Ypip3 feod-international trade & regulatory regime in pakistan

International Trade & Regulatory Regime in Pakistan
‘Young Professionals Induction Program (YPIP-3)’
By Sohail Hussain – Standard Chartered Bank Pakistan
21-22 August, 2014

Regulatory Regime in Pakistan
Import and Export Control Act, 1950
Registration (Importers & Exporters)
Order, 1993
Import Policy Order
Export Policy Order
Foreign Exchange Regulations Act
(FERA), 1947
Foreign Exchange Manual (8th
Edition, 2002)
Protection of Economic Reforms Act
(PERA), 1992
Prudential Regulations
Anti Money Laundering Act, 2010
Bill of Lading Act, 1856
Contract Act, 1872
Negotiable Instrument Act, 1881
Customs Act, 1969
Income Tax Ordinance, 2001
Federal Excise Act, 2005
2

Objectives
Knowledge sharing;
Correct application;
Avoid surprises;
Improve overall productivity & efficiency
Enable the candidates to develop a holistic knowledge of the core concepts
relating to International Trade and the Foreign Exchange regimes in Pakistan
Develop the ability to relate theory with the practical on ground challenges faced
in the field of Trade.
3

International Conventions
Uniform Customs & Practices for Documentary Credits (UCP-600);
Uniform Rules for Reimbursement (URR-527);
Uniform Rules for Documentary Collections (URC-522);
International Standby Practices (ISP-98);
International Standard Banking Practices (ISBP-681);
Incoterms 2010;
4

International Trade Considerations
5
Prior to that discussion, one must acknowledge a general principle, in every international
trade transaction that there must be:
a seller
an agreed product / services
a sales / service contract / agreement
shipping & delivery details

6
Similarly, one must also acknowledge a general principle, in every international trade
transaction that there must be:
a buyer
terms of payment
required documentation
insurance cover

Before entering into an international trade transaction, the parties should
take account of the political, legal and economic framework within which
their transaction will be taken place.
This means they should consider the following:
Tariffs and quotas restrictions;
Export / import licensing;
Restrictive governmental policies;
Trade embargoes / sanctions, if any;
Exchange controls;
Pre-shipment inspection / price comparisons;
Health requirements;
Policies on hazardous goods;
Taxation etc.
7

Objectives of parties to a trade transaction
Minimize the cost of the goods.
Cost of financing between the time they purchased
and the time they are converted into cash upon
subsequent sale.
Opportunity cost of not being able to invest funds in
the event available cash is used to pay for the goods.
Foreign exchange cost (hedging) if the deal is
denominated in a currency other than the buyer’s.
Assure receipt of goods contracted with the seller.
Increase the attractiveness of the product offering
lenient trade terms to the buyer.
Maximize the price of the goods without losing the
sale, either through borrowing or through available
cash.
Cover the cost between the time the sale is
contracted and the final payment is received.
Build the cost into the price of the product.
Assure payment from the buyer.
8
The buyer’s objectives are:
The seller’s objectives are:

Modes of International Trade
Generally there are four modes of International Trade namely:
Advance Payment;
Open Account;
Documentary Collection; and
Documentary Credit.
9

Advance Payment or Cash in Advance
The buyer places the funds at the disposal of the seller prior to shipment
of the goods or provision of services.
This method of payment is expensive and contains a huge degrees of risk
for the buyer.
It is common when the manufacturing process or services delivered are
specialized and capital intensive.
10

Advance payment method is used:
when the buyer’s credit is doubtful;
where there is a seller’s market;
when there is an unstable political or
economic environment in the buyer’s
country.
Advantages to the seller
Immediate use of funds.
Disadvantages to the buyer
Pays in advance, tying up his
capital prior to receipt of the
goods or services;
No assurance that what he
contracted for will be:
Supplied;
Received;
Received in a timely
fashion; and/or
Received in the quality
or quantity ordered.
11

Open Account
An arrangement between the buyer and seller whereby the goods are
manufactured and delivered before payment is received.
12

Open Account
Open account provides for payment
at some stated specific future date
and without buyer issuing any
negotiable instrument evidencing
his legal commitment.
The seller must have absolute trust
that he will be paid at the agreed
date.
Advantages to the buyer
He pays for the goods or services
only when they are received
and/or inspected; and
Payment is conditioned based on
the issues discussed previously i.e.,
political, legal and economic.
Disadvantages to the seller
Releases the title to the goods
without having assurance of
payment;
Possibilities of events like political
or regulatory restrictions, which
may defer or block the movement
of funds; and
Capital is tied up until the goods
are received and/or inspected by
the buyer or until the services are
found to be acceptable.
13

Documentary Collection
Documentary Collections are usually connected with the sale of goods rather
than with the provision of services.
All documentary collections are deal subject to Uniform Rules for Collection
(URC-522).
Documentary collections are explained in the URC-522 as collection of:
Financial documents accompanied by commercial documents; and
Commercial documents not accompanied by financial documents.
14

Types of Documentary Collections
Documentary collection has two type
of settlement:
1-D/P = Documents against Payment;
and
2-D/A = Documents against Acceptance.
Accordingly, if the instruction is D/P
the importer’s / buyer’s bank will
release the documents to the importer
/ buyer only against payment.
And if, the instructions are D/A
(documents against acceptance), the
importer’s bank will release the
documents against acceptance of the
bill of exchange by the importer.
Normal precautions to be
taken by the seller
The seller should:
Obtain a credit report on the
buyer;
Obtain an economic and
political analysis on the
country of importation;
Not consign the goods
directly to the buyer; and
Establish alternative
procedures for the resale,
reshipment or warehousing of
the goods in the event of non-
payment by the buyer.
15

Settlement Process Flow:
1. The seller ships the goods and obtains
the shipping documents and usually
draws a Draft, either at sight or with a
tenor of x days, on the buyer for the
value of the goods;
2. The seller submits the Drafts and
documents to his bank which acts as
his agent (the Remitting Bank). The
bank acknowledges that all documents
as noted by the seller are presented.
3. The seller’s bank (the Remitting Bank)
sends the Draft and the other
documents along with a collection
letter / instructions to a correspondent
bank (the Collecting Bank) usually
located in the same city / country as
the buyer.
4. Acting as an agent for the Remitting
Bank, the Collecting Bank notifies the
buyer upon receipt of the Draft and
documents; and
5. All the documents, and usually title to
the goods, are released to the buyer
against payment and/or acceptance as
the case may be.
6. Collecting bank pays / conveys
acceptance to the remitting bank. 16
Seller
Remitting Bank
2-Time Draft &/or Docs.
1-Goods
3-IntimationOfdraft&/ordocs.
5-Acceptance &/ or Payment
5-Docs Released vs. Accept &/or Pmt
Collecting Bank
Buyer
6-Accept&/orPmt
4-Notification of Documents
6-Accept &/or Pmt

Documentary Collection Advantages to the seller
Documentary Collections are uncomplicated and inexpensive;
Documents of value i.e., title documents, are not released to the
buyer until payment or acceptance has been effected.
In the event of non-payment or non-acceptance, the Collecting Bank,
if properly authorized, may arrange for the goods release,
warehousing, insurance or even re-shipment to the seller.
Disadvantages to the seller
He ships the goods without an unconditional promise of payment by
the buyer;
There is no guarantee of payment or immediate payment by the
buyer; and
He ties up his capital until the funds are received.
Advantages for the buyer
Collections may favor the buyer since payment is deferred by him
until the goods arrive or even alter if delayed payment arrangements
are agreed to. 17

Documentary Credit
As per UCP, Credit means any arrangement, however named or described,
that is irrevocable and thereby constitutes a definite undertaking of the
issuing bank to honor a complying presentation [Art # 2 (Definitions) of UCP
600]
Documentary Credits are deal subject to Uniform Customs & Practices (UCP
600).
Payment undertaking given by a bank (Issuing bank) on behalf of a buyer
(applicant) to pay a seller (beneficiary) a given amount of money against
complying presentation.
Payment made to the beneficiary upon presentation of documents specified
in the credit, representing the supply of goods/services within specified time
limits conforming to the terms and conditions set out in the credit.
18

Documentary Credit
Important Notes
The documentary credit refers to documents representing the goods - not
the goods itself.
Banks are not in the business of examining goods / service / performance on
behalf of their customers as they are dealing in documents and not in goods /
services / performance. [Art # 5 of UCP 600]
19

Types of Documentary Credits
All Credits must clearly indicate whether they are available by:
Sight Payment;
Deferred Payment;
Acceptance;
Negotiation;
20

Benefits of the Documentary Credit
Provides a specific transaction with an independent credit backing and a clear cut
promise of payment.
Satisfies the financing needs of the seller and the buyer by placing the bank’s credit
standing, distinguished from the bank’s fund, at the disposal of both the parties.
May allow the buyer to obtain a lower purchase price for the goods as well as longer
payment terms than would open account terms or a collection.
Reduces or eliminates the commercial credit risk since payment is assured by the
bank, which issues the Credit.
The seller no longer needs to rely on the willingness and capability of the buyer to
make payment.
Reduce political / sovereign risk.
21

Utilization of the Documentary Credit
Upon receipt of the Documentary Credit, the Beneficiary and/or their Bank
(Nominated Bank) should review the same to see:
The Documentary Credit appears to be a valid Documentary Credit;
The type of Documentary Credit and its terms and conditions are in
accordance with the sale contract;
The Documentary Credit does not contain any conditions, which are
unacceptable or impossible to comply with;
The documents required by the Documentary Credit are obtainable and
presentable under the Credit;
The goods description or unit prices, if any, are as stated in the sales contract;
22

Irrevocable Documentary Credit
Status Tag: Field: Actual:
M 27 Sequence of Total 1/1
M 40A Form of Documentary Credit IRREVOCABLE
M 20 Documentary Credit Number 010IML1091390001
O 23 Reference to Pre-Advice -
O 31C Date of Issue 090519
M 40E Applicable Rules UCP LATEST VERSION
M 31D Date and Place of Expiry 090630THAILAND
O 51a Applicant Bank SCBPKKA
M 50 Applicant ABC PRODUCTS ENTERPRISES
M 59 Beneficiary XYZ CO., LTD
M 32B Currency Code, Amount USD 1,000,000
O 39A Percentage Credit Amount Tolerance -
O 39B Maximum Credit Amount NOT EXCEEDING
O 39C Additional Amounts Covered -
M 41a Available With ... By ... ANY BANK IN THAILAND BY NEGOTIATION
O 42C Drafts at ... SIGHT
O 42a Drawee STANDARD CHARTERED BANK PAKISTAN
O 42M Mixed Payment Details -
O 42P Deferred Payment Details -
O 43P Partial Shipments ALLOWED
O 43T Transhipment ALLOWED
O 44A Place of Taking in Charge/Dispatch from.../Place
of Receipt
-
O 44E Port of Loading/Airport of Departure ANY THAILAND PORT
23

24
O 44F
Port of Discharge/Airport of Destination KARACHI SEAPORT
O 44B
Place of Final Destination/For Transportation
to.../Place of Delivery
-
O 44C
Latest Date of Shipment 090615
O 44D
Shipment Period -
O 45A
Description of Goods and/or Services H.S.CODE 6001-9200
QTY 34 ROLLS (1,846.95M) 100 PERCENT POLYESTER UPHOLSTERY FABRIC TR065BE01
(PHENOMENA 454B) AS PER BENEFICIARY'S PROFORMA INVOICE NO.SC09035 DATED
12-05-2009 TOTAL USD:15,772.95 CFR KARACHI, PAKISTAN
O 46A
Documents Required DOCUMENTS REQUIRED
1-WE UNDERSTAND THAT THE INSURANCE TO BE ATTENDED BY THE APPLICANT.
BENEFICIARY'S OR SHIPPER'S ADVICE MUST BE SENT THROUGH COURIER TO M/S
RELIANCE INSURANCE COMPANY LTD, SUITE NO.17, 1ST FLOOR, SHAN ARCADE, NEW
GARDEN TOWN, LAHORE, PH: 00952-042-5889258-9, FAX:0092-042-58892620 GIVING
PARTICULAR OF THE SHIPMENT (MENTIONING TRANSSHIPMENT IF APPLICABLE) FOR
INSURANCE PURPOSE UNDER POLICY NUMBER 104002/07173/05/2009. A CERTIFIED
TRUE COPY OFTHIS ADVICE IS TO ACCOMPANY THE DOCUMENTS.
2-DETAILED PACKING LIST IN THREE
3-ONE COMPLETE SET OF ORIGINAL MARINE BILL OF LADING MARKED CLEAN ON
BOARD, MADE OUT TO THE ORDER OF STANDARD CHARTERED BANK, PAKISTAN DULY
MARKED FREIGHT PREPAID EVIDENCING NOTIFY TO APPLICANT.
4-MANUALLY SIGNED COMMERCIAL INVOICES IN THREE ORIGINALS AND THREE COPIES
SHOWING CFR VALUE OF THE GOODS CERTIFIED THAT THE GOODS SHIPPED IN
CONFORMITY WITH PROFORMA INVOICE NUMBER SC09035 DATED 15-05-2009
CONFIRMING THAT THE GOODS ARE OF THAILAND ORIGIN.

25
O 47A Additional Conditions
LETTER OF CREDIT REFERENCE NO. MUST BE INCORPORATED ON ALL SHIPPING
DOCUMENTS
2-DOCUMENTS BEARING DATE OF ISSUANCE PRIOR TO THE ISSUANCE OF THIS CREDIT
WILL NOT BE ACCEPTABLE
3-INVOICE EXCEEDING THE CREDIT AMOUNT NOT ACCEPTABLE
4-ALL DOCUMENTS MUST BE IN ENGLISH LANGUAGE
5-DISCREPANCY FEE OF USD 50.00 TO BE DEDUCTED FROM THE PROCEED AT THE TIME OF
SETTLEMENT ON EACH PRESENTATION OF DOCUMENTS WITH DISCREPANCY.
6-ALL PARTIES TO THIS TRANSACTION ARE ADVISED THAT THERE ARE SPECIFIC
SANCTIONS IMPOSED BY U.S. AND OTHER GOVERNMENT AND OR REGULATORY
AUTHORITIES AGAINST CERTAIN COUNTRIES, ENTITIES AND INDIVIDUALS. UNDER THESE
MEASURES, BANKS MAY BE UNABLE TO PROCESS A TRANSACTION THAT INVOLVES A
BREACH OF SUCH SANCTIONS, AND AUTHORITIES MAY REQUIRE DISCLOSURE OF
INFORMATION. BARCLAYS BANK IS NOT LIABLE IF IT, OR ANY OTHER PERSON, FAILS OR
DELAYS TO PERFORM THE TRANSACTION, OR DISCLOSES INFORMATION ON AS A RESULT
OF ACTUAL OR APPARENT BREACH OF SUCH SANCTIONS
O 71B Charges ALL BANK CHARGES OUTSIDE PAKISTAN ARE ON BENEFICIARY'S ACCOUNT
O 48 Period for Presentation 15 DAYS AFTER SHIPMENT DATE BUT WITHIN THE VALIDITY OF THE CREDIT
M 49 Confirmation Instructions WITHOUT
O 53a Reimbursing Bank -
O 78
Instructions to the Paying/Accepting/Negotiating
Bank
1-PLEASE DISPATCH DOCUMENTS IN 2 LOTS TO STANDARD CHARTERED BANK PAKISTAN
TRADE DEPT, P.O. BOX # 123, 1ST FLOOR OPERATIONS BLDG, I. I. CHUNDRIGAR ROAD,
KARACHI PAKISSTAN THRU COURIER. 2-IN REIMBURSEMENT OF SIGHT DRAWINGS WE
SHALL PAY YOU IN CURRENCY OF THE CREDIT AS PER YOUR INSTRUCTION UPON RECEIPT
OF ORIGINAL DOCUMENTS AT OUR COUNTER PROVIDED ALL TERMS OF THE CREDIT ARE
COMPLIED WITH. 3-CONFIRM EXECUTION BY RETURN SWIFT.
O 57a 'Advise Through' Bank
BANGKOK BANK PUBLIC COMPANY LIMITED
BUKKHALO BRANCH
BANGKOK 10600
THAILAND
O 72 Sender to Receiver Information

{1:F01BARCPKKAXXXX1111111111}{2:I700BKKBTHBKXXXXN}{4:
:27:1/1
:40A:IRREVOCABLE
:20:010IML1091390001
:31C:090519
:40E:UCP LATEST VERSION
:31D:090630THAILAND
:50:ABC PRODUCTS ENTERPRISES
:59:XYZ CO., LTD
152 CHARTERED SQUARE BLDG.,
15TH FL, UNIT 2A NORTH SATHORN RD.,
SILOM, BANGRAK, BANGKOK 10500
:32B:USD100000
:39B:NOT EXCEEDING
:41A:ANY BANK IN THAILAND BY NEGOTIATION
:42A:SIGHT
:42D:STANDARD CHARTERED BANK, PAKISTAN
:43P:ALLOWED
:43T:ALLOWED
:44E:ANY THAILAND PORT
:44F:KARACHI SEAPORT
:44C:090615
:45A:H.S.CODE 6001-9200
QTY 34 ROLLS (1,846.95M) 100 PERCENT POLYESTER UPHOLSTERY
FABRIC TR065BE01 (PHENOMENA 454B) AS PER BENEFICIARY'S
PROFORMA INVOICE NO.SC09035 DATED 12-05-2009
TOTAL USD:15,772.95 CFR KARACHI, PAKISTAN
:46A:DOCUMENTS REQUIRED
1- BENEFICIARY'S OR SHIPPER'S ADVICE MUST BE SENT THROUGH
COURIER TO M/S RELIANCE INSURANCE COMPANY LTD, SUITE NO.17,
1ST FLOOR, SHAN ARCADE, NEW GARDEN TOWN, LAHORE,
PH: 00952-042-5889258-9, FAX:0092-042-58892620
GIVING PARTICULAR OF THE SHIPMENT
2-DETAILED PACKING LIST IN THREE
3-ONE COMPLETE SET OF ORIGINAL MARINE BILL OF LADING MARKED CLEAN
ON BOARD, MADE OUT TO THE ORDER OF BARCLAYS BANK PLC, PAKISTAN
DULY MARKED FREIGHT PREPAID EVIDENCING NOTIFY TO APPLICANT
AND STANDARD CHARTERED BANK PAKISTAN.
4-MANUALLY SIGNED COMMERCIAL INVOICES IN THREE ORIGINALS
SHOWING FOB VALUE OF THE GOODS CERTIFIED THAT
THE GOODS SHIPPED IN CONFORMITY WITH PROFORMA INVOICE NUMBER
SC09035 DATED 15-05-2009 CONFIRMING THAT THE GOODS ARE OF
THAILAND ORIGIN.
:47A:1-LETTER OF CREDIT REFERENCE NO. MUST BE INCORPORATED ON ALL
SHIPPING DOCUMENTS
2-DOCUMENTS BEARING DATE OF ISSUANCE PRIOR TO THE ISSUANCE OF
THIS CREDIT WILL NOT BE ACCEPTABLE
3-INVOICE EXCEEDING THE CREDIT AMOUNT NOT ACCEPTABLE
4-ALL DOCUMENTS MUST BE IN ENGLISH LANGUAGE
5-DISCREPANCY FEE OF USD 50.00 TO BE DEDUCTED FROM THE PROCEED AT THE
TIME OF SETTLEMENT.
5-ALL PARTIES TO THIS TRANSACTION ARE ADVISED THAT THERE ARE SPECIFIC
SANCTIONS IMPOSED BY U.S. AND OTHER GOVERNMENT AND OR
REGULATORY AUTHORITIES AGAINST CERTAIN COUNTRIES, ENTITIES AND
INDIVIDUALS. UNDER THESE MEASURES, BANKS MAY BE UNABLE TO
PROCESS A TRANSACTION THAT INVOLVES A BREACH OF SUCH SANCTIONS,
AND AUTHORITIES MAY REQUIRE DISCLOSURE OF INFORMATION.
STANDARD CHARTERED IS NOT LIABLE IF IT, OR ANY OTHER PERSON, FAILS
OR DELAYS TO PERFORM THE TRANSACTION, OR DISCLOSES INFORMATION
ON AS A RESULT OF ACTUAL OR APPARENT BREACH OF SUCH SANCTIONS
:71B:ALL BANK CHARGES OUTSIDE PAKISTAN
ARE ON BENEFICIARY'S ACCOUNT
:48:15 DAYS AFTER SHIPMENT DATE BUT WITHIN THE VALIDITY OF THE CREDIT
:49:WITHOUT
:78:1-PLEASE DISPATCH DOCUMENTS IN 2 LOTS TO STANDARD CHARTERED BANK
PAKISTAN TRADE DEPT, 1ST FLOOR, P. O. BOX NO. 123, I. I. CHUNDRIGAR
ROAD, KARACHI PAKISTAN THRU COURIER.
2-IN REIMBURSEMENT OF SIGHT DRAWINGS WE SHALL PAY YOU
IN CURRENCY OF THE CREDIT AS PER YOUR INSTRUCTION UPON
RECEIPT OF ORIGINAL DOCUMENTS AT OUR COUNTER PROVIDED
ALL TERMS OF THE CREDIT ARE COMPLIED WITH.
:57A:BANGKOK BANK PUBLIC COMPANY LIMITED
BUKKHALO BRANCH BANGKOK 10600 THAILAND
-}
Ack No : 177:0905191131
26

Issuance of Documentary Credit
Seller/Bene Buyer
Issuing BankAdv. Bank
1-Contract
2-DCApplication
3-DC Issued
4-DCAdvised
1. The buyer and the seller
conclude a Sale Contract
providing for payment by
Documentary Credit.
2. The buyer instructs his bank –
the “Issuing” Bank – to issue a
Credit in favor of the seller
(Beneficiary).
3. The Issuing Bank asks another
bank, usually In the country of
the seller, to advise and
perhaps also to add its
confirmation to the
Documentary Credit.
4. The Advising or Confirming
Bank Informs the seller that
the has been issues.

LC Settlement / Payment
Seller/Bene
Buyer
Applicant
Issuing BankAdv / Nominated Bank
1-Goods
5-Payment/Acceptance
3-Documents/Acceptance
1. The seller dispatches the
goods and sends the
documents evidencing the
shipment to the Bank where
Credit is available (the
Nominated bank)
2. After checking that the
documents meet the Credit
terms, the bank makes
payment.
3. This bank then sends the
documents to the Issuing
Bank.
4. The Issuing Bank, after
checking that the documents
meet the Credit requirements,
makes reimbursement In the
pre-agreed manner
5. The Issuing Bank then
sends / release the
documents to the Buyer.
6. Reimbursement is obtained
in the pre-agreed manner.

Conventional Documentation Usage
Bill of Exchange (Draft)
Definition
A bill of exchange is an unconditional order in writing, addressed by one
person to another, signed by the person (Drawer) giving it, requiring the
person to whom it is addressed to pay (Drawee) on demand or at a fixed or
determinable future time a sum certain in money to or to the order of a
specified person, or to bearer.
29

Conventional documentation usage
Specimen of a draft
Drawn under ABC Bank Plc, UK Credit No. 12345 Dated 25-January-2009
Our Reference ________________________
Exchange for US$ 500,000/- Karachi 28-February-2009
At 60 days Sight please pay against the FIRST of Exchange (SECOND of the same tenor and date being unpaid) to the
Order of ABC Bank ………………………, M. T. Khan Road, Karachi-75530, Pakistan.
The sum of US$ Five Hundred Thousand Only.
To: FIRST COMMERCIAL BANK For and on behalf of
HEAD OFFICE, SOHAIL & SONS (PVT) LIMITED
INTERNATIONAL OPERATION DEPT.,
4FL., 30 CHUNG KING S/d
S. RD., SEC. 1, TAIPEI 100 TAIWAN
R.O.C.
(Manager / Director)
30

Commercial Invoice (Article # 18 - UCP 600)
Definition
A commercial invoice is the accounting document by which the seller claims payment
from the buyer for the value of the goods and/or services being supplied.
A commercial invoice normally includes the following information:
Name and address of the seller;
Date of issue;
Invoice number;
Name and address of the buyer;
Order or contract number, quantity and description of goods, unit price (and
details of any other agreed charges not included in the unit price), and the
total invoice price;
Shipping marks and numbers;
Terms of delivery and payment;
Shipping details; and
Any other information required by the Documentary Credit. 31

Certificate of Origin
Definition
A certificate of origin is a statement signed by the appropriate authority, as
required in the underlying commercial contract / agreement between the
buyer and seller, providing evidence of the origin of the goods.
Basically, it certifies origin of goods by an independent organization e.g., a
Chamber of Commerce.
33

Insurance Document (Article # 18 – UCP 600)
The insurance document must:
be the same specified in the underlying commercial contract / agreement between
the buyer and seller;
cover the risk specified in the underlying commercial contract / agreement
between the buyer and seller (preferably Cargo Clause “A”);
be consistent with the other documents in its identification of the voyage and
description of the goods;
be a document issued and signed by insurance companies or underwriters or their
agents, and must be presented in the full set of originals, if issued in more than
one original duly assigned in bank’s favor;
indicate cover is effective at the latest from the date of loading on board or
dispatch or taking in charge of the goods;
coverage must be for a minimum of 110% of the amount for which payment,
acceptance or negotiation is requested under the DC.
35

Inspection Certificate
Definition
An inspection certificate is a statement issued and signed by the appropriate
authority, either a governmental entity or a private inspection company,
providing evidence that the goods were inspected and detailing the results of
such inspection.
In many countries, an inspection certificate is issued by an independent
inspection company contracted for either by the buyer or by the seller, as
stipulated in the underlying commercial contract / agreement between
the buyer and seller.
The inspection certificate contains details of the shipment to which it relates,
states the results of the inspection, and bears the signature, the stamp or the
seal of the inspecting entity.
36

Transport Documents
Bill of Lading (B/L)
Definition
The document covers transport by sea;
Signed by the carrier, whether a shipping line or a freight forwarder;
Serves as a receipt to the consignor for the goods, as evidence of the contract
of transport;
Contains conditions of transport; and
A document of title;
37

What is "title"?
39

"Title" is the foundation of ownership of property.
Section 2 (4) of the Sale of Goods Act, 1930 defined a bill of lading as a
document of title.
Tenders a legal right to possess the property.
The right may be transferred to a third party by endorsement.
Bills of lading are thus written contracts between shippers and carriers
that spells out the carrier’s obligation to deliver specific goods to specific
person at named places.
40

What are the main functions of a bill of lading?
41

Functions of a Bill of Lading
1-Receipt for the goods;
2-Contract of Carriage / affreightment;
3-Quasi Negotiable Document;
4-Document of Title;
42

Bill of Lading, Combined Transport / Multimodal
A document issued or signed by a carrier indicating carriage by more
than one means of transportation. [Ref: Art # 19 of UCP 600]
For example:
A multimodal transport document for a door-to-door shipment with
main carrier by vessel might indicate pickup at the place where the
shipment originates (often the seller’s premises) with [pre-carriage] by
truck / train and main carriage by a named vessel, as per agreed terms of
the contract of carriage.
This document could be issued either on a [received for shipment] basis
at the time after the goods come into the control of the carrier.
43

Bill of Lading, Combined Transport / Multimodal
On board notation to legitimate the shipment on an specific vessel
marked once the goods loaded on the named vessel.
The carrier will be responsible for pre-carriage and main carriage.
The date of issuance of the transport document will be deemed to be the
date of dispatch, taking in charge or shipped on board, and the date of
shipment.
If the transport document indicates, by stamp or notation, a date of
dispatch, taking in charge or shipped on board, this date will be deemed
to be the date of shipment. [Ref: Art # 19(a) (ii) of UCP 600].
Indicates the place of dispatch, taking in charge or shipment and the
place of final destination as per agreed terms.
44

Bills of Lading, CLAUSE / FOUL
A bill of lading which has exceptions to the receipt of merchandise / goods in
"apparent good order". [Ref: Art 27 of UCP 600]
45

Bills of Lading, CLEAN
Bears no clause or notation, which expressly declares a defective
condition of the goods or their packing.
The word “clean” need not appear on a transport document, even if a
credit has a requirement for that transport document to be “clean on
board”. [Ref: Art # 27 of UCP 600]
46

Bills of Lading, CONTAINER
When goods are packed in containers, shipping companies issue bills of
lading, which simply act as a receipt for a container.
To cover goods being transported on a traditional port-to-port basis, or
cover transport from an inland container depot in the exporter’s country
to an inland container depot in the importer’s country.
To this effect, we often experience the super imposed stamps like CY/CY,
CFS / CFS, CFS/CY, CY/CFS (Container Yard to Container Yard or Container
Freight Station to Container Freight Station).
47

Bills of Lading, COSOLIDATOR’S / FORWARDER’S
A bill of lading issued by a cargo consolidator / forwarder to shippers as a receipt
for goods to be consolidated with cargo obtained from other exporters.
Firms providing cargo consolidation services often act as carriers, providing their
own (house) transport document backed by a (master) transport document
issued by the liner carrier for entire consolidated shipments.
Also recognized as (House Bill of Lading) backed by a (Master Bill of Lading)
issued by the liner carrier for entire consolidated shipment.
Usually, many forwarders provide additional services, such as assistance with
country-specific documentary requirements, insurance, storage and even
customs clearance against brokerage / commission.
48

Bills of Lading, LINER
These documents fulfill all the normal functions of a bill of lading,
including that of document of title.
Normally, used by shipping lines offering (liner service) i.e.,
regular scheduled service for goods transportation among ports
where they engaged facilities to receive, load, unload and
dispatch of goods.
49

Bills of Lading, RECEIVE FOR SHIPMENT
Acknowledging the receipt of goods by a carrier for shipment on a specified
vessel.
Indicating the goods have been handed over to the carrier but not loaded on the
carrying vessel. This is the opposite of an ‘on-board’ bill of lading.
50

Bills of Lading, SHORT FORM
This does not contain the full terms & conditions of the contract of carriage.
Instead it contains an abbreviated version of the carrier’s conditions with a
reference to the full set of conditions.
However, they fulfill all the other functions of bills of lading, and in particular they
are considered to be documents of title.
51

Bills of Lading, STRAIGHT
It is a non-negotiable bill of lading whereby the consignee named in the bill holds
title to the goods.
The bill of lading cannot be endorsed by one party to another.
52

Generic Terms use in Bills of Lading
Shipper’s Load, Stow and Count
Under this term shipper gives the delivery of the goods to the shipping
company after having stuffed the cargo into a container, to load the
container on a named ship.
Under this arrangement, shipping company does rely on the shipper and
to protect themselves by putting a caveat applied to containerized cargo
on the face of the bill of lading.
CY / CY (Container Yard to Container Yard)
This term comprises the delivery of box (container) from Container Yard
(CY) to Container Yard (CY), means Exporters and Importers give / take
the delivery of the goods in their own yards (premises) and not in the
shipping company’s container yard / port / Freight Station.
53

CFS / CFS (Container Freight Station)
According to this term, Importers and Exporters give &/or take the delivery of
goods at shipping company’s Container Freight Station (Yard) / Port of Discharge /
Loading.
LCL / LCL (Less Container Load)
This term is used where a single box (container) contains cargo for more than one
party / exporter.
54

FCL / FCL (Full Container Load)
This term is used where a box (container) contains cargo for a single party.
Free In & Free Out (FIFO)
Generally, these terms used as “Chartering Terms” whereby the vessel owner is
not responsible for the cost of loading and un-loading.
Roll-on / Roll-off (RORO)
Generally, used in specialize vessels used to carry vehicles (carriers). Such vessels
usually call “Carrier vessels / ships”.
55

NVOCC
Non-vessel Operating Common Carrier.
Carrier that does not own or operate own vessels.
Pledges cargo to the operating carriers.
CDC – Container Detention Charges
Container Demurrage / Detention are charges by shipping line / company
(container owner) against compensate for their lost the opportunity to use their
containers.
Normally, shipping line companies will give free time for container demurrage /
detention.
56

Air Transport Document
UCP 600 Article 23 covers in detail the requirements of an air transport document
for presentation under DCs.
The document covers transport by air. It is issued by the carrier, whether an
airline or a freight forwarder, as a non-negotiable document serving as a receipt
to the consignor for the goods, and containing the conditions of transport.
It also shows the details of the consignee so that they can be contacted on arrival
of the goods.
57

Air Transport Document
HAWB
House AWB issued by a freight forwarder acting as a carrier.
MAWB
The term used for the AWB issued on airline's stationery to a freight forwarder for
all of the goods covered by one or more House AWBs on the one flight going from
one loading airport to one destination airport.
58

60
Foreign Exchange Regulations Act, 1947 (FERA)
• Through which law Foreign Exchange policies and its operations govern
with in Pakistan?

61
• In Pakistan, foreign exchange policy and its operation is regulated in
accordance with the provisions of the Foreign Exchange Regulation Act
(FERA), 1947 & the Protection of Economic Reforms Act (PERA), 1992.

62
• What is the core objective of the law?

63
• The core objective of the existing laws are to regulate the economic and
financial interest of Pakistan, certain payments, dealings in foreign
exchange, securities, import/export of currency and bullion.

64
• Which authority is being delegated to give directions under the law and
to run foreign exchange policy with in Pakistan?

65
• In order to secure meticulous compliance, the Exchange Policy
Department (EPD) of the State Bank of Pakistan (SBP) under sub-section
(3) of Section 20 of the Act authorized to give directions to the Authorized
Dealers, Exchange Companies, Travel Agents, Carriers, Stock-Brokers and
other persons who are authorized by SBP to do the foreign exchange
transactions in the normal course of their business. [FEM-Chapter I, Para
2]

66
• In which manner SBP issues directives?

67
• Directions are issued in the form of Public Notices, FE Circulars and
Circulars Letters etc. [FEM-Chapter I, Para 3]

68
• Which is the latest edition of FEM along with the date up-to which
setting out the terms and conditions already incorporated in this
manual?

69
• Foreign Exchange Manual (8th Edition – 2002), dated 01.01.2002 in
which instructions issued by SBP to the ADs, ECs, Travel Agents, Carriers,
etc., covered upto 31-12-2001, setting out the terms and conditions
subject to which they may engage in transactions covered by the Act,
have been incorporated in this Manual.

70
• Is it compulsory for us to update the FEM?
Foreign Exchange Regulations Act, 1947 (FEM)

71
• Yes, it is in the interest of ADs and other stake holders of the Manual to
ensure that it is keep updated and the old pages are regularly replaced
by new pages whenever issued. [FEM-Chapter I, Para 3]

72
• Exports from Pakistan governed through which law?
Regulatory Regime in Pakistan - Exports

73
• Exports from Pakistan are regulated by the Ministry of Commerce,
Government of Pakistan, under the Imports and Exports (Control) Act,
1950. Chapter XII Para 4 of FEM]

74
• Is it mandatory to furnish a declaration before making exports by post
and otherwise either directly or indirectly, to any place outside
Pakistan to the Collector of Customs?

75
• Yes, it is compulsory to furnish a legal declaration in the shape of ‘E’
Form by the exporter to the Collector of Customs or to such other
person as the State Bank may specify in this behalf that foreign
exchange representing the full export value of the goods has been or
will be disposed of in a manner and within a period specified by the
State Bank. [FEM-Chapter XII, Para 1]

76
• What is the defined time frame for realization of exports proceeds?

77
• As a general rule, full export value of goods exported from Pakistan
and declared to the Custom authorities should be received on the due
date for payment or within 180 days from the date of
shipment/posting, whichever is earlier through an Authorised Dealer.
• However, payments under irrevocable letter of credit for Hand
Knotted Carpets and export to South American countries payment
may be realized within 270 days.
• A 15 days buffer period has also been given to the exporters to
repatriate the export proceeds within 195/285 days from the date of
shipment/posting, as the case may be.
• Prior approval of the State Bank should be obtained before arranging
for payment in any manner other than that indicated above. [FEM-
Chapter XII Para 6]

78
• May exporters hold incoming export proceeds including advance
payment in foreign currency?

79
• Exporters may retain the export proceeds including ‘Advance
Payments’ in FCY accounts with an Authorised Dealer in Pakistan for
three working days and to sell the same within this period to any
Authorised Dealer.
• The FCY so retained shall be kept by the Authorised Dealers in ‘Special
FCY Exporters’ Account’ outside their ‘Exposure’ limits. [FEM-Chapter
XII Para 7]

80
• Is it compulsory to make out export transport documents to order or
an authorized dealer?

81
• Yes, in case of export of goods from Pakistan the transport / title
documents to the goods should be drawn only to the order of an AD
designated for the purpose by the exporter.
• However, this restriction will not apply if the exporter produces a
certificate to the carrier from the AD concerned in the prescribed form
(Appendix V-13).
• The certificate will be issued by the Authorised Dealer only if the
shipment is being made against an advance payment or against an
irrevocable Letter of Credit which calls for drawing of documents of
title to cargo to the order of the opening bank, or the importer, or the
exporter or to order and blank endorsed. [Chapter XII Para 11 (i)]

82
• Is there any restriction to submit shipping documents to the AD as an
evidence of export of goods from Pakistan?

83
• Yes, all shipping documents covering goods exported from Pakistan
and declared on Form “E” must be passed through the medium of an
authorized dealer (normally who had certified the Form “E”) within 14
days from the date of shipment. [Chapter XII Para 16 of FEM]
• Form “E”

84
• Imports into Pakistan governed through which law?
Regulatory Regime in Pakistan - Imports

85
• Imports into Pakistan are regulated by the Ministry of Commerce,
Government of Pakistan, under the Imports and Exports (Control) Act,
1950 and the notifications issued there under. [Chapter XIII Para 2 of
FEM]

86
• On which form/declaration Import payments/transactions are
reported to State Bank of Pakistan?

87
• Import payments are being reported on Form “I” to State Bank of
Pakistan [Chapter XIII Para 32-33 of FEM]
• Form “I”

88
• How many modes for payment against imports are available in our
regulatory regime?

89
• Payment for imports may be made either through letters of credit,
without letters of credit against documents received for collection on
the basis of registration of contracts, or as clean remittance without
opening of letter of credit and without registration of contract. [Para 5
Chapter XIII of FEM]

90
• What is the maximum time frame for open or extend normal LCs or
LCs for machinery and mill-work?

91
• If the import policy does not lay down any instruction or restriction in
this regard, AD may open letters of credit to import normal stuff for a
period upto 12 months.
• However, in respect of machinery and mill-work (CAPEX), which are
required to be specifically manufactured and the period of
manufacturing is more than 12 months, the letter of credit may be
opened for a period upto 24 months. [Para 9 Chapter XIII of FEM]

92
• Similarly, the validity of a letter of credit may be extended by the ADs
for further periods not exceeding 12 months at a time on payment of
fee, if so prescribed in the import policy.

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