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Contd. 1 of 2
CHAPTER
XIV
COMMERCIAL REMITTANCES (OTHER THAN FOR IMPORTS)
1. Freight and Passage Collections.
i) Shipping
companies/airlines may accept freight and passage money in Rupees only in the under-noted
cases without the prior approval of the State Bank:
a) Exports
from Pakistan made on C&F/CIF basis against Form ‘E’ duly certified by
Authorised Dealers on their letterheads in terms of para 29 of Chapter XII of the Manual.
b) Imports
into Pakistan on FOB basis:
aa) Against Authorised Dealer’s certificate on form prescribed at Appendix V–27
in terms of para 24 of Chapter XIII of the Manual.
bb) Against
SBP’s approval for import on FOB basis in public sector in terms of para 25 of
Chapter XIII of the Manual.
cc) Against
certificate of registered importers for freight on Import of Trade Sample not exceeding
Rs. 2000/- per year in terms of para 27 of Chapter XIII of the Manual.
c) Freight on personal effects/excess baggage in
accordance with the provisions laid down in paras 40(i) & 40(iii) of Chapter XVII of
the Manual.
d) Freight on Export of Trade Sample and gift
parcels in accordance with the procedure laid down in para 40 (ii) of Chapter XVII of the
Manual.
e) Passage money in accordance with the
instructions laid down in Chapter XVII.
In all other cases prior approval of State Bank should be obtained before collecting
freight in Rupees. For this purpose, applications should be made to the State Bank giving
the nature of the transactions and the reasons why freight cannot be paid in foreign
currency.
ii) Foreign
shipping companies and airlines, whether having an office in Pakistan, or not, are not
allowed to open PLS accounts. They can open current accounts for keeping funds received
from abroad and the amounts of freight and passage collections, pending remittance to
their head offices. Agents of foreign shipping companies and airlines may, however, retain
freight/passage collections in PLS accounts held in their own names provided the profits
earned in these accounts are not passed on in any manner to their principals.
iii) Cargo
Consolidators/Forwarders who are approved members of FIATA and registered with the Board
of Investment, Government of Pakistan as such, may accept freight in rupees without the
prior approval of the State Bank only in respect of Pakistani exports cargo on C&F/CIF
basis as per procedure prescribed in paragraph 29 of Chapter XII of the Manual provided
the consignment is being dispatched against Advance Payment or an irrevocable letter of
credit which contains a provision for issuance of document of title under Cargo
Consolidation System and a certificate to this effect issued by the Authorised Dealer on
Appendix V-13 is produced.
2. Reporting of Passage and Freight Earnings.
Foreign airlines/General Sales Agents/Shipping companies/Shipping Agents are required to
report each month to the State Bank full particulars of the passages and freight booked by
them in Pakistan on form ‘F.P. Airline’/‘F.P. Shipping’ in duplicate
as per specimen appearing at Appendices V-34 and V-35. The statements should be sent to
the State Bank by the end of the month following that to which they pertain. While the
Airlines should submit only one form ‘F.P. Airline’ in respect of bookings made
by them and their agents, the Shipping Agents should submit separate statement (form F.P.
Shipping) for each of their principals whose ships are handled by them during a month. The
forms F.P. should be supported by bank encashment certificate in support of Inward
remittances received.
3. Remittance of Surplus Passage and Freight
Collections.
i) Authorised Dealers may allow remittance of surplus
passage and freight collections of those foreign airlines, General Sales Agents, and
shipping companies/agents which are keeping their collections with them, on submission of
application alongwith the following documents: -
a) A
copy of F.P. Statement (Appendix V-34 for airlines and V-36 for shipping companies).
b) Import/Export
freight manifests.
c) A copy
of each bill of lading/airway bill issued in respect of export on freight pre-paid basis,
alongwith Authorised Dealers certificates as stated in paragraph 1.
d) Passage
statement (Appendix V-37) alongwith photocopies of ticket coupons and other documents
prescribed in Chapter XVII.
e) Statement
of passage/freight bookings earlier made on credit now realised (Appendices V-38 for
airlines and V-39 for shipping).
f) Disbursement
Statements (Appendices V-40/V-41).
g) Cancellation/refund
statement (Appendix V-42).
h) Statement
of outstanding passage/freight bookings on credit (Appendices V-43/ V-44).
i) Authenticated
copy of the charter party if the vessel calling at the ports in Pakistan has been
chartered by the principals of the shipping agents in Pakistan.
j) A
copy of manifest of Cargo Consolidators together with relative non-negotiable copies of
House Bill of Lading or/House Airway Bill (quoting reference of original Master Bill of
Lading or Master Airway Bill issued by them with names of each shippers), “E”
form certificates prescribed vide para 29 of Chapter XII of the Manual, encashment
certificate where freight is paid in foreign exchange separately and a copy of valid
permission letter given by the Board of Investment.
k) A
copy of encashment certificate in respect of inward remittance.
l) Auditors’
certificate showing payment of income tax, or exemption certificate given by the Revenue
authorities.
m) In
the case of agents, a copy of the valid permission letter given by the Board of Investment
for acting on behalf of the foreign principal.
n) An
undertaking to repatriate back to Pakistan, the amount found by the State Bank, on
post-facto checking, to have been remitted in excess of the entitlement.
ii) Authorised
Dealers will allow remittance of surplus passage and freight collections plus inward
remittance, to the extent of amounts of passage and freight actually realised less
disbursements, refunds, and income tax paid/payable. No remittance is to be allowed in
excess of the balance available in the account, as it is not permissible to make
remittances out of borrowed funds.
iii) Authorised
Dealers will retain all the documents mentioned in sub paragraph (i) alongwith a photocopy
of Form ‘M’ submitted by shipping companies/shipping agents for on sight
inspection by the Banking Inspection Department. In the case of airlines or their G.S.As,
the documents will be submitted to the Joint Director, Operations Division, Exchange
Policy Department, SBP, Karachi within three working days from the date of remittance. The
original Form ‘M’ shall be submitted as usual through schedule E-4 while
reporting the transaction in the monthly Foreign Exchange Returns.
iv) Any irregularity detected and advised by the State Bank
shall be rectified by the concerned airline/GSA/shipping company/agent within ninety days
or the amount under objection will be repatriated or adjusted from subsequent remittance,
as applicable.
4. General Average Payments.
i) Applications
for remittance of general average collected from consignees in Pakistan shall be made by
the shipping companies/shipping agents on Form ‘M’ accompanied by the following
information/documents:-
a) Circular
of Insurance Association regarding general average.
b) N.O.C.
from the Insurance Association and National Insurance Company Limited about the remittance
of the amount of the general average.
c) The
amounts collected from each individual consignee.
d) List
of cargo subject to general average.
e) The
general average bonds covering the collections.
f) General
Average Award.
Authorised Dealers may allow remittances on the basis of these documents and attach the
same with the ‘M’ form, while reporting the transactions in their monthly
Foreign Exchange Returns.
ii) Pending
General Average Award, the Authorised Dealers may also issue bank guarantees in favour of
the General Average Adjusters on submission of the information documents referred to from
(a) to (e) above. Remittances under the guarantees will, however, be allowed by them on
production of General Average Award.
iii) In
the case of exports from Pakistan, if general average is declared and if the general
average claim is paid by the overseas importer, the insurance company in Pakistan, with
whom the goods were insured prior to shipment from Pakistan may be allowed to reimburse
the amount to the overseas importer on production of the following documents, which should
be submitted to the State Bank as mentioned in sub-para (i):
a) Export
Realisation Certificate.
b) All
shipping documents viz. a copy of the bill of lading, invoice, insurance policy etc.
c) Average
deposit receipt duly endorsed by the overseas importer in favour of the insurance company
in Pakistan.
d) Letter
of subrogation.
e) An
undertaking to render the account on finalization of the award.
5. Operating Expenses of Pakistani Shipping
Companies/Airlines.
Pakistani shipping companies and airlines are required to submit to the State Bank a
monthly statement of their earnings and expenditure at foreign ports in the prescribed
forms (Appendices V-45 and V-46) supported by passage/freight manifest for receipts and by
vouchers in respect of payments. They can make disbursements in respect of approved
transactions only out of their receipts at foreign ports and they are under obligation to
regularly repatriate the excess collections, if any, to Pakistan and attach the bank
encashment certificates with the statement. In case the collections fall short of the
disbursements, the shipping companies/airlines should make an application to the State
Bank for remittance of the deficit or for meeting bonafide individual items of
disbursements like crew wages, bunkering charges, port dues, food charges etc.
Applications for repair of ships/aircrafts and purchase of durable stores other than food
provisions should, however, be routed through the Ministry of Communications in the case
of shipping companies and the Ministry of Defence in the case of airlines.
Authorised Dealers can make remittances on account of
lease rentals by the Airlines incorporated in Pakistan upto the guaranteed
hours. However, if the amount exceeds the guaranteed hours, ADs would refer the
case to the Director , FEOD, SBP Banking Services Corporation for necessary
approval by submitting the following documents:
Attested copy of valid agreement.
Original invoices
An audited statement showing the opening balance, earning, expenditure and net
amount (surplus/deficit).
6. Charter of Foreign Ships and Aircrafts.
Persons or firms intending to hire on charter non-resident owned ships or aircrafts should
apply in the first instance to the Ministry of Communications for the charter of ships and
the Ministry of Defence for the charter of aircrafts. Applications for remittance of
charter hire should be made to the State Bank on Form 'M' supported by the Government
sanction and a copy of the Charter Party Agreement and an undertaking that detailed
account of all disbursements made for the account of the owners will be submitted to the
State Bank within 15 days of the expiry of the agreement. If the application is approved,
a permit will be issued to cover any advance payments required under the terms of the
charter but the remittance of the total amount agreed upon will not normally be sanctioned
until the final account of disbursements is made available to the State Bank. The
charterers should seek from the owners’ periodical reimbursement of the disbursements
made on their behalf or have them adjusted from their remittances of charter hire.
(i) “Ship
owners, charterers and operators and/or owners, charterers, and operators of all
floating crafts including tugs, dredgers, survey vessels and other specialized
crafts may open and
operate foreign currency accounts in Pakistan. They will be permitted to operate
these accounts for both receipts and payments of foreign
exchange. Such
foreign currency account holders may retain their surplus earnings in these
accounts and shall surrender the same within three months of closing of the
financial year.
Foreign partners in Pakistan based Joint Venture companies may receive their
share of profits after tax. Operation of such account will be subject to the
following
conditions;
7. Export Claims.
Applications from exporters for remittance of various types of claims on exports should be
made on Form 'M' accompanied by a declaration in the prescribed form (Appendix V-47) duly
supported by the following documents:
(i) QUALITY CLAIMS.
a) Proceeds
Realisation Certificate.
b) Debit
Note from the buyer.
c) Test
Report from a recognized Test House or an Arbitration Certificate from an approved body of
arbitrators.
(ii) AMICABLE SETTLEMENT.
(a) Proceeds
Realisation Certificate.
(b) Debit
Note from the buyer.
(c) Certificate
from the Chamber of Commerce in the country of import.
(d) Correspondence
in original exchanged between the shippers and the buyers. Original cables should be
produced if cable charges are included in the Debit Note.
(iii) COMMISSION (If not paid in terms of the authority delegated vide Chapter XII).
(a) Proceeds
Realisation Certificate.
(b) Debit
Note.
(c) Agreement regarding payment of Commission.
Shippers should furnish a copy of the Export Price Check (EPC) form registered with the
relevant authority, if the goods are subject to “Export Price Check” procedure.
The form should show the rate of commission.
(iv) NON-FULFILMENT OF EXPORT CONTRACT EITHER IN FULL OR IN PART.
a) Debit
Note from the buyer.
b) Contract
in original.
c) Arbitration
award from a recognized arbitrator.
d) Correspondence
in original exchanged between the buyer and the shipper.
e) In
case of claim for partial non-shipment, Proceeds Realisation Certificate for the quantity
shipped.
(v) INSPECTION FEE, ARBITRATION FEE, SURVEY AND ANALYSIS FEE, CONTROLLING FEE, WEIGHING
CHARGES ETC.
(a) Proceeds
Realisation Certificate.
(b) Debit
Note from the institution claiming fees.
(c) Report
from the above institution in support of the claim.
(vi) MISCELLANEOUS CLAIMS LIKE REFUND OF EXPORT DUTY ETC.
a) Proceeds
Realisation Certificate.
b) Debit
Note.
c) Contract.
d) Correspondence.
(vii) LOSS IN WEIGHT.
a) Proceeds
Realisation Certificate and Export Invoice.
b) Debit
Note from the buyers.
c) Weighment
Certificate/Note from a recognized weighing body and Controller’s Report.
Applications in respect of items (v), (vi) and (vii) may be approved by the Authorised
Dealers and the prescribed documents surrendered to the State Bank alongwith the monthly
Foreign Exchange Returns. Applications in respect of items (i), (ii), (iii) and (iv) will,
however, require approval from the State Bank.
8. Guarantees for Payment of Claims.
i) In case of export of cotton only, Authorised
Dealers may extend guarantees in favour of overseas importers for payment of claim,
provided the following conditions are fulfilled:
a) Advance
payment or confirmed and irrevocable letter of credit for hundred percent value has been
received in favour of the exporter.
b) The amount of the guarantee does not exceed 5% of the
total invoice value covered by the advance payment or confirmed and irrevocable letter of
credit.
c) The
guarantee covers shipment of cotton only.
d) The
guarantee is valid for a maximum period of 30 days after the last date of discharge of
cotton in the country of import.
e) The
guarantee provides for payment of claims on submission of Liverpool Cotton Association
Arbitration Award in case of exports to U.K. and of internationally known associations
whose names are approved by the State Bank in the case of export to other countries.
ii) Authorised Dealers may also allow remittance of
claims falling within the terms of these guarantees provided the amount is fully covered
by the Arbitration Award of the respective association. While reporting these remittances
to the State Bank, the Authorised Dealers should enclose with the form 'M': -
a) Relative Arbitration Award,
b) Proceeds Realisation Certificate, and
c) Certificate confirming the date of
discharge of cotton in the country of import.
9. Employment of Overseas Agents etc.
Prior permission of the State Bank is required by persons or firms in Pakistan who wish to
acquire the services of agents abroad for any purpose other than export of goods from
Pakistan, whether on regular basis or otherwise. Applications for this purpose should be
made by letter giving full details of the nature and value of business transacted in the
past by the applicant, the existing arrangements and the nature of the arrangements
proposed to be made with the overseas agents.
10. Remittance of Royalty/Franchise and
Technical Fees.
(i) Royalty and Technical Fee in the
Manufacturing Sector has been defined as under:-
a) Definition of Royalty: Royalty is a fee paid by a local firm to the foreign
collaborator in consideration of “Licence to use the foreign manufacturers’
patent/brand name for marketing the product(s).”
b) Definition of Technical Fee: It is a
fee paid by the local firm to the foreign collaborator in consideration of:-
aa) Engineering and Technical Services
including assistance on manufacturing process, testing and quality control, assistance by
way of making available patented process and/or secret know-how and right to avail of the
technical/confidential information resulting from continuous technical research and
development etc; and
bb) Technical training of local personnel.
NOTE:
No technical fee shall be allowed for simple conventional process goods which are being
produced in the country without foreign technical collaboration.
ii) The remittance of Royalty/Franchise and
Technical Fee or Service Charges in Agriculture, Social, Infrastructure and Service Sector
projects including international food chains may be allowed according to the following
guidelines:-
(a) The
initial lump sum fee payable to the foreign investor/the party providing technical
expertise and/or allowing use of their brand name, should not exceed US$ 100,000/-
irrespective of the number of outlets under one franchise.
(b) A maximum of 5% remittance of net sales
(excluding sales tax) in the food sector may be allowed as Franchise Fee only for those
items, which are core items of the franchise and are the specialties of the trade name.
The payment of such fees will be allowed on monthly basis. No item will be eligible for
twice payment of Royalty/Franchise Fee. In other words, the payment of Royalty/Franchise
Fee shall not be admissible for those items whose franchise is not held by the food chains
and/or which are sold under some other brand name e.g. soft drinks etc.
(c) Percentage/amount of fees etc., for other
non-manufacturing projects may also be upto the maximum of 5% of net sales (excluding
sales tax).
(d) Initial period for which fees is to be
allowed to projects in non-manufacturing sectors, including international food chains,
should not exceed 5 years. Subsequent extension in time period will be considered and
allowed by the Government/State Bank of Pakistan, provided these projects also make
investment in allied upstream projects.
iii) The remittance of
Royalty/Franchise and Technical Fee or Commission/Service Charges for the
financial sector may be allowed on the following guidelines:
a) The applications for remittances of such payments by the Commercial Banks as
well as Non-Banking Financial Institutes (NBFIs) including leasing/modaraba
companies and investment banks, to the foreign collaborators in respect of their
branded financial products/services within the area of their authorized
business, would be processed and approved by the State Bank of Pakistan, on a
case to case basis, on submission of an attested copy of the agreement and other
relevant information/documents.
b) The one time lump sum upfront Royalty/Technical Fee/Franchise Fee should not
exceed US$500,000/-. This would be allowed from the interbank market.
c) Continuing royalty payments, service/technical charges/commission or handling
charges/any other directly related charges not exceeding 0.25% in aggregate of
customers’ billing net of taxes/surcharges would be allowed which would either
be recovered from the customers or met through the financial institution’s own
resources. No foreign exchange would be provided/utilized for this purpose from
the interbank market.
d) Permission for standby LC/guarantee, if required, would be granted on the
merit of each case.”
iv) Upon execution of an agreement for transfer of
technology with foreign collaborator, the local firm engaged in manufacturing as stated in
sub-para (i) or operating in the non-manufacturing sectors as stated in sub-para (ii) will
designate any of the Authorised Dealers in foreign exchange in Pakistan through whom
payments under the agreement will be made and send an authenticated copy of the agreement
to the State Bank of Pakistan, Exchange Policy Department (Investment Division), Central
Directorate, Karachi through the designated bank within 30 days from the date of its
execution. Application for acknowledgement will be made on the prescribed form (Appendix
V-48). The State Bank will record the agreement if it conforms to the foregoing
definitions of Royalty/Franchise and Technical Fees and send an acknowledgement or return
it if the same is not in accord therewith.
v) Remittance of Royalty/Franchise and
Technical Fees may be allowed by the Authorised Dealer designated for the purpose, without
the prior approval of the State Bank subject to the following:-
a) Application
for remittance of Royalty/Franchise and Technical Fees is submitted by the firm concerned
in the prescribed form (Appendix V-49) in triplicate alongwith a copy of the
acknowledgement letter issued by the State Bank.
b) The
correctness of the information furnished in the application(Appendix V-49) must be
certified by the auditors of the firm in the space provided for the purpose. An additional
statement showing calculation of Royalty/Franchise and Technical Fees duly certified by
the auditors should also be enclosed with the application.
c) Payment
of income tax supported by a certificate from the auditors of the paying firm. In case it
is claimed that the amount of Royalty/Franchise and Technical Fees is exempt from levy of
Pakistan taxes, the applicant should invariably produce a certificate to this effect from
the competent tax authority and attested copy of the said certificate should be enclosed
with the prescribed application to be sent alongwith other relevant documents while
reporting the transaction to the Exchange Policy Department.
(vi) Authorised Dealers will maintain company-wise
record of remittances allowed by them on the above account so as to facilitate inspection
by the State Bank’s Inspection Teams.
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