Islamabad, December 26, 2025 — The government of Pakistan has introduced stricter conditions for cotton exports by making it mandatory for exporters to place a security deposit with the State Bank of Pakistan (SBP). The move aims to strengthen contract compliance and ensure timely shipment of cotton exports.
The new requirement has been enforced through an amendment to the Export Policy Order, 2022, issued by the Ministry of Commerce via SRO 2486(I)/2025. The revised policy applies to the export of cotton falling under HS Code 5201.000.
Under the amended rules, cotton exporters are required to deposit 1% of the total contract value with the State Bank of Pakistan. Exporters must also present a confirmation letter issued by SBP to customs authorities along with shipping documents at the time of export clearance.
The policy further requires foreign buyers to open an irrevocable letter of credit (LC). Exporters must complete the shipment of the contracted cotton quantity within 180 days from the opening of the LC. In case of failure to ship the agreed quantity within the stipulated timeframe, the SBP will forfeit the security deposit proportionate to the unshipped quantity.
Shift from TDAP to SBP
Before this amendment, the security deposit was submitted through the Trade Development Authority of Pakistan (TDAP). Exporters were also required to provide cotton grading and classification certificates issued by the Pakistan Cotton Standards Institute, and exports were allowed based on cotton types or grades under specific documentation rules.
The revised policy shifts the security deposit mechanism directly to the SBP and removes several documentation requirements, simplifying the overall export process while tightening financial oversight.
Cotton Export Policy: Key Changes at a Glance
• Security Deposit Authority:
Earlier handled by TDAP; now mandatory with SBP along with an official confirmation letter.
• Documentation Requirements:
Cotton grading and classification certificates are no longer explicitly required.
• Letter of Credit Timeline:
Previously, the LC had to be opened within 35 days of contract registration. Under the new rules, an LC is mandatory, but no specific opening deadline is mentioned.
• Shipment Period:
Shipment must now be completed within 180 days from the opening of the LC, instead of from contract registration.
• Forfeiture of Deposit:
Security deposit will only be forfeited in case of non-performance of shipment, rather than delays in opening the LC.
• Export by Type or Grade:
The revised policy does not include provisions for exporting cotton based on type or grade.
Key Takeaway
The updated cotton export policy reflects the government’s focus on improving transparency, reducing procedural complexity, and ensuring timely fulfillment of export contracts. By shifting oversight to the State Bank of Pakistan and streamlining documentation, the new rules are expected to enhance discipline in cotton exports while protecting national trade interests.