designated banks either directly or through their bankers.
(ii) In the case of US AID Loans, PL-480 and KFW (German) Loans, the State Bank
designates banks in U.S.A. and West Germany also for claiming payment or reimbursement
from the loan/aid giving agencies. Similar designation of banks in the country
of other aid giving agencies may also be made, if necessary, under the aid/loan
arrangements.
37. Rates of Commission to be charged by Banks.
(i) Authorised Dealers may recover from the importers following charges:-
(a) Bank charges specified in and remittable under the provisions of para 20
of this chapter and the amount of interest, where authorised under loans like
US AID Loans and others, payable to the foreign banks handling the transactions
at the other end. The amounts of bank charges and interest as mentioned above
may be remitted to the foreign banks without the prior approval of the State
Bank subject to report on Form 'M'.
(b) Their own commission at rates allowed by the Banking Supervision Department
from time to time, if applicable.
In respect of imports under Aids/Loans/Credits/Barters where the business is
handled through Authorised Dealers who are not designated banks, the commission
will be shared equally between the designated bank and the bank handling the
business on behalf of its customers.
(ii) Authorised Dealers may recover commission at the following rates on
letters of credit covering imports by the Government routed through State Bank:
(a) In respect of cash/reimbursable loans/barters expressed in U.S. Dollar or
any other foreign currency including L/Cs under A.C.U. arrangement:
aa) 1/8 % if the value of the letter of credit is less than Rs.250,000/-
bb) 1/16 % if the value of the letter of credit is Rs 250,000/- or more.
(b) In respect of non-reimbursable credits and Rupee Barters: 3/8 % irrespective
of the value of the letter of credit.
The above charges are inclusive of foreign correspondents charges. However,
in addition to the above, Authorised Dealers may recover actual cable/telex
charges where L/Cs are desired to be established through cable/telex and confirmation
charges of foreign bank if foreign bank's confirmation is also to be added on
opener's request.
38. Special Features of various Aid, Loans and Credits.
(i) U.S. AID LOANS: After the signing of the loan agreement, U.S. AID,
Washington issues letters of commitment which indicate the salient features
of the loan as also the names of designated Pakistani and American banks. U.S.
AID loans stipulate minimum monetary limits for the opening of each letter of
credit as well as the value of each shipment. They may, however, issue one letter
of commitment under each U. S. AID Loan. Goods are required to be shipped on
U.S./Pakistan flag vessels in accordance with the shipping requirements laid
down in respect of each loan. U.S. Liner Services are available on some ports
from where shipments can be made only on U.S. flag vessels. In cases U.S. flag
vessels are not available on these ports, shipments can be made on Pakistan
flag vessels or on the vessels of any other country which is included in the
AID Geographic Code 941 after obtaining waiver from the U.S. AID. From ports
where U.S. Liner Services are not available, shipments can be made on Pakistan
flag vessels or vessels of other countries included in AID Geographic Code No.941.
Two percent or ten percent of the freight amount under U.S. AID Loans on 'Free-Out'
and 'Non-Free-Out' basis respectively, which is not financed by AID authorities,
is paid from Pakistan's own resources.
(ii) PL-480 PROGRAMME: Major food items like wheat, soyabean oil, tobacco and
non-fat dry milk are imported under Public Law 480. Banks are not designated
for import of wheat which is directly handled by the Ministry of Food. For the
remaining items, banks in Pakistan and the U.S.A. are designated for handling
imports. Payment to the suppliers is made directly by the Commodity Credit Corporation
(C.C.C.) of U.S.A. for which Procurement Authorisation (P.A) is issued. Shipments
are required to be made on Pakistan and U.S. flag vessels on 50:50 basis. In
the event of non-availability of U.S./Pakistan flag vessels, shipments can be
made on vessels of any other country at the discretion of Commodity Credit Corporation.
In case of shipments by Pakistan flag vessels, Pakistani Shipping Companies
can accept payment of freight in Rupees without approval of the State Bank.
In case of shipment on U.S. flag vessels, permission of the State Bank for opening
of freight letter of credit/making remittance of freight is required in each
individual case.
(iii) I.D.A. CREDITS: Imports under I.D.A. Credits can be made from member countries
of I.B.R.D. (International Bank for Reconstruction and Development) and Switzerland.
Shipment is also required to be made on the vessels of member countries of I.B.R.D.
and Switzerland. There are different case procedures for payments under I.D.A.
Credits.
(iv) OTHER LOANS AND CREDITS: In respect of loans and credits other than those
mentioned above, which are provided by various countries, specific instructions
are issued by the State Bank from time to time for handling imports and claiming
reimbursements thereunder.
(v) ACU CLEARING ARRANGEMENT: ACU Clearing Arrangement provides a clearing system
through which all eligible payments for current international transactions among
the member countries, other than payment relating to travel, are compulsorily
settled through the ACU mechanism which allows payment in the AMU or the currency
of the participating country in which one party to the transaction resides.
However, there is no bar to any contract or letter of credit or invoice being
denominated in Non-ACU Currency, provided such contract/letter of credit invariably
contains a clause to the effect that payment of equivalent amount in ACU Currency/AMU
shall be made through the Clearing Arrangement and also specifies the manner
in which the currency of the contract/letter of credit will be converted into
the currency of actual payment/AMU. Payments for exports to member countries
against letters of credit established under loans/credits taken by the importing
country from the international financial institutions like World Bank, Asian
Development Bank etc., can be realised in convertible currency outside the Clearing
Arrangement.
39. Foreign Currency Loans and Credits Negotiated by the Government
of Pakistan.
Foreign currency loans and credits negotiated by the Government of
Pakistan with the international institutions and other agencies are utilised
for import of machinery, capital goods, technical know-how, commodities etc.
Such credits negotiated for import of machinery, capital goods etc., are normally
placed at the disposal of public sector agencies (who use it by opening letters
of credit through the banks designated by State Bank of Pakistan or by arranging
direct disbursement by the lending agency) and the Development Finance Institutions
e.g. PICIC, NDLC and IDBP who in turn disburse them to their constituents. The
credits for import of commodities, raw materials, spares etc., are normally
disbursed through banks designated by the State Bank against the allocations
made by the Economic Affairs Division, Government of Pakistan. Any other foreign
currency credits negotiated privately would require approval of the Federal
Government/State Bank.
40. Project Loans and Credits.
In respect of imports under Project loans, banks are also designated.
Normally, Authorised Dealers are advised to deliver shipping documents to the
importing agencies free of payment.
41. Reimbursable Loans and Credits.
In case of reimbursable loans and credits, imports are financed in
the first instance from Pakistan's own foreign exchange resources and reimbursement
is obtained from the loan giving agency. In some cases imports are also financed
from Pakistan's cash foreign exchange resources pending signing of the relevant
loan agreement. As and when the loan agreement is signed, reimbursement is to
be sought expeditiously from the relevant Loan/Credit giving agency. The procedures
for obtaining reimbursement from the loan giving agencies are worked out on
loan to loan basis.
42. Deposit of Counter-Part Rupee Funds with the State Bank in
respect of Foreign Non-Project Commodity Loans.
The designated Authorised Dealers will observe the following procedure
for deposit of counter-part Rupee funds:
(i) Appropriate Rupee amounts in respect of imports under all foreign
non-project commodity loans and credits on non-reimbursable basis will be deposited
with the regional office/branch of the State Bank within three working days
of the receipt of documents by the designated banks in Pakistan or within 10
days from the date of negotiation by the bank abroad, whichever happens to be
earlier, at the rate of exchange prevailing on the date of lodgement of documents
in cases where no forward exchange is booked. Where forward cover has been booked,
the booked rate is applied for the purpose of depositing Rupee funds.
(ii) The designated Authorised Dealers will submit, to the concerned area Chief
Manager of the State Bank, a statement of Rupee deposits at the time such deposits
are made against foreign non-project commodity loans and credits in the prescribed
form (Appendix V-31). Copies of these statements will also be sent to various
Government agencies.
43. Fine on delay in deposit of Counterpart Funds.
In the event of delay in depositing counterpart funds with the State
Bank within the prescribed period, the concerned Authorised Dealer will pay
to the State Bank fine at the rate of Rs 4 per day per Rs 10,000 or part thereof
for the period of delay.
44. Documents received on Collection Basis due to Discrepancy/Documents
drawn on usance basis.
(i) In cases where the overseas negotiating bank does not make payment
to the supplier but sends the documents to the bank in Pakistan on collection
basis due to discrepancy in the documents, the Authorised Dealers will deposit
counterpart funds with the State Bank on retirement of the documents by the
importers concerned. The prescribed period for deposit of counterpart funds
will be reckoned as from the date of retirement of bill by the importer. If
the funds are held back by the Authorised Dealers beyond the prescribed period,
fine would be charged as per paragraph 43 ibid.
(ii) In those cases where the negotiating banks make payment to the suppliers
under reserve or guarantee due to minor discrepancies in documents, either the
documents should be sent back to the negotiating bank or the counterpart funds
deposited with the State Bank within a maximum period of one week from the date
of the receipt of the documents. In case, however, the designated bank in Pakistan
chooses to retain the documents beyond the prescribed period of one week, a
statement of all such cases should be sent to the Director of Accounts, Economic
Affairs Division, Government of Pakistan, Islamabad and the concerned Chief
Manager of the State Bank showing the particulars of shipping documents and
indicating names and addresses of the importers, letters of credit numbers and
dates, vessel, commodity and foreign currency amount specifying the detailed
reasons for not depositing the amount within the prescribed period of one week.
The cases in which deposits are made within a week need not be reported.
(iii) The designated Authorised Dealer is required to deposit counterpart
funds with the State Bank within the period specified in paragraph 42 ibid.
The letters of credit opened by the Authorised Dealers for imports under Aid/Loans
and Credits should not, therefore, provide for documents to be drawn on usance
basis. Documents with usance clause if received by an Authorised Dealer will
not be accepted by the State Bank as sufficient reason for waiver of fine on
account of delayed deposit of counterpart funds.
45. Deposit of Funds Received under Reimbursable Loans/Credits.
In case of loans and credits on reimbursable basis, the designated
banks are required to deposit funds in the State Bank's Account with the Federal
Reserve Bank, New York or with such other banks as may be specified from time
to time. The deposits should be made immediately on reimbursement by the foreign
loan/credit giving agencies but not later than the date following that on which
reimbursement is received. Late deposits will be subject to payment of fine
at rates given in paragraph 43 ibid. The Authorised Dealers designated to open
letters of credit for imports under loans and credits should, therefore, make
necessary arrangements in advance with their correspondents abroad to effect
the transfers within the stipulated period. Late receipt or non-receipt of reimbursement
advice by the designated banks in Pakistan would not be accepted as sufficient
reason for waiver of fine.
46. Exchange Facilities for Merchanting Business by Pakistan Intermediaries.
(i) Residents of Pakistan and firms and companies functioning
in Pakistan are allowed to engage themselves in three way merchanting trade
through back-to-back letters of credit providing for payment in convertible
currency or advance payments excluding payments under bilateral/multilateral
accounts, in respect of the following commodities:
1.Crude Oil
2. Edible Oil
3. Wheat
4. Rubber
5. Cotton
6. Tea
7. Sugar
8. Fertilizer
Authorised Dealers are permitted to open letters of credit in favour of third
country exporters either against an irrevocable letter of credit on sight basis
or against advance remittance in convertible currency received from the ultimate
importer subject to the following conditions:
a) The price differential includes intermediary's commission at not less
than one percent, plus actual charges incurred on account of opening of back-to-back
letter of credit, buying and selling rates differential etc.
b) The letters of credit to be established by Pakistani intermediary in
favour of third country supplier will carry sufficient usance so that payment
becomes due only after receipt of payment from the importer. In case where letters
of credit are to be opened against advance remittance, the condition of usance
will not be obligatory.
c) The amount of foreign exchange representing the price differential including
commission will be converted into Pak rupees.
d) No commission or any other claim of whatsoever nature will be allowed
to be remitted from Pakistan.
e) No credit line such as export finance etc. will be available.
f) Goods will be shipped directly from the country of supply to the country
of import.
g) No forward cover facility will be available for trade under this arrangement.
However, if desired, the intermediary Pakistani trader can open a "Special
Foreign Currency Account" with an Authorised Dealer in Pakistan for deposit
of the proceeds of the letters of credit/advance remittances received from the
third country buyer pending (i) eventual payment to the third country suppliers
under the back-to-back letter of credit stipulating reimbursement to the third
country suppliers out of Special Foreign Currency Account and (ii) conversion
into Pakistan rupees of the amount left out after making payment to the third
country supplier against back-to-back letters of credit.
General permission has been accorded to the Authorised Dealers for opening and
maintaining Special Foreign Currency Accounts for merchanting trade which will
be subject to the following terms, conditions and the procedure:
aa) The account will be fed exclusively through remittances emanating
either from the realisation of proceeds under an irrevocable letter of credit
opened by an overseas buyer for third country goods or advance remittance made
by such buyer for supply of third country goods.
bb) The account will be kept outside the scope of Foreign Currency Accounts
Scheme as embodied in paragraph 3 of Chapter VI of this Manual. In other words
the foreign currency received in such accounts will not be required to be surrendered
to the State Bank. Authorised Dealers can hold such foreign currency abroad
in addition to the normal balances held abroad.
cc) Interest accruing on the balances held in the account will be converted
into and paid in Pak rupees.
dd) The exemption of interest income from levy of taxes etc. shall not
be admissible.
After payment for import under the back-to-back letter of credit, the Authorised
Dealer will prepare a statement in the format appearing at Appendix V-32 matching
the receipt and payment for each merchanting transaction individually and will
submit the same to the concerned area office of the Exchange Policy Department.
The reporting of inward and outward remittances would be as indicated in the
format appearing at Appendix V-33.
(ii) It is also permissible to conduct three-way merchanting trade in commodities
other than those mentioned in sub-para (i), subject to the same terms and conditions,
except that the margin to be retained by the Pakistani intermediary which includes
his commission and expenses, is not less than (a) 10%, if the sale price is
to be received from the foreign buyer before remittance of the purchase price
is made to the overseas supplier of the goods, and (b) 15% if back-to-back letter
of credit provides for payment to be made to the overseas supplier of the goods
before receipt of remittance from the overseas buyer.
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