Govt to replace bank guarantee with insurance for Afghan transit trade through Gwadar Port

The government has decided to replace the existing bank guarantee system with an insurance guarantee to facilitate transit trade between Pakistan and Afghanistan, particularly for goods passing through Gwadar Port.

This initiative is being implemented under the Afghanistan-Pakistan Transit Trade Agreement (APTTA), signed in 2010, as the bank guarantee requirement has posed significant challenges for the movement of goods between the two countries, especially for bulk cargo imports such as wheat, sugar, and fertilizers.

According to a news report, investors in Gwadar, along with the Port Operator and Gwadar Port Authority, repeatedly called for the removal of the bank guarantee requirement and the introduction of an insurance guarantee instead.

The Ministry of Commerce had previously allowed the import of Afghan bulk cargo at Gwadar Port, with the onward transit to Afghanistan using bonded, insured, and sealable trucks equipped with tracking devices. This was aimed at improving efficiency and transparency in transit trade and was initially introduced under Customs Rules 2021 (Rule 471, clause-xi). The Insurance Guarantee for Afghan transit goods was later replaced with SRO No.1402(1)/2023 on October 7, 2023.

Ministry of Maritime Affairs also termed the requirement for bank guarantees a major hurdle, particularly for bulk cargo imports, which negatively impacted the ease of business. 

In response to these concerns, several meetings were held with key stakeholders, including the Minister for Maritime Affairs, Minister for Commerce, and Minister for Planning, Development & Special Initiatives, to discuss potential solutions. 

During these discussions, it was revealed that in October 2023, the Ministry of Commerce introduced a new policy requiring special permission for bulk cargo imports under APTTA at Gwadar Port, with particular emphasis on Di-ammonium Phosphate (DAP). 

At a meeting of the Special Investment Facilitation Council (SIFC), the Ministry of Commerce clarified that transit trade between Pakistan and Afghanistan had not been halted but was instead being regulated through the newly issued SROs. Additionally, transactions were now being documented through banks to prevent smuggling at the Pakistan-Afghanistan border.

The Secretary of the Apex Committee stressed the need for the Ministry of Commerce to address these issues and encouraged stakeholders to collaborate in overcoming challenges to revive transit trade.