Export Facilitation Scheme – Pakistan Business Council

Pakistan Business Council, in a letter addressed to the Member Customs – Policy, has submitted committed on the proposed amendments to the Export Facilitation Scheme [EFS], vide SRO 1517 dated November 2, 2023.

Amongst various proposals aimed towards efficient and effective utilization of EFS for growth of exports, following major proposals have been submitted for consideration by the Member Customs – Policy:

1.  Rule 872(a) has been proposed to be amended as follows [amendment has been highlighted in Red font]:

   “872. Scope of the scheme.— (1) This scheme shall be available to the following persons subject to authorization of import, warehouse and purchase of input goods under these rules and registration in the WeBOC or PSW:

   (a)       
   persons registered under
   the Sales Tax Act, 1990, as manufacturer-cum-exporter, who make value-addition in the manufacture and export of goods, which shall not be less than ten per cent in USD terms;”

    

   PBC’s Comments and Recommendation: Considering the recent unprecedented increase in Electricity / Gas prices coupled with overall reduction in margins [due to slowdown in worldwide economic activities], value addition of 10% and that too in USD terms is not possible in each and every case. Due to cyclical movement [commodity cycle], goods are sometimes exported for a very low margin or even at a loss in order to retain a customer. Therefore, proposed amendment to assess value addition in USD terms must be deleted. Moreover, the Rule should be amended to make it clear that the assessment of 10% value addition will be made on annual basis, otherwise, the Custom department may take a view that this assessment is required for each consignment. 

2. As per Rule 876, EFS Applicant is required to submit security instrument [Post dated Cheques (PDC)] equivalent to sales tax, income tax, duties against purchases for the period in advance. PBC has stated that the submission of PDC equivalent to total expected import value may result in harassment / coercive action by total encashment of PDC even incase of minor outstanding dues, therefore, PDC should be provided as and when goods are imported / locally purchased. This will have no revenue impact for the Government Exchequer and the Collector Karachi has also consented to this proposed vide his letter addressed to the Secretary Exports Policy.
3. EFS users falling under category C1 with self-owned manufacturing facility and more than 3 years of history are allowed to submit Post dated cheques [PDC] as security instrument against authorization. PBC has therefore, proposed that authorization on the basis of PDC should be restricted to the extent of average export history of past 3 years. For any authorization above that average, 3^rd party security instrument should be sought.