KARACHI: The State Bank of Pakistan (SBP) has allowed Authorised Dealers (ADs) to make import advance payments, without prior approval of SBP, against 100 percent irrevocable letters of credit or invoices.
However, in case the goods against advance payment are not imported or the funds remitted in advance are not repatriated for any reason, the Ads will recover an interim penalty at 0.1 percent per day for the delayed period, on the outstanding amounts of advance payment.
The SBP has issued revised instructions under Para 30, Chapter 13 of the Foreign Exchange Manual and granted authorisation to ADs to effect import advance payment with appropriate due diligence, without prior approval of SBP, against irrevocable letters of credit or invoices, up to 100 percent of the value of letter of credit or invoice, as the case may be.
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However, the SBP has clarified that import advance payments already made prior to issuance of these instructions, shall be treated as per previous regulations issued on the subject.
The ADs shall effect the advance payment against import of goods subject to appropriate due diligence and compliance of Trade Based Money Laundering (TBML) framework.
As per terms and conditions the amount of the import advance payment shall commensurate with the profile of the customers, the quantity and nature of goods being imported, and the pricing trends prevailing in the international/domestic markets.
The ADs will be responsible to ensure that goods are imported within the stipulated time or the funds remitted in advance are repatriated back in a timely manner. Therefore, the ADs need to take necessary measures to examine the transactions and verify the bona fides and genuineness of the beneficiaries to mitigate the risk of any misuse.
For this purpose, the ADs will obtain an undertaking from the importer(s) on the prescribed form and may seek appropriate collaterals/ guarantees from the customers/beneficiaries in order to safeguard their interests.
In case the goods against advance payment are not imported or the funds remitted in advance are not repatriated for any reason within 730 days, in case of plant and machinery or 120 days, in all other cases, from the date of advance payment, the ADs shall recover an interim penalty at 0.1 percent per day for the delayed period, on the outstanding amounts of advance payment and deposit the same on monthly basis, in favor of the SBP.
For calculating the interim penalty amount accruing on each day of the delayed period, the prevailing market exchange rate of that day will be used. The period for recovery of penalty for the delay in import or repatriation will start from the first day after the lapse of 730 days or 120 days, till the date of import of goods into Pakistan, as evidenced by the Goods Declaration filed by the importer in PSW, or the date of repatriation of funds into Pakistan.
The SBP-BSC may seek additional information and may file complaints against the importers to Foreign Exchange Adjudication Department (FEAD), SBP-BSC under the Foreign Exchange Regulations Act (FERA), 1947.
The FEAD, SBP-BSC will adjudicate the matter and may impose final penalty on the importers as per powers conferred under FERA, 1947. Moreover, appropriate penal action can also be initiated against the Authorised Dealers, in terms of section 23K of FERA, 1947.
The Authorised Dealers should establish a monitoring mechanism to ensure that the importer does not misuse import advance payment and may take appropriate actions against any delinquent importers, including filing of STRs in cases involving TBML, debarring the importer from making any future advance payments, etc.
The SBP has advised ADs to bring fresh instructions to the knowledge of all their constituents for meticulous compliance.
Copyright Business Recorder, 2024