Pakistan proposes key amendments to barter trade mechanism with Iran, Afghanistan, and Russia

ISLAMABAD: Pakistan’s Ministry of Commerce has proposed significant amendments to the Barter Trade Mechanism (SRO 642(I)/2023) aimed at streamlining barter trade with Iran, Afghanistan, and Russia. These proposed changes come after extensive consultations between the Ministry of Commerce, public-private stakeholders, and relevant government bodies, including the State Bank of Pakistan (SBP), the Ministry of Foreign Affairs (MOFA), and the Pakistan Single Window (PSW).

The barter trade framework, launched on June 1, 2023, was designed to facilitate non-cash trade with neighboring countries. The proposed amendments aim to simplify the operations and broaden the scope of the barter system. 

Key changes include removing the current list of importable products outlined in the SRO, with plans to align it with the Import and Export Policy Orders of 2022.

Another important change involves replacing the requirement for verification of sanctioned and non-sanctioned entities by Pakistan Missions or MOFA. This will be substituted with self-undertakings from private entities, affirming compliance with UN and international sanctions.

Additionally, the condition of “import followed by export” may be replaced with a more flexible “imports/exports” formula, offering greater operational flexibility. The proposed changes also allow private entities to form consortia for barter trade, enabling multiple Pakistani firms to collaborate with foreign partners. Traders will be required to net off the value of goods quarterly, with transactions completed within 120 days and under Customs’ regulatory oversight.

To ensure compliance, the Federal Board of Revenue (FBR) has recommended that both Pakistani traders and foreign chambers of commerce provide undertakings confirming that contracting entities are not sanctioned. 

Furthermore, a clause has been proposed to make all consortium members jointly liable under the Customs Act, 1969, and the Imports and Exports (Control) Act, 1950.

While MOFA and SBP have agreed to the proposed framework, the PSW raised concerns regarding the electronic validation of self-undertakings by traders through the WEBOC platform, suggesting that Customs should confirm the non-sanctioned status of entities.

The revised draft notification, incorporating these recommendations, has already been reviewed by the Law Division. 

The Ministry of Commerce has now initiated the process for Federal Cabinet approval, after which an amended SRO will be issued to operationalise the reformed barter trade mechanism.