8.1 Import Procedures, Payment Terms & Cash Margins

Two rulebooks, one consignment

When a Pakistani importer wants goods, two legal layers fire at once. The Ministry of Commerce Import Policy Order (IPO), issued under the Imports and Exports (Control) Act, 1950 and kept current by S.R.O.s, answers whether the goods may be imported, from which origin, and on what extra licences. The State Bank of Pakistan Foreign Exchange Manual Chapter 13 answers how an Authorized Dealer (AD) may sell foreign exchange for that import. Chapter 13 para 1 states that scope in one sentence: regulations relating to sale of foreign exchange by ADs for import of goods into Pakistan.

Confusing the two books is a classic NIBAF trap. An IPO-clean shipment can still be an FE breach if the AD remits on the wrong mode, wrong Incoterm, or without the importer declaration. An FE-clean LC can still be an IPO breach if the HS heading sits on a banned appendix. Chapter 13 para 4 therefore tells the AD, before opening an LC, registering a contract, or remitting, to make sure the goods are clearly classifiable under the IPO then in force. If there is doubt, the AD or the importer refers the Ministry of Commerce. Failure can confiscate the goods or attract an IPO penalty; establishing the LC or making the remittance in that state is also an infringement of the foreign-exchange regulations.

Chapter 13 para 2 adds origin screens that sit beside the IPO: no import is permissible from Israel or from any other country the Ministry of Commerce may notify, and goods originating from those sources are likewise prohibited even if shipped from a third country. Imports from India are regulated as the Ministry of Commerce notifies. Those screens are not a cash-margin list and they are not a TBML typology; they are a hard FE prohibition on opening the LC or registering the contract (para 15).

This independent OpenExamPrep chapter teaches the current Chapter 13 text (updated into the Manual by EPD Circular Letter No. 09 of 2025, with later circular overlays noted where they change desk practice). It does not reprint the Incoterms 2020 risk-and-cost map already taught in Chapter 4 of this study guide.

F.E. 1/2021-SB: the importer declaration

SBP Notification No. F.E. 1/2021-SB dated 19 July 2021, issued under section 20(3) of FERA 1947 and superseding F.E. 1/2016-SB dated 26 July 2016, does two things every AD must be able to recite:

1. All imports into Pakistan shall only be made against the permissible modes of imports as allowed by SBP from time to time.
2. All importers shall submit a declaration, while undertaking an import transaction, in the prescribed manner and to the prescribed authority, stating that the payment against the goods imported or to be imported has been or will be made through an Authorized Dealer in Pakistan, where required, as per SBP instructions from time to time.

On WeBOC that declaration is the Electronic Import Form (EIF) before Goods Declaration (GD). On Pakistan Single Window (PSW), under the Pakistan Single Window Act 2021, it is part of the integrated declaration, and the AD communicates the Financial Instrument (FI) by Electronic Data Interchange (EDI). Banks not yet integrated with PSW still issue EIF. The declaration is not a Customs valuation form and it is not a substitute for KYC; it is the statutory statement that FX, if due, will move through an AD.

Five payment modes (para 6), not five Incoterms

Para 6 lists the modes: (i) letter of credit, (ii) registered contract, (iii) documentary collection, (iv) open account, and (v) advance payment. Each mode is a timing and document-routing choice. It is not the same as the Incoterm, which is the risk, cost, and insurance split between seller and buyer (Chapter 4 of this guide; Incoterms 2020, ICC).

Letter of credit (paras 9–15, 10). The AD may open or extend an LC if the goods remain allowed under the IPO then in force. If the IPO is silent on tenor, the AD may open up to 12 months; for machinery and capital goods that must be specifically manufactured and whose manufacture exceeds 12 months, up to 24 months. In both cases the AD may extend further by not more than 12 months from the original expiry. If an LC is already issued and a later IPO amendment restricts the goods, origin, or method of payment, the LC already issued remains valid. Beneficiary or goods may be changed within validity if the new goods are IPO-permissible. Shipping documents must be presentable at the issuing bank's counter within 30 days of shipment, except crude oil and petroleum products imported by oil refineries or marketing companies, which may go beyond 30 days but still within LC/contract validity. Every LC must call for a full set of clean on-board (shipped) bills of lading, air waybill, railway receipt, or post-parcel receipt to a place in Pakistan; sea-way bills are not permitted. The port of discharge in Pakistan should be named; “any port in Pakistan” or a bare “Karachi” should be avoided unless the underlying contract gives the foreign exporter that option. Invoices must certify country of origin (for crude/petroleum, country of blending may be accepted if the AD is satisfied as to bona fides). Clean LCs and transferable LCs are not permitted without FEOD; time-based revolving LCs may be opened on para 9 terms. For LC value equivalent to USD 20,000 or above, the AD must obtain a confidential report on the exporter from its own branches or correspondents, or from an accredited reference book; importer-supplied reports are not accepted. Payment may go to the country of origin or the country of shipment; a third-country beneficiary is allowed only if that person is the actual exporter on the contract and the AD runs TBML due diligence. PKR-denominated cross-border LCs may be opened, but the EIF/FI is issued in equivalent foreign currency. ACU clearing applies where the contract envisages shipment from ACU member countries, unless the beneficiary is registered outside those countries and payment is required outside ACU.

Registered contract and collection (para 16). The importer lodges the contract, purchase order, proforma invoice, or indent. The AD issues a registration certificate in Appendix V-27. If shipping documents arrive directly from the supplier's banker, the AD has general permission to remit. If the importer (or the AD) receives documents from the supplier rather than from that banker, or receives only photocopies, the case is processed as open account under para 17. Afghanistan land-route trade has a special FE Circular No. 02 dated 27 February 2017 overlay: bank routing of shipping documents is not mandatory; the AD pays after verifying each remittance against GDs cleared on the FI/EIF.

Open account (para 17). Open account means documents reached the importer or the AD directly from the foreign supplier. The IPO permits remittance after goods have been received in Pakistan, but Chapter 13 then narrows who may use the mode. ADs may allow manufacturing and industrial concerns, and commercial importers, to pay on open account for spare parts and raw materials only for the ultimate use of the manufacturing/industrial concern. In addition, ADs may allow open-account payments up to USD 50,000 (or equivalent) for life-saving medicines and devices, and up to USD 10,000 for essential medicines and devices, aircraft-related spare parts/components, lab equipment/instruments imported by educational institutions for their own use, and newspapers, magazines, periodicals, and books. Life-saving/essential medicine cases need a certificate from the principal of a public-sector teaching hospital or the head of a government specialized hospital. Payment must be made within one year of GD (WeBOC) or of the PSW declaration; otherwise the importer, through the AD, approaches FEOD for an extension. On PSW, only importers whose customer profile already permits open account may file an open-account declaration. On WeBOC, the importer still needs an approved EIF before Customs clearance, on photocopies of shipping documents.

Usance (para 18). Usance LCs or registered contracts may not stipulate interest as a separate amount. Usance runs from bill of lading/air waybill date or from acceptance of the bill of exchange. A usance LC cannot later be converted to sight, the usance period cannot be shortened, and usance bills cannot be paid prematurely.

Para 5 Incoterms: cross-cite Chapter 4, do not reprint it

Chapter 4 of this study guide already covers the eleven Incoterms 2020 rules, the sea-only versus multimodal split, and CIP Institute Cargo Clauses (A) versus CIF Clauses (C). Chapter 13 para 5 (footnote: Incoterms 2020) is the Pakistani FX filter, not a second Incoterms textbook. Subject to the rest of Chapter 13, imports may be made on FOB, FCA, FAS, CFR, and CPT. EXW may be allowed only if remittance is made against presentation of shipping documents at the applicant's bank counter and insurance from the supplier's warehouse is arranged by the applicant. Any other Incoterm (including CIF, CIP, and the D-terms) needs prior permission of FEOD, SBP-BSC.

Desk implication: a Karachi mill can open a CFR LC without asking FEOD; the same mill cannot treat CIF as a standing Chapter 13 term. Time-boxed circulars can overlay para 5. EPD Circular Letter No. 04 of 11 March 2026 allowed CIF for crude oil and petroleum products for 60 days; EPD Circular Letter No. 10 of 7 May 2026 extended that overlay up to 10 July 2026. After that date, unless a successor circular is live, CIF again sits outside the para 5 list and needs FEOD. The exam point is the method: open the live circular; do not assume CIF is always free because a 2026 energy circular once said so.

Cash margins: apply the live circular, do not invent an HS list

Cash margin is a macro-prudential overlay, usually issued as a BPRD circular letter with an HS annex and a percentage. It is not printed as a permanent table in Chapter 13. Historically, letters such as BPRD Circular Letter No. 09 of 2022 and No. 25 of 2022 required 100 percent cash margin on listed items (and, in the 2022 credit-term letter, 100 percent where import credit exceeded 90 days). BPRD Circular Letter No. 06 dated 24 March 2023 then withdrew the existing cash-margin requirement with effect from 31 March 2023, and withdrew BPRD Circular No. 02 of 2017, Circular No. 05 of 2018, Circular Letter No. 30 of 2021, and Circular Letters No. 09, 25, and 37 of 2022.

Chapter 13 para 6B nevertheless keeps the operating hook, because a future circular can switch the tool back on:

• The importer provides cash-margin information when importing specified items under open account.
• No FI is required for open-account items that are not specified under cash-margin instructions.
• Where cash margin is required on open account, the importer must pre-inform the AD; the AD recovers the margin and then communicates the FI to PSW.

How an AD applies a live circular on the day:

1. Open the latest BPRD/EPD cash-margin circular (and any letter that withdrew or replaced it), not a 2022 photocopy in the credit file.
2. Classify the goods to an HS heading from the commercial invoice/contract, consistent with the IPO classification duty in para 4.
3. If that heading is on the live annex, collect the stipulated rupee margin before establishing the LC or issuing the OA FI.
4. If the heading is not on the live annex, do not invent a margin “because the goods look luxury.”
5. Never recite a memorized historic HS list in an exam answer as if it were current law.

One Customs (non-PSW) still requires an FI for all modes on the importer's request. PSW bank-to-bank FI transfer is available only after the instrument has been associated with at least one Goods Declaration. EPD Circular Letter No. 09 of 23 April 2026 delegated a crude-oil/petroleum overlay: ADs may issue the FI for those products at the time of registering the import contract (they need not wait for shipping documents), and may issue SBLCs for crude, petroleum products, and LNG under the companion Chapter 19 change.

Firm contract, FX purpose, and a worked desk sequence

Para 7: before any import-related transaction the AD must see a firm commitment (proforma invoice, order, or indent) with full description and prices. Para 8: pay the beneficiary in the country of origin or shipment, or in a third country only if that beneficiary is the actual exporter. Para 31 (the Chapter 13 statement of FERA section 4(3)'s purpose-use rule): foreign exchange acquired for an import may be used only for that purpose.

Worked sequence for a Lahore auto-parts importer opening a sight LC on CFR Karachi: (1) IPO classification and origin screen; (2) live cash-margin circular check; (3) para 5 Incoterm check (CFR is on the list); (4) USD 20,000+ supplier report obtained by the bank; (5) F.E. 1/2021-SB declaration / PSW profile with LC as an allowed mode; (6) LC issued and FI pushed to PSW; (7) importer associates the FI with the GD; (8) documents examined under UCP 600 (Chapter 3 of this guide); (9) remittance and Bank Debit Advice; (10) settlement message once GD value and payment commensurate. Swap CFR for CIF without a live circular, and the file stops at step 3 for FEOD. Swap the LC for open account on finished consumer goods, and the file stops at para 17 because finished goods are outside the spare-parts/raw-materials delegated bucket.