The State Bank of Pakistan (SBP) has abolished limits on the cost of imports purchased without opening letters of credits (L/Cs). Certain limitations on imports will nevertheless remain.

The bank has also said that importers should adopt the Incoterms issued by the International Chamber of Commerce (ICC) in order to avoid confusion in international trades.

No limits

According to an August circular issued by SBP, the requirement that had previously applied for imports costing more than US$5,000 to be paid for using L/Cs has been dropped.

The circular says importers are now free to purchase foreign goods for use in the manufacturing process or for sale to end-users "without any monetary limits."

New arrangements

If importers pay cash-in-advance, they will be required to provide their bank with an undertaking to produce relevant invoices, bills of lading and airway bills within a period of four months of the date of the advance payment.

When importers want to make payments after goods are received they will have to show their bank the invoices, original bills of lading or airway bills related to an import in order to trigger a remittance.

Limitations

The new arrangements to pay for imports over US$5,000 without opening a L/C are limited to goods imported to Pakistan by air or by courier.

Commodity importers may also be required to obtain the SBP's permission before importing sugar or cereals.

Incoterms

In the same circular that announced the bank's relaxation of methods of payment for imports, it also said international traders adopt the ICC's Incoterms.

Importers and exporters should use these terms of trade because they "provide a set of international rules to avoid uncertainty of different interpretation of the most commonly used trade terms in foreign trade will be adopted," according to SBP Circular No15.1.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.