In a move aimed at tightening controls and preventing abuse, the Federal Board of Revenue (FBR) has announced significant revisions to the Export Finance Scheme (EFS). The changes, implemented through the newly issued SRO301(I)/2025 amending the Customs Rules, 2001, are effective immediately and address several key areas of the scheme.
According to the SRO issued on Friday, the most notable change is the complete withdrawal of the Export Facilitation Scheme (EFS) 2021 for importers dealing in iron and steel scrap. This action suggests that the FBR has identified this sector as particularly vulnerable to misuse of the export financing facility.
Beyond this sector-specific withdrawal, the FBR has also overhauled the security requirements for manufacturers-cum-exporters seeking to utilize the EFS. The new rules introduce a tiered system based on export performance:
- High-Value Exporters (>$20 million): Manufacturing-cum-exporters with a substantial export history – defined as a minimum export value of $20 million in the past two years – will be required to furnish an indemnity bond alongside post-dated cheques (PDCs).
- Lower-Value Exporters (<$20 million): Exporters with a lower export value will face more stringent security measures. They must provide an indemnity bond and PDCs equivalent to the average annual duty and taxes on input goods used for exports over the preceding two years. Crucially, they will also be required to furnish a bank guarantee (BG) or revolving bank guarantee (RBG) to cover any deferred or remitted duty and taxes exceeding this average.
The FBR is also taking a stricter stance on compliance. Exporters with a history of non-compliance, including pending recoveries, contraventions of regulations, or ongoing criminal proceedings, will face immediate suspension of their EFS authorization. This suspension will remain in effect while the exporter is given an opportunity to present a defense. Furthermore, discrepancies or failures to comply with reconciliation statements and mandatory stock audits will also trigger immediate suspension from the scheme.
The revised procedures outline a range of further modifications designed to strengthen oversight of the EFS. These include:
- Reduced Input Utilisation Period: The timeframe for utilizing imported inputs acquired under the EFS has been shortened to nine months. Extensions may be granted in exceptional circumstances, subject to the approval of a board-constituted committee.
- Capacity-Based Input Authorisation: Input authorization will now be more closely tied to production capacity and input-output ratios, aiming to prevent inflated or unwarranted input claims.
- Bank Guarantees Over Insurance: Bank guarantees are set to replace insurance guarantees, likely reflecting a preference for more secure and readily enforceable forms of security.
- Vendor Facilitation Controls: The specifics of these controls were not detailed, but this suggests the FBR is implementing measures to better manage and monitor the vendors involved in the EFS supply chain.
- Sample Collection for Utilisation Verification: To ensure that imported inputs are indeed being used in exported goods, the FBR will implement a system of sample collection for verification purposes.
In addition, the FBR has clarified procedures for exporters making supplies against international tenders or to exempt projects or sectors within Pakistan. These users will now be required to file a mandatory declaration in the WeBOC (Web Based One Customs) system.
These sweeping changes to the Export Finance Scheme signal the FBR’s commitment to curbing misuse and ensuring the facility is used as intended – to genuinely promote and facilitate legitimate exports. While these measures may be welcomed by those concerned about illicit activities, they may also present new compliance challenges for exporters, particularly smaller businesses navigating the more complex security and procedural requirements.
