SBP sets mechanism for ITM facility in importing input goods

The State Bank of Pakistan (SBP) has outlined the procedure for accessing the International Toll Manufacturing (ITM) facility within the Export Facilitation Scheme (EFS), allowing the import of input goods directly or indirectly from foreign principals without requiring any remittance of foreign exchange.

The Federal Board of Revenue (FBR), through SRO 1093(I)/2023 dated August 23, 2023, has added a new chapter, “Export Facilitation Scheme (EFS)-2021,” to Customs Rules 2001.

Rule 885 outlines the process for International Toll Manufacturing (ITM), allowing the import of input goods without foreign exchange remittance, subject to specified terms and conditions.

To facilitate EFS, including import-cum-export transactions under ITM, Pakistan Customs/WeBOC has developed a module.

A checkbox labeled “EFS toll manufacturer” has been incorporated into the GD type “Export Facilitation Scheme.” Once relevant formalities are completed, license holders can avail the EFS ITM facility, according to SBP.

Under the mechanism, import and export of goods under ITM will be conducted through a single Authorized Dealer (AD) for reconciliation and reporting purposes.

During import, ADs must provide a financial instrument (FI) on a ‘remittance not involved from Pakistan’ basis in Pakistan Single Window (PSW) before filing ‘EFS import GD.’

At the time of export, ADs will provide FI in PSW equivalent to the service charges/value added before filing ‘EFS export GDs.’

These service charges will be received as foreign remittance from abroad, and ADs will submit bank credit advice (BCA) against the respective FI in PSW to confirm the receipt/realization of service charges for the release of security submitted to Customs by the local importer-cum-exporter at the import stage.

SBP has instructed ADs to report the realization of foreign exchange equivalent to the service charges to the SBP. In cases of non-realization or delays in the realization of export proceeds, ADs are required to report such cases as overdue following existing procedures.

ADs are also mandated to conduct Know Your Customer (KYC) and Customer Due Diligence (CDD) of the applicants, ensuring compliance with EFS scheme parameters and all applicable rules and regulations, including the Framework for Managing Risks of Trade-Based Money Laundering and Terrorist Financing.

To operationalize this arrangement, ADs, as part of their due diligence exercise, will obtain an EFS license/authorization from Pakistan Customs and other necessary documents.