SBP Issues Instructions to Banks for ITM Export Facilitation

SBP Issues Instructions to Banks for ITM Export Facilitation

Karachi, December 27, 2023 – The State Bank of Pakistan (SBP) has issued crucial instructions to banks regarding International Toll Manufacturing (ITM) under the Export Facilitation Scheme (EFS).

The move comes as part of the ongoing efforts to streamline and enhance trade processes, aligning with recent regulatory amendments.

The SBP highlighted the significance of SRO 957(I)/2021 dated July 30, 2021, and subsequent amendments by the Federal Board of Revenue (FBR) through SRO 1093(I)/2023 dated August 23, 2023. These changes introduced a new chapter, “Export Facilitation Scheme (EFS)-2021,” to Customs Rules 2001.

Under Rule 885, the SBP introduced the International Toll Manufacturing (ITM) procedure, allowing the import of input goods directly or indirectly from foreign principals without necessitating the remittance of foreign exchange, subject to specific terms and conditions.

To facilitate the EFS, including import-cum-export transactions under ITM, Pakistan Customs/WeBOC has developed a dedicated module. A crucial addition is the checkbox “EFS toll manufacturer” in the GD type “Export Facilitation Scheme,” allowing license holders to avail themselves of the EFS ITM facility upon completion of relevant formalities.

The SBP has disseminated comprehensive instructions to banks, emphasizing several key points to ensure a smooth and compliant process:

1. Single Authorized Dealer: Import and export of goods under ITM should be carried out through a single Authorized Dealer for reconciliation and reporting purposes.

2. Financial Instruments (FI): Banks must provide a financial instrument (FI) on a ‘remittance not involved from Pakistan’ basis before filing ‘EFS import GD’ and ‘EFS export GDs,’ ensuring compliance with the Foreign Exchange Manual.

3. Service Charges: FI in PSW equivalent to service charges/value added must be provided by banks before filing ‘EFS export GDs.’ These service charges will be received as foreign remittances from abroad.

4. Bank Credit Advice (BCA): Banks are required to submit BCA against the respective FI in PSW, confirming the receipt/realization of service charges from abroad for the release of security submitted to Customs at the import stage.

5. Reporting to SBP: Banks must report the realization of foreign exchange equivalent to the service charges to the SBP on Form-R, using code ‘9236 – Processing fees on goods owned by others’ in Schedule J/O-3 of ITRS.

6. KYC/CDD Compliance: Banks should continue to perform Know Your Customer (KYC) and Customer Due Diligence (CDD) for applicants, ensuring compliance with the EFS scheme parameters and all relevant rules and regulations, including anti-money laundering and terrorist financing frameworks.

To operationalize these arrangements, banks are required to obtain specific documents from local importer-cum-exporters as part of their due diligence exercise. These include the EFS license/authorization, certified copies of the application submitted to Pakistan Customs, contracts/supply orders, export invoices, and periodic reconciliation statements as required under EFS rules.

Banks are instructed to communicate these guidelines to all their constituents and ensure meticulous compliance. The SBP’s instructions are aimed at fostering a transparent, efficient, and secure environment for international trade under the Export Facilitation Scheme.