SBP eases LC requirement for commercial banks

KARACHI: The State Bank of Pakistan has allowed commerial banks to open letter of credit (LC) for authorised dealers against import of goods into Pakistan from any country in parity with their dollar earnings.

Addressing a function commemorating 75 years of establishment of the SBP, central bank’s Governor Jameel Ahmad said a circular in this regard would be issued soon by the central bank.

Dwindling foreign exchange reserves was the reason behind SBP placing curbs on imports, he said.

Import of goods into Pakistan is regulated by the Ministry of Commerce, the Government of Pakistan, under the Imports and Exports (Control) Act, 1950 and the notifications issued thereunder.

No import is permissible from Israel or from any other country, which may be notified by the Ministry of Commerce. Import of goods originating from any of these countries/ sources is also prohibited.

Imports from India are regulated as notified by the Ministry of Commerce, Government of Pakistan from time to time.

Registration of Importers

According to the SBP, no person can import goods into Pakistan unless he is registered with the Export Promotion Bureau, under the registration (importers and exporters) Order, 1993 or exempted from the provisions of the said order.

Authorised dealers should, therefore, verify that the importer is registered or otherwise exempted before any letter of credit is opened/contract registered or remittance made on his behalf for imports into Pakistan.

According to the SBP, authorised dealers should ensure that the registration number of the importer is invariably furnished on Form ‘I’. Where the importer has been granted an exemption, a suitable mention of this fact should be made on Form ‘I’.

Classification of Imports 

Before establishing any letter of credit/registering contracts, Authorised Dealers should take all precautions to ensure that the goods to be imported under it are clearly classifiable under the Import Trade Control Schedules.

In all cases of doubt, reference should be made either by the Authorised Dealer or the importer direct to the Export Promotion Bureau.

Failure to do so may result in confiscation of goods or imposition of penalty for violating the provisions of the I.T.C. regulations. In all such cases establishment of letter of credit/registration of contract and/or making of remittance will also constitute infringement of the Foreign Exchange regulations.

Modes of payments for imports

According to the SBP, payment for imports may be made either through letters of credit, without letters of credit against documents received for collection on the basis of registration of contracts, or as clean remittance without opening of letter of credit and without registration of contract, as described in detail in the subsequent paragraphs.

Letters of credit to be opened only against firm contracts

Authorised dealers should ensure before opening a letter of credit that in each case a firm commitment exists. For this purpose, they should ensure that an invoice, order or indent has been issued by an indentor duly registered as importer under registration (Importers and Exporters) Order, 1993 and it bears registration number of the indentor concerned. It is also permissible to open a letter of credit on the basis of proforma invoice/order issued/accepted by the foreign supplier.

Authorised dealers should also ensure that while opening letters of credit, full description of the goods to be imported is given in each credit alongwith their prices. In all cases where the amount of the letter of credit is Rs.1,500,000/- or over.