international trade & forx asssignmnt

8/3/2019 International Trade & Forx Asssignmnt

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PROF: DR. KHAIR-UZ-ZAMAN

Department of Business Administration Gomal University Page | 2 Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan

IN THE NAME OF

ALLAH

THE MOST GRACIOUS & BENIFICIAL &THE MOST MERCIFUL


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ImportsThe term "import" is derived from the conceptual meaning as to bring in the goods and services

into the port of a country. The buyer of such goods and services is referred to an "importer" who

is based in the country of import whereas the overseas based seller is referred to as an

"exporter". Thus an import is any good (e.g. a commodity) orservice brought in from one countryto another country in a legitimate fashion, typically for use in trade. It is a good that is brought in

from another country for sale.[2] Import goods or services are provided to domestic consumers by

foreignproducers. An import in the receiving country is an export to the sending country.

Imports, along with exports, form the basis ofinternational trade. Import of goods normally

requires involvement of the customs authorities in both the country of import and the country

ofexport and are often subject to import quotas, tariffs and trade agreements. When the "imports"

are the set of goods and services imported, "Imports" also means the economic value of all goods

and services that are imported. The macroeconomic variable I usually stands for the value of

these imports over a given period of time, usually one year.

Types of importThere are two basic types of import:

1. Industrial and consumer goods

2. Intermediate goods and services

Companies import goods and services to supply to the domestic market at a cheaper price and

better quality than competing goods manufactured in the domestic market. Companies import

products that are not available in the local market.

There are three broad types of importers:

1. Looking for any product around the world to import and sell.

2. Looking for foreign sourcing to get their products at the cheapest price.

3.

Using foreign sourcing as part of their global supply chain.Direct-import refers to a type of business importation involving a major retailer (e.g.Wal-Mart)

and an overseas manufacturer. A retailer typically purchases products designed by local

companies that can be manufactured overseas. In a direct-import program, the retailer bypasses

the local supplier (colloquial middle-man) and buys the final product directly from the

manufacturer, possibly saving in added costs. This type of business is fairly recent and follows

the trends of the global economy.

Role of the InternetMany online auction websites are now providing wholesalers through a wholesale list, generally,

the lists that require a fee to view, may not be updated frequently, the data may be old, and the

companies listed may no longer be in business.Another form of online middlemen are B2B trade companies. These cater mainly to big

businesses who are importing large quantities of goods from foreign countries. They also have

sister sites that serve smaller orders for small businesses. In addressing the concerns of listed

companies' legitimacy and dependability, such B2B portals may inspect suppliers at their actual

premises before they list suppliers. Alternatively, these companies may also branch out of

cyberspace and organize their own sourcing fairs, where thousands of buyers and suppliers can

meet face-to-face.

Letter of creditA standard, commercial letter of credit ("LC") is a document issued mostly by a financial

institution, used primarily in trade finance, which usually provides an irrevocable payment

undertaking.

Department of Business Administration Gomal University | 3Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
http://en.wikipedia.org/wiki/Good_(economics_and_accounting)http://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Import#cite_note-1http://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Production,_costs,_and_pricinghttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Exportshttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Import_quotahttp://en.wikipedia.org/wiki/Trade_agreementshttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Macroeconomicshttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Wal-Marthttp://en.wikipedia.org/wiki/Wal-Marthttp://en.wikipedia.org/wiki/Manufacturerhttp://en.wikipedia.org/wiki/Added_costhttp://en.wikipedia.org/wiki/Economic_globalizationhttp://en.wikipedia.org/wiki/Wholesalershttp://en.wikipedia.org/wiki/Wholesale_listhttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/Good_(economics_and_accounting)http://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Import#cite_note-1http://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Production,_costs,_and_pricinghttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Exportshttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Import_quotahttp://en.wikipedia.org/wiki/Trade_agreementshttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Macroeconomicshttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Wal-Marthttp://en.wikipedia.org/wiki/Manufacturerhttp://en.wikipedia.org/wiki/Added_costhttp://en.wikipedia.org/wiki/Economic_globalizationhttp://en.wikipedia.org/wiki/Wholesalershttp://en.wikipedia.org/wiki/Wholesale_listhttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Trade_finance


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The LC can also be source of payment for a transaction, meaning that redeeming the letter of

credit will pay an exporter. Letters of credit are used primarily in international trade transactions

of significant value, for deals between a supplier in one country and a customer in another. They

are also used in the land development process to ensure that approved public facilities (streets,

sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are usually a

beneficiary who is to receive the money, the issuing bankof whom the applicant is a client, and

the advising bankof whom the beneficiary is a client. Almost all letters of credit are irrevocable,

i.e., cannot be amended or cancelled without prior agreement of the beneficiary, the issuing bank

and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions

common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present in

order to receive payment include a commercial invoice,bill of lading, and documents proving the

shipment was insured against loss or damage in transit. However, the list and form of documents

is open to imagination and negotiation and might contain requirements to present documents

issued by a neutral third party evidencing the quality of the goods shipped, or their place of

origin.

Terminology

The English name letter of credit derives from the French word accreditation, a powerto do something, which in turn is derivative of the Latin word accreditivus, meaning trust. The

Application any defense relating to the underlying contract of sale. This is as long as the seller

performs their duties to an extent that meets the requirements contained in the LC.

International Trade Payment methods Advance payment (most secure for seller)

Where the buyer parts with money first and waits for the seller to forward the goods

Documentary Credit (more secure for seller as well as buyer)

Subject to ICC's UCP 600, where the bank gives an undertaking (on behalf of buyer and at

the request of applicant ) to pay the shipper ( beneficiary ) the value of the goods shippedif certain documents are submitted and if the stipulated terms and conditions are strictly

complied.

Here the buyer can be confident that the goods he is expecting only will be received since

it will be evidenced in the form of certain documents called for meeting the specified

terms and conditions while the supplier can be confident that if he meets the stipulations

his payment for the shipment is guaranteed by bank, who is independent of the parties to

the contract.

Documentary collection (more secure for buyer and to a certain extent to seller)

Also called "Cash Against Documents". Subject to ICC's URC 525, sight and usance, for

delivery of shipping documents against payment or acceptances of draft, where shipment

happens first, then the title documents are sent to the [collecting bank] buyer's bank byseller's bank [remitting bank], for delivering documents against collection of

payment/acceptance

Direct payment (most secure for buyer)

Where the supplier ships the goods and waits for the buyer to remit the bill proceeds, on

open account terms.

http://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Traveler's_chequehttp://en.wikipedia.org/wiki/Commercial_invoicehttp://en.wikipedia.org/wiki/Bill_of_ladinghttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Traveler's_chequehttp://en.wikipedia.org/wiki/Commercial_invoicehttp://en.wikipedia.org/wiki/Bill_of_lading


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Documents & Procedure Requiredfor Import of a Commodity



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Pro forma Invoice

A pro forma Invoice is much the same as a commercial invoice which, when used in international

trade, represents the details of an international sale to the Customs authorities. A pro forma



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invoice is presented in the place of a commercial invoice when there is no sale between the

sender and the importer, or if the terms of the sale between the seller and the buyer are such that a

commercial invoice is not yet available at the time of the international shipment. A pro forma

invoice is required to state the same facts that the commercial invoice would and the content is

prescribed by the governments who are a party to the transaction.

INCO TermsIncoterms rules are standard trade definitions most commonly used in international salescontracts. Devised and published by the International Chamber of Commerce, they are at the

heart of world trade.

Among the best known Incoterms rules are, FOB (Free on Board), CIF (Cost, Insurance and

Freight), and CPT (Carriage Paid To).

ICC is currently revising Incoterms 2000. The new edition, Incoterms 2010, is expected to enter

into force on 1 January 2011.

H.S. CodeThe Harmonized Commodity Description and Coding System (HS) of tariff nomenclature is an

internationally standardized system of names and numbers for classifying traded products

developed and maintained by the World Customs Organization (WCO) (formerly the Customs

Co-operation Council), an independent intergovernmental organization with over 170 member

countries based in Brussels, Belgium.

Pro forma invoice includes:

Name of Importer

Name of Exporter

Description of goods

There Tarrif number (HS code)

Quantity

Price in currency agreed and Packing INCO Terms

Origin of Merchandise

Payment condition i.e Irrevocable LC at sight

Last date of Shipment

Country of origin

Final Destination

Advising bank details

Signature of Exporter

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Application Form

This is the form given by the Advising bank and is filled by the importer. A special adhesive

stamp of 100PKR is pasted.

LC at sight

LC becomes payable once it is presented along with the necessary documents, e.g. goods orders,shipping documents.

TranshipmentTransshipment or Transhipment is the shipment of goods or container to an intermediate

destination, and then from there to yet another destination.

Partial shipmentDelivery of an order in two or more consignments, if allowed by the customeror under

theterms of a letter of credit.

Following information is filled:

Applicats name and full address

Benificiarys name and full address

Type of LC i.e. LC at sight

Total amount including C&F

Shipment destination from origin to final

Date of expiry

All other charges amount and due written

In case of india shipment and transshipment cant be on Israeli/Indian vessels/Airlines is

Prohibited

http://en.wikipedia.org/wiki/Shipmenthttp://en.wikipedia.org/wiki/Cargohttp://en.wikipedia.org/wiki/Intermodal_containerhttp://www.businessdictionary.com/definition/delivery.htmlhttp://www.businessdictionary.com/definition/consignment.htmlhttp://www.businessdictionary.com/definition/customer.htmlhttp://www.businessdictionary.com/definition/term.htmlhttp://www.businessdictionary.com/definition/letter-of-credit-L-C.htmlhttp://en.wikipedia.org/wiki/Shipmenthttp://en.wikipedia.org/wiki/Cargohttp://en.wikipedia.org/wiki/Intermodal_containerhttp://www.businessdictionary.com/definition/delivery.htmlhttp://www.businessdictionary.com/definition/consignment.htmlhttp://www.businessdictionary.com/definition/customer.htmlhttp://www.businessdictionary.com/definition/term.htmlhttp://www.businessdictionary.com/definition/letter-of-credit-L-C.html


11/28 Department of Business Administration Gomal University | 11

Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan


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I-Form

This is a form for imports and is basically used of taxation purpose. It is the application for

permission under the foreign exchange regulation act 1947 to purchase foreign exchange for the

payment of imports.

Beneficary

Person or other legal entity for whose present or future interest (benefit) an annuity,assignment

(such as a letter of credit), contract,insurance policy,judgment, promise,trust, will, etc., is made.

IndentorThe purchaser of the commodity the buyer of the goods. The following information is posted in

this document:

Authorized dealer name

Beneficiarys name and address

Indentors name and registration number


ITC No. (HS code)

Quantity

Port of Shipment

Date of shipment

Invoice value in Foreign currency

Other terms and conditions

Stamp and signature of the importer

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Insurance Cover Note

Document evidencing issuance of an insurance policy and gives a summary of

the informationgiven in a certificate of insurance.

Insurance cover note is issued on pro forma invoice, its is required for the bank to issue the LC.

First the schedule is made then the Final receipt is issued to importer.

War and SRCC

War, Strikes, Riots, and Civil Commotions Risks

C & F(Cost and Freight.) Seller owns goods until they are loaded on vessel; selling price includes all

costs so far plus cost of ocean freight.

The conditions required for Cover note

Name of the bank

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Name of participant

Detail of goods covered with their HS code

The period insuraed

Mode of convance

Sum covered

Contribution calculation

Exchange rate Declaration

Other conditions and warrities like Computer millium charges, radio active exclusion

clause, war, strike clause etc.



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LC Document

What DoesIrrevocable Letter Of Credit - ILOCMean

A letter of credit that can't be canceled. This guarantees that a buyer's payment to a seller will be

received on time and for the correct amount.

This is the document called the LC it shows did different conditions and terms on which boththe parties are agreed upon.

UCP RulesThe Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules on the

issuance and use ofletters of credit. The UCP is utilised bybankers and commercial parties in

more than 175 countries in trade finance. Some 11-15% ofinternational trade utilises letters of

credit, totalling over a trillion dollars (US) each year.

Reimbursement bankA bank providing cover for a payment order.

Explaination

First of all the SWIFT code is displayed

Form of LC i.e Irrevocalbe LC

Date of Issue; it is read in opposte direction i.e. 080328 this means 28 th of 3rd month march

of year 2008

Rules that are applicable are mentioned that are UCP Latest version i.e. UCP 600

Applicatns name

Beneficary name

Currency code and amount

Partial shipments allowed or not

Port of loading

Last date of shipment

Descriptions of goods

Charges outside Pakistan are on beneficys account

Period of presentation

Reimbursement bank name

http://en.wikipedia.org/wiki/Letters_of_credithttp://en.wikipedia.org/wiki/Bankershttp://en.wikipedia.org/wiki/Bankershttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Letters_of_credithttp://en.wikipedia.org/wiki/Bankershttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/International_trade


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SWIFT Code (Society for Worldwide Interbank Financial Telecommunication)The SWIFT Bank Identification Code is an internationally-recognized system of codes for

identifying banks (see ISO 9362). These codes are commonly used to identify the banks involved

in an international wire transfer.

It is not the only coding system for banks - individual countries also have their own sets of codes

which are used to identify banks in national interbank business. For example, ABA numbers (or

routing codes) identify banks in the US and Canada, Sort Codes identify banks in the UK.

SWIFT is the Society for Worldwide Interbank Financial Telecommunication, a member-owned

cooperative through which the financial world conducts its business operations with speed,certainty and confidence. More than 9,000 banking organisations, securities institutions and



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Railway Receipt: When the goods are dispatched by railway track, railway receipt is issued.

Ports: Their there two kinds of ports.

Dry Port: In Pakistan there are many dry port like At present, there are six dry ports running

under the management of Railways: Lahores Established in 1973, Karachi Dry Port Established

in 1974, Quetta Dry Port Established in 1984, Peshawar Dry Port Established in 1986, Multan

Dry Port Established in 1988, Rawalpindi Dry Port Established in 1990

Sea Port: There are three sea ports in Pakistan that are Port Qasim and Port Gwadar, port keti

Bander, port karachi. Port Qasim maximum sea weight capacity is 25,000 MT.

The mentioned terms required.

Consignee name

Notify address

Currency agreed upon

Goods details and HS Code number

Packing list

Detailed packing list

http://en.wikipedia.org/wiki/Dry_porthttp://en.wikipedia.org/w/index.php?title=Karachi_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Quetta_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Peshawar_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Peshawar_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Multan_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Multan_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Rawalpindi_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/wiki/Dry_porthttp://en.wikipedia.org/w/index.php?title=Karachi_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Quetta_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Peshawar_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Multan_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Multan_Dry_Port&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Rawalpindi_Dry_Port&action=edit&redlink=1


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Commercial Invoice

A commercial invoice is a document used in foreign trade. It is used as a customs declaration

provided by the person or corporation that is exporting an item across international

borders. Although there is no standard format, the document must include a few specific pieces

of information such as the parties involved in the shipping transaction, the goods being

transported, the country of manufacture, and the Harmonized codes for those goods. A commercial

invoice must also include a statement certifying that the invoice is true, and a signature.

The invoice is the receipt for the goods shipped. The mentioned things on Commercial invoice

Exporter name

Importer name

Pro forma Number

Vessel number

Port of loading

Final destination

Terms and delivery of payment

Marks and number of container


Quantity

Tariff and HS code

Rate per KG and amount in currency decided

Stamped by exporter bank

Invoice contains amount due to the importer Whereas the packing list includes only the

information about packing, no amount is shown in this list.

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Packing List

A shipping list, packing list, packing slip (also known as a bill of parcel, unpacking

note, packaging slip, (delivery) docket, delivery list, or customer receipt), is

a shippingdocument that accompanies delivery packages, usually inside an attached shipping

pouch or inside the package itself. It commonly includes an itemized detail of the package

contents and does not include customer pricing. It serves to inform all parties, including transport

agencies, government authorities, and customers, about the contents of the package. It helps themdeal with the package accordingly.

The mentioned things on Commercial invoice

Exporter name

Importer name

Pro forma Number

Vessel number

Port of loading

Final destination

Terms and delivery of payment

Marks and number of container Description of goods

Quantity

Packing further details

Tariff and HS code

Stamped by exporter bank

Packing list includes only the information about packing, no amount is shown in this

list.Whereas the Invoice contains amount due to the importer

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Bill of Entry

Declaration (on a prescribed form) by an importerorexporterof the exact nature, precise

quantity and value ofgoods that have landed (entered inwards) or are being shipped out (entered

outwards). Prepared by a qualified customs clerk orbroker, it is examined by customs

authorities for its accuracy and conformity with the tariffand regulations. See also customs entry.

When all the duties and charges are paid the Custom Duty officer (CDO) issues a bill of entry.

And now the importer is allowed to ship the commodity to the desired place.

Declared Value:It is a value that is declared by the importerAssessed Value: It is the value that is calculated by the CDO and duties are charged on Assessed

rate.The bill of entry contains following information

Exporter/ Consignors name

Importer/Consignees names

NTN number

HS Code

Currency name and code


Number of cartons

Declared value, rate

Assessed rate and value

Port of shipment

Delivery terms

Marks and Container numbers

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Indemnity Bond

It's a bond to repay a lender in the event of a shortfall in a loan repayment. Coverage for loss of

an oblige in the event that the principal fails to perform according to standards agreed upon

between the oblige and the principal.

The indemnity Bond is issued for the collector of customs in the custom house

Warehouse name and license number

Date of deed of indemnity

Importers name

Total sum amount

2 witnesses are also required

The bond must be on a stamp paper of above 50PKR or so

A post dated cherub must be attached with this bond

Certificate of Origin



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A Certificate of Origin (often abbreviated to CO or COO) is a document used in international

trade. It traditionally states from what country the shipped goods originate, but "originate" in a

CO does not mean the country the goods are shipped from, but the country where their goods are

actually made. This raises a definition problem in cases where less than 100% of the raw

materials and processes and value are not all from one country. An often used practice is that if

more than 50% of the sales price of the goods originates from one country, that country is

acceptable as the country of origin (then the "national content" is more than 50%). In variousinternational agreements, other percentages of national content are acceptable.

Certificate of origin is a proof that the goods made are purely manufactured into final good where

they are claimed

This document shows the following details

Consignor Name

Consignee

Consigned through

Packages detail is given with their HS Code

Description of goods is given

Detailed packing list is given i.e. Bags numbers and kinds of packing

Gross weight in KGs

Number of pieces

Value in Rupees and in dollars

Stamped by the origin country

Detailed Procedure

Eligibility

The least criteria for importing a commodity are that:

Account Number; LC can also be issued on cash basis Member of ICC; Company must have Membership in international Chamber of

Commerce

Companys STN and NTN

SECP Registered Company

Dealing

First of all the both parties who want to purchase and sell the Commodity deal with each other

and bargain on different points. They settle the product price INCO Terms, its quantity, Weight,

Shipment date, payment methods, type of LC, Exchange rate, Freight charges and other

information.

Issuance of Performa Invoice

When the dealing is finalized all the agreed conditions settled are then written in printed form

called the preformed invoice.

Insuring the Commodity

To issues a LC against a commodity mostly large in quantity, insurance of the commodity must

be taken, a copy of preformed invoice is given to the insurance company for the issuance of

insurance cover note. Insurance is issued on some reserve or goodwill of the importer.

Documents required are

Performa invoice

Certificate of Origin

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Certificate of origin is the document assuring the concerned that the goods/commodity shipped

are fully made by the claiming countrys company

Application for issuance of LC

Once the preformed invoice and cover note is issued, an application is written to a bank for the

issuance of letter of credit against it. The documents that are required are as below

Performa Invoice

Insurance Cover Note Application Form

I- Form

Here the I-Form is used for the eligibility of importing a commodity and for deduction of tax,

nowadays only STN and NTN is used, the use of I-Form is very rare.

LC Draft

After this procedure an LC Draft is issued based on all the information given to bank, it is a

almost a letter of credit but not yet approved, this is presented to importer to make some

corrections and changes, once approved by importer and stamped the final LC document is sent to

beneficiary bank/exporter for his confirmation through SWIFT code.

SWIFT/ TELEX

The advising bank then sends this Letter of credit advice to the Beneficiary bank in SWIFT

Coding, the bank communicate with each other in this coding. Other formalities and payments are

also made in this code.

Exporter will take notice

When the exporter receive the letter of credit advice, if he agrees on it the LC is approved if not

then further amendments will be done up till finalization of terms and conditions. The exporter

always gives 7 days free time to pay all the duties and expenses to clearing agent. This time

period can be expanded on request up to 14 and then 21 days in this period no dammar age is

charged.

Shipment Documents sent

When the dealing gets final, the exporter sends original shipping documents to importers bank

and copies to importer. And set of original documents placed in the container of commodities it.

The shipping documents contain:

Bill of lading/ Airway Bill/ Railway Receipt

Commercial Invoice

Packing List

Detailed packing list

Payment to the Advising Bank and retirement:When payment is made to the advising bank, the bank then releases the original shipping

documents. Then bank then issues a retirement note and after that the LC is closed on payment.

Further Procedure after retirement of LC

Clearing of Shipment:

Once the payment is made the original documents received are given to clearing agent.

Assessments of Value of Commodity:

Now as the documents are handed over, the duties are calculated on assessed rate on the exchangerate decided. Duties charged are



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Custom duty(CD) i.e. according to the H.S. Code (mentioned in FBR)

Sales tax (ST) i.e. 16% of the total value. Its fixed

Income tax(IT) i.e. 4% (for commercial), 3% (for manufactures) of the total value, its

also fixed

Federal excise duty(FED) i.e. 1%

Additional sales tax i.e. 2%

There are also other charges like Dammar age charged on not clearing the shipment on due date

Issuance of bill of Entry:

When all the duties and charges are paid the Custom Duty officer (CDO) issues a bill of entry.

And now the importer is allowed to ship the commodity to the desired place.

Bonded Warehouse:

Bonded warehouse is used when the importer is not willing or doesnt want to pay the due

amount in full. The importer stores the commodity in the bonded warehouse where he can pay for

commodity and ship the goods in installment. It requires following documents:

Indemnity bond Post dated cherub

Indemnity bond is the guarantee by the importer that he will pay the full amount as scheduled

otherwise the commodities can be confiscated.

Payment Flow Chart based on original Documents

Beneficiary/Exporter:

Payment is made to importer when the original shipping documents are handed over to its bank.

Beneficiary Bank:

The beneficiary bank sends these documents to the advising bank and receives the payment form

it.

Guarantee of State Bank

The state bank gives the guarantee to the beneficiary bank on the behalf of Government of

Pakistan.

Advising bank:

The advising bank charges the importer and receives the money and distributes the documents

Importer:

When the importer pays its due amount the bank hands over the original shipping documents to it.



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