The Federal Board of Revenue (FBR) has issued a comprehensive draft of the insurance guarantee format required under Pakistan’s Export Facilitation Scheme (EFS), initially introduced through SRO 957(I)/2021.
The draft sets out clear terms, conditions, and responsibilities for insurance companies, exporters, and customs authorities in relation to guarantees issued for the duty- and tax-free import of inputs and capital goods.
Under the proposed structure, insurers will provide irrevocable and unconditional guarantees on behalf of exporters in favour of the FBR. These guarantees underpin the EFS framework, which allows exporters to import raw materials and machinery without upfront duties and taxes, subject to full compliance with scheme obligations.
The FBR has emphasised that exporters availing the EFS must furnish adequate financial security to cover potential liabilities such as customs duties, taxes, surcharges, fines, penalties or any other charges arising from non-compliance. The guarantee ensures that if an exporter defaults or violates scheme conditions, the FBR can recover the full amount without delay.
A key element of the draft is that the guarantor insurance company will bear primary liability, going beyond the role of a conventional surety. Upon receiving a written demand from the FBR, the insurer will be required to immediately pay the guaranteed amount—without raising objections, seeking confirmation from the exporter, or resorting to legal delays. The FBR’s declaration of non-compliance will be deemed final and binding.
Key features of the proposed guarantee format include:
- A fully independent, unconditional guarantee enforceable on the first written demand by customs.
- Liability limited to the amount specified in the guarantee.
- Mandatory immediate payment in Pakistani Rupees without deductions, set-offs or counterclaims.
- Permission for multiple calls on the guarantee during its validity period until the total sum is exhausted.
- Compliance by insurers with the Credit and Suretyship (Conduct of Business) Rules, 2018, including SECP exposure limits and maintenance of adequate collateral.
The guarantee will remain valid regardless of ongoing disputes, extensions granted to exporters, changes in ownership, or amendments to the EFS. Insurers issuing guarantees must also hold a PACRA credit rating of AAA (ifs) or AA+ (ifs) at the time of issuance.
The draft further states that all guarantor obligations will be governed solely under Pakistani law, with dispute resolution falling within the jurisdiction provisions of the Customs Act, 1969.
The FBR will finalise the guarantee format after reviewing stakeholder feedback. The updated framework aims to reinforce compliance within the Export Facilitation Scheme while offering exporters a clearer, more transparent risk-mitigation mechanism.
