|A:The Trade Development Authority of Pakistan (TDAP) is a body corporate established on 8 November, 2006, under a Presidential Ordinance. The Ordinance will be tabled in the Parliament as an Act for approval. The TDAP is the successor organization to the Export Promotion Bureau (EPB) and is mandated to become a dedicated, effective and empowered organization that is professionally managed. TDAP, as part of its trade ‘development’ mandate, as opposed to ‘export promotion’ only, will be dedicated to the ‘holistic’ development and promotion of goods and services for exports globally. TDAP in this enhanced responsibility and role will create direct linkages with stakeholders, local and abroad, aiming for a ‘Quantum Leap’ in exports. The administrative ministry of the TDAP will be the Ministry of Commerce, with the objective of promotion of sustainable growth in the quantum and value of export of goods and services.
Functions of TDAP
|A: What to Export?
Every product/service has a market. Even then, one has to be on the lookout for overseas importer. Nevertheless, export control is to be imposed at times, but its scope is very limited. There are also a few basic requisites for selling overseas. Determination land planning and planning are the basic requirements. Overseas selling begins with a state of mind.
Any commodity and/or product including services produced, processed and manufactured in a country can be exported, as there is hardly anything in the world that is not internationally traded. There is a market abroad for all types of products and services as no nation can itself produce everything to satisfy its needs in the modern world even if one chooses to sacrifice the principle of comparative cost advantage. Every country is continuously on the lookout to locate overseas suppliers of one commodity or another, thereby, creating every-increasing scope for export of other countries.
To take advantage of the situation, all nations make every possible effort to sell their products and services abroad. After all, exports are a vehicle of growth and development. They help not only in the procurement of the latest machinery, equipment and technology but also the goods and services not available indigenously, Expansion of export earning is as crucial for financing development plans as the mobilization of domestic resources. It leads to national self-reliance and reduces dependence on external assistance, which, howsoever liberal, may not be available without strings.
Where to Export?
The whole world can be a potential market for your products. Individual and specialized approach is needed to ensure that each country’s import requirements are met. In addition to the various publications there are a number of agencies that provide help to locate your markets overseas. Potential Market
Having made the planning and determination to sell abroad, the next step is to know the markets where one can export. Though the whole world can be a potential market for one’s product(s), it may not be possible and/or worthwhile to export to the world as a whole. Each country has its own peculiarities, thereby, necessitating individual and specialized approach. Moreover, one cannot sell every product to every country. It is better to specialize in your products first before you start to export/market them.
The way refrigerators cannot be sold to Iceland, it may likewise be difficult, if not impossible, to export watches to Switzerland. At the same time, it may be wrong to assume on the basis of sketchy information that certain markets have no potential at all. For example, a Canadian manufacturer of heating equipment discovered to his surprise that he could sell his products in Jordan because, although days are hot there, the nights are cool; He is also selling them in Venezuela, where his equipment is used not to heat houses, but to dry coffee beans.
What is therefore, important is proper and judicious selection of markets where one’s product(s) could sell best. Alternative usage, if devised and marketed, always helps.
In the selection of potential markets, the primary task is to identify the areas where products(s) similar to those of the prospective exporter, are currently sold either by Pakistan or other countries. A number of organizations have been set up to help the exporters in this task of identification. These include the Ministry of Commerce, Export Promotion Bureau, and Federation of Pakistan Chamber of Commerce & Industry. Besides these, there are number of Trade Associations/Chambers of Commerce which provide information on potential market(s) for different product(s). The exporter should establish a contact with the nearest organization. In addition, a little exercise at his desk and nearest export promotion organization’s library and/or any other good library is advisable to identify the market(s).
Whom to Export?
To find prospective customers and that too in overseas markets is the most arduous task. But a little experience and contact with different agencies backed by a concerted follow up action on the information provided by them will help the exporter in locating overseas customers. But selective approach will prove to be advantageous.
The location of prospective customers or importers is the next important and perhaps arduous task faced by the exporter after the identification and selection of markets. It usually takes a long time in finding a serious and right customer who is interested in the exporter’s product(s). His competitors in the country are naturally tight-lipped and would not like to reveal the name s of their importers. Similarly, institutions like banks, shipping companies and custom houses are supposed to keep secret the names of parties to whom exports are currently affected by other firms.
However, the exporter(s) should not feel disheartened on account of this problem. These problems are not peculiar to international markets and apply equally to the domestic selling. There are a number of published sources of information and Organizations/institutions, which provide information on prospective customers in overseas countries. It just requires a little exercise and contact with different agencies and contact with different agencies and follow-up action on the information provide by them.
How to Export?
The choice between the two basic methods of selling – direct & indirect – depends primarily on the amount of money and effort you want to put in. To export directly, you need to organize yourself in a suitable manner, with regard to staff and personnel, backed by skill and knowledge of both product & market.
Basically, there are two methods of export selling – direct and indirect. For direct exporting, the firm makes its own arrangements either within the existing selling apparatus or by setting up a separate and different department/ company to handle export transactions. In case of indirect exporting, the firm sells through an intermediary like merchant – exporters, Export Houses, Export Consortia/Marketing Groups, and Trading Corporations – Central and State.
Though the choice between the two methods of selling depends upon different considerations, the most important being the amount of money and the effort one wants to put in. It may some times be advisable to operate through agencies.
|A: Registration for importer / exporter is no longer required.|
|A: Ministry of Commerce announced a 3-year Trade Policy in 2009-10, which is available for perusal on the website of Ministry of Commerce.|
|A: Incoterms is an abbreviation of International Commercial terms. This is an International rule for the interpretation of the most commonly used trade terms in international trade prepared by ICC (International Chamber of Commerce), which is based in Paris. The purpose of Incoterms is to avoid disputes between trading parties arising from different interpretation of such trade terms in different countries.
Today, most of the business of international trade in the world is conducted using incoterms as a general business custom. In order to avoid this misunderstanding and confusion between a seller and buyer, it is advisable for the exporter to add to the contract a clause to the effect that interpretation of trade terms are based on incoterms.
Most commonly, they stipulate the wording in the general terms to fulfill condition of the contract. Trade terms such as FOB, CIF and other terms that may be used in this contract shall have the meaning defined and interpreted by incoterms 2000, ICC, as amended. Unless otherwise specifically provided in the contract, there are 13 commonly used incoterms as follows:
FOB – Free On Board (-------------- Named Port of Shipment)
CFR – Cost of Freight (-------------- Named Port of Destination)
CIF – Cost, Insurance & Freight (--------------Named Port)
|A: The following terms are normally used in obtaining payments against exports:
LC (Letter of Credit)
Documents Against Payment
Documents Against Acceptance
Letter of Credit
When it comes to doing business with overseas buyers, the exporter bear the risk when the importers fails to pay for the consignment he has made, since there is no means to enforce the payment from the importer under the different sovereignty with different rules and regulations, and business customs. However, if a bank can guarantee the payment from the importer, the exporter can be assured of getting payment for his goods. Letter of Credit (L/C) is the bank’s guarantee that they will pay exporter in the event of the importer becoming insolvent. The bank’s guarantee is provided by issuing an L/C to the importer.
A Letter of Credit serves to facilitate smooth transaction in international trade. Therefore, it is extensively used around the world. Exporters are recommended to do business on L/C particularly when doing business with foreigners of whose financial standing they have little knowledge.
The Mechanism for opening an L/C is as follows:
Sight L/C, Acceptance L/C and Cash L/C
If the L/C terms demand that the Bill of Exchange drawn by the exporter is the type, which requires the importer to pay at sight, i.e. when the reimbursing bank presents the bill to him, L/C with such terms is called Sight L/C. On the other hand, the L/C, which has terms allowing the importer a deferred payment, is called Acceptance L/C. If the L/C terms require the importer to pre-arrange the amount of money for the import to be transferred from his bank to either the branch or correspondent bank in the exporter’s country, so that the money can be paid from that account when the exporter presents the documents to the bank, such L/C is called Cash L/C.
Under Irrevocable L/C terms, the L/C cannot be cancelled or withdrawn after it has been opened and notified to the exporter (who is the beneficiary of L/C) as long as there is no arrangement on cancellation or withdrawal among the applicant of L/C, opening bank and the beneficiary. However, in the case of Revocable L/C, it can be cancelled anytime upon the applicant’s request. Therefore, L/C should be irrevocable from the exporter’s point of view. The exporter has to be aware that any L/C received which does not specify either, as being revocable or irrevocable, will be regarded as being revocable.
The confirmed L/C is the one, which is confirmed and guaranteed by a third party bank for payment in the event that the opening bank becomes bankrupt. The exporter can be assured of a safe transaction if the L/C is confirmed by a leading bank.
The beneficiary (exporter) can transfer the Transferable L/C to a third party, but he is unable to do this with the Non-transferable L/C.
Under the term s of a restricted L/C (sometimes called special L/C), only a specific bank, which is usually the notifying bank, can purchase a Bill of Exchange from the exporter. However, under the terms of a General L/C, the purchasing bank is not specified, hence the exporter can present the Bill of Exchange to any bank and receive payment.
Document Against Payment & Document Against Acceptance
There are cases when traders do business without L/C terms. For instance, a buyer may not be able to obtain an L/C from his bank due to tight regulations. Another reason is when the buyer resides in a country where banks do not issue L/C at all. There are also cases when the exporter does not need an L/C since the buyer is a credible leading company or the import’s good financial standing is very well known to the exporter from the long standing business relationship. Generally speaking, exporting to an unknown overseas importer without L/C terms is rather risky, as there is no guarantee against non-payment by the importer. Nevertheless, there are two terms of settlement through documentary collection without using L/C. They are commonly called D/P (Documents against Payment) terms and D/A (Documents against Acceptance) terms.
Under D/P terms, the exporter ships the goods and presents the Bill of Exchange to his negotiating bank together with B/L and other shipping documents. Then, the bank may pay the exporter against the documents, provided that there is a previous arrangement between the bank and the exporter to do so.
However, in most cases, the bank does not pay the exporter immediately, but mails the documents to its correspondent bank (reimbursing bank/collecting bank) in the importer’s country. The reimbursing bank then notifies the importer on the arrival of the documents. When the importer pays the Bill of Exchange at the reimbursing bank, the bank notifies the negotiating bank in the exporter’s country to confirm payment from the importer.
On the receipt of this notice, the negotiating bank pays the exporter and the settlement is complete. This method of settlement is called “Collection of Documentary Bill of Exchange”.
It should be noted that this method of settlement entails certain risks for the exporter. For instance, if the importer des not pay the bill of Exchange and refuses to accept delivery of the goods, the exporter has to dispose off the goods in a foreign country. Therefore, the exporter may have to find another buyer either in the designated country or elsewhere. Even if he does find another buyer, he may have to sell his goods at a lower price. In addition, the exporter has to bear the cost of insurance and storage of the goods until they are disposed.
Using D/A term, the exporter gives a grant of deferred payment to the importer. If the exporter is assured of the importer’s integrity, he may grant him a credit facility. The process for D/A up to arrival of the documents at the reimbursing bank in the importer’ country is the same as that of D/P. After the reimbursing bank notifies the importer on the arrival of the documents, the importer checks the documents and agrees on payment (promise to pay at the later date), then the bank hands over the document to the importer.
Under D/A terms, the exporter draws the Bill of Exchange with grant of credit term called “Usance Bill” on the importer. “Usance” means the time limit for the drawee to honor the bill. With this arrangement, the importer is allowed a grace period for the payment (from 30 to 180 days after sight). This method poses a great advantage for the importer because he can sell the goods during the credit period and pay later. However, for exporter, this is even more risky then D/P terms due to obvious reasons.
Trust Receipt Function
In the case of settlement on D/A terms (Usance term), the importer is allow to delay the payment for such a period of 30, 60, 90 or 180 days after seeing the documents including B/L. Theoretically, during this grace period, he is allowed not be execute payment at the reimbursing bank (collecting bank), though he cannot receive the documents from the bank, for as a rule, the documents are handed over to the importer in return for payment. This means that the importer can not receive the goods from the shipping company as goods are only released upon submission of the documents.
Under such circumstances, the bank will release the documents to the importer on condition that he submits the T/R (Trust Receipt) to the bank. The T/R is a document that certifies that the importer recognizes that the goods are the bank property until the bank is paid. In this way, he can take possession of the goods from the shipping in exchange for the documents, and sell the goods to the buyer, and eventually pay to the bank within the said grace period.
|A: To price your product for export, you would normally start with cost of production. Allow for special designs, special runs, modification and costs necessary to produce a marketable product. Rather than using your normal administrative cost, it is much better to add a direct export administrative cost, which may include representative’s commissions, direct cost for attorneys, freight forwarders, accounting, telephoning, mail, labor, etc. Some costs for exporting will be less than for domestics sales and some will be more. When you quote a price to your customer, you want to be sure there is reasonable profit margin left for you. Price can be quoted several ways. Here are some examples:
You may have a better opportunity to sell to any foreign customers if you can quote them a price C.I.F. In order to do this, determine your direct packaging and crating costs for export; this may be different from domestic sale. Add domestic shipping costs to the port of exit, together with documentation costs (a freight forwarder can help you with this). Include the freight forwarder’s fee, any applicable port charges, air or ocean freight, and insurance to quote the Costs, Insurance, freight (C.I.F) price delivered to the buyer’s nearest port of entry. Any duty and further inland charges are at buyer’s expense.
Some exporters have made the mistake of quoting their domestic price without figuring the actual cost and have later discovered that they had not made the profit they estimated. Consider the Fair Trade Practice Laws also when pricing your product. To avoid possible “Dumping” allegation, normally, a firm should make on export sales at least the profit that it makes on domestic sales, and possibly more, if costs have been accurately calculated. The challenge is to make your price high enough to return a profit, but low enough to be competitive in foreign markets. If domestic sales are not utilizing full production capacity, export sales could bring production close to capacity, therefore reducing unit costs and raising overall profits. Nearly always the exporter’s responsibility ends upon arrival of the goods at buyer’s port. Import charges should only be calculated and included in price quotations when specifically requested by the buyer.
Export Price Elements:
Whole Sale Price
|A: Custom Duty, Sales Tax and Excise Duty etc. paid on raw materials required for production are refundable on export of manufactured goods. This is called Duty Drawback or rebate. Please regularly visit FBR website for drawback rates and latest news on procedures and other related issues.|
|A: Following are some important factors, in connection with the export procedure.
The Following documents are normally used in exports:
Port Shipment Documents
|A: In order to improve and enhance exports from Pakistan, the exporters have been provided numerous incentives as well facilities. The objective of these facilities/incentives is to make the exports Zero-rated, which means that the exporter does not pay any tax on the sales abroad. Major facilities/incentives available to exporters at present are:
|A: Following is the procedure for participating in Trade Fairs and Exhibition abroad, organized by Trade Development Authority of Pakistan:
The procedure for participation in the local fairs organized by TDAP is, more or less, the same as mentioned above.
Mentioned below is the procedure for participation of exporters, in private capacity, in trade fairs/exhibitions abroad.
Authorized Dealers may extend, subject to fulfillment of drill prescribed herein for each category, the following facilities to Pakistan registered exporters for participation in the International Trade Fairs/Exhibitions in their private capacity as and when approached:
Category ‘A’ where sample goods are taken for display:
Category ‘B’ –Trade Fairs/Exhibitions organized by the Chambers of Commerce and Industries (of Pakistan) or where exporter is participating in individual capacity where goods are taken for sale under Form ‘E’ procedure.
|A: Following is the procedure for participating in Trade Delegations, Organization by TDAP:
Along with the application following material are required from the interested delegates:
NOTE: If any of the above is not provided, it is assumed by TDAP that the applicant is unable to provide the same and this may have a negative effect on selection of the applicant.
|A: The export packaging requirement vary from product to product but the primary function of packaging is to protect the product from any damage due to contamination, crushing, breakage, climatic conditions and theft before, during or after its transportation from the place of its manufacturing to its destination. In order to avoid damage to the product, the exporter must take into account all possible factors that can prove to be hazardous to the product safety during its handling and storage at different points of its shipment to the final destination.
The factors that should be considered when deciding best type of packaging include fragility, durability, mode of transportation, resistance to abrasion, value, and susceptibility to moisture, chemical reaction like oxidation and corrosion, chemical stability and shelf life.
Normally, it is the market where the product is being sent that determines the requirement of the packing to be done, because these differ from country to country and importer to importer. The consumer also influences the type of packaging demanded by the importers in different countries. It is essential to get an idea of packing required by the importers in order to customize the packaging with the behavior and needs of consumers in their countries because it is an essential tool of marketing and remains with the products till the product is used or consumed. It also helps the exporter find out any restriction imposed by the importing country on the packaging of certain product or accommodation. For example, most countries, particularly the developed nations, will not allow import of fruit, vegetable and meat in packs that do not completely eliminate the chances of contamination.
The packaging requirements are also influenced by international guideline such as ISO standard as well as by national health, safety, environmental and consumer protection measures and regulation affecting the product and packaging concerned. Most developed, and some developing nations have their own standard-setting bodies to serve their domestic needs, focusing primarily on the requirement of their industries and the needs of their consumers.
General Packaging Guidelines
Use a rigid carton with flaps intact. For best results use a new box large enough to allow room for adequate cushioning material on all sides of the contents. Never exceed the maximum gross weight for the box, printed on the bottom flap.
Use adequate cushioning material. For this wrap each item separately. Fragile items need to be protected from each other and separated from the corner and sides of the box to prevent damage, Use air-encapsulated plastic or expanded polystyrene “peanuts” (for lightweight products), foam-in-place (foam sprayed into boxes to form a protective mould around contents), corrugated dividers or crumpled newspapers or Kraft paper as cushioning material.
Use adequate sealing material. Use strong, pressure-sensitive or nylon reinforced or water-activated tape designed for shipping. Do not use strng.
Use a single address label that has a clear, complete delivery and return address. Place duplicate label inside the carton.
Always print the characteristics such as fragile, abrasive, breakable, etc. of the product on the cartons for their proper handling and storage.
The list of national standards applicable to packaging is pretty long. It is enough to mention that they deal with matters as varied as static and dynamic performance tests, size requirements types of packages, closure techniques and compatibility with the ISO freight containers and agricultural packaging.
The standard-setting organizations of most countries are, with very few exceptions, associate members of the International Standards Organization (ISO), which means that new ISO standards, by and large, represent their technical views. Thus in the presence of ISO standards published over the last 20 years or so (available at www.iso.ch) means that there is less need to refer to or rely on national standards. As an exporter involved in international trade, the exporter should try to adopt ISO standards and apply them in accordance with the needs and requirements of the buyers and the importing countries.
The Packaging Standards are Classified as under
Dimensional Standard: They ensure the inter-changeability of packaging components and accessories and assist modular packaging. Such standards help to curb proliferation of package dimensions and thus assist consumers in making objective comparison of the package contents and price.
Standards Concerning Quality of Resistance to Wear: They guarantee that the product will meet the purpose for which it has been designed.
Standard Test Method: These methods are used to compare materials and products intended to be used for the same purpose. They determine, for example, the breaking point of the corrugated board used in the containers for transport by sea. A test method must be developed before any standards relating to the aspects of use can be established.
Standardized Technical Terms & Symbols: These terms and symbols are adopted throughout a country by every industry as a common technical language to be readily understood within the sector.
Codes of Standard Practice: In general, these codes recommend method concerning the technical procedures for packing for use in specified industries. The packaging industries in some highly industrialized countries have already adopted such codes. Other lesser-developed countries often use the code as operational guidelines and in reference manuals.
The packaging requirements vary from product to product and an example of standards for Kino export packaging from Pakistan are given below:
What is eco labeling?
The eco label was intended to encourage sustainable production and consumption by creating awareness among consumers of the environmental effects of everyday products. Its objectives are:
The purpose of eco-labels is to assist the consumer who wants to choose environmentally preferred products. They are particularly prevalent in Northern Europe where there are currently a number of eco-label schemes up and running.
Environmental labeling or “eco-labeling” plays a very important part at present, especially with the increased awareness on the need to protect the environment. Consumer, industrialists, technologists, and the society as a whole are not only making their purchasing decisions based, more and more, on the key aspects associated to the products itself; but also the environment effects before, during and after manufacturing of the products. Thus “eco-labelling” presents a judgement of one’s product’s relative environment qualities compared to another functionally and competitively equivalent product. It also provides the message that a product is environmentally friendly at all stages of its life cycle and that it satisfies both voluntary and mandatory requirements. Environmental labeling makes a positive statement that identifies products and services as less harmful to the environment than similar products or services. Eco-labeling programs can be export sector driven or state mandated.
If appears as though the prevalence of eco-label schemes, in particular those involving rapidly consumed household goods, will increase. However, for more durable goods such as personal computers, eco-labels are unlikely to be a factor in the purchasing decisions of the vast majority of consumers. For manufacturers of such durable goods, the more important question concerns the professional user and in particular the public procurement market.
How it Works?
The eco-label scheme is voluntary and open to manufacturer or from both EU and non-EU countries. Manufacturers are under no obligation to apply for the eco-label. The definition of criteria for the award of the eco-label is based on the study of product life-cycles. The commission is responsible for adopting and revising the criteria. Either the commission or a competent body can propose a new product group.
The award of labels of products is a matter for national authorities (Competent-Bodies). These bodies are independent and neutral. Manufacturers or importers applying for an eco-label must address the competent body in the country where the product is manufactured or into which it is imported from the third country. Currently, 28 eco-labeling programs exist world-wide including Brazils Department de Certifi caoca, Gerente; Ccnada’s Environmental choice program; European Union’s eco-label Award, Germany’s Blue Angle Program, Japan’s Eco-mark Program; Norway and Sweden’s Nordic Swan Program; Thailand’s Green Label; and the United States Green Seal Program.
|A: It is important that the exporter knows the export market before starting any export business. The exporter should know in advance, the distribution channel, the market segment, the governing regulations and the price at which his goods can be sold in the new market. This information will be useful for him when drawing up his own marketing plan and negotiating with the importer.
He has to develop his own strategy to match his products with the local needs and preferences of consumers. There is a slim chance that his product will fit the target market without some modification. He may have to change the size, color, specification, etc. in order to meet the consumer’s preferences and the rules and regulations concerning the distribution of the product. Therefore it is helpful for the exporter to know the following points regarding his target market before he commences his export business:
For those who do not have any financial or organizational capability to engage marketing companies to conduct the research, there are some other ways to know more about the target market. Listed below are some ways to find information on overseas market:
|A: During the course of international trade, commercial disputes between the exporters and the importers may arise because of a variety of factors, ranging from non-payment of commission or short supply and inferior quality of goods to non-shipment of the ordered goods or cancellation of the order.
Such disputes between the two parties in international trade contract can be resolved by employing one of the following methods and means:
It is seen that the disputing parties generally fail to settle their dispute through direct negotiations. Lawsuits are avoided because of costs, delays and other factors. To avoid expenses of legal action or arbitration, the TDAP in liaison with Pakistan’s trade officer abroad, provides mediation services free of costs for amicable settlement of the dispute arising out of export trade, if an exporter approaches it with a complaint against and importer or vice versa.
The following procedure is adopted by the TDAP to settle the trade disputes when an exporter approaches it with his or her complaint against the buyer:
Function of Commercial Courts
Commercial courts have been provided for in the Imports and Exports Control Act. 1950., which empowers the Federal Government to establish as many Commercial Courts as it considers necessary. In terms of powers vested in the Federal Governments two Commercial Courts, one each at Lahore and Karachi, have been set up to adjudicate on trade disputes. Th e commercial courts take cognizance of trade dispute on complaints in writing made by an officer of the TDAP. The decision of the Commercial Courts is final and can not be questioned in any courts of law.
|A: I. ROLE
1. The role of Pakistani Trade Officer stationed abroad is to increase the foreign exchange earning of Pakistan through promoting and facilitating the expansion of Pakistan’s visible and invisible exports to the territory to which he is assigned. His principal responsibilities are therefore:
2. Through fulfillment of this role, the Trade officer will not only contribute to his Government’s economic and trade related objectives, but also assist in the strengthening of Pakistan’s general bilateral relations with the countries of his Post territory.
3. To perform this role effectively, the trade officer will be expected to:
6. Form time to time, the Trade officer may also be required to: • Negotiate and sign sales and purchase contracts on behalf of Government and Semi-government agencies; • Participate in bilateral and multilateral meeting convened in the post territory; • Provide assistance on the securing and implementation of economic assistance programme.
7. In certain posts, the Trade Officer may, in addition, be responsible for servicing Pakistani residents in post territory with respect to provisions for imports into Pakistan against their foreign exchange earning under the Gift Scheme and the Baggage Scheme. For this activity he should be guided by instructions issued by the FBR, as amended from time to time.
|A: The Generalized System of preference (GSP) is a system whereby preferential treatment by way of a reduced or duty free tariff is granted by developed countries known as preference giving or donor countries, to eligible products imported from the development countries. This preferential treatment is granted without any reciprocal obligation on the part of the developing countries.
The main purpose of the above tariff concession scheme is that the exporters in the preference receiving countries should be able to increase their export earning contributing to the foreign exchange earnings of their country, both through obtaining better export prices for their products (importers will pay a reduced rate of duty or often no duty at all) and by increasing the volume of sales (importers will be more interested to import the products from beneficiary countries than from any where else, in order to benefit form the margins of preferences provided).
It is believed that the main objectives of Generalized System of Preferences will be met by the ways given below:
Scheme in Operation
Generalized System of Preferences is at present in the form of following different schemes operated by preferences giving countries:
Countries that accept form ‘A’ for the purpose of the Generalized System of preferences (GSP)
Australia, Canada, Japan, New Zealand, Norway, Switzerland, United States of American, Republic of Belarus, Republic of Bulgaria, Czech Republic, Republic, Republic of Hungary, Republic of Poland, Russian Federation, Slovakia.
How to Export under GSP Scheme
To establish the tariff classification
If an exporter wished to benefit from Generalized System of Preferences he has to establish classification of his products within the Customs Tariff Schedule of the country where he has an export interest. Normally this will be the CCCN (Customs Co-operation Council Nomenclature) heading is used in most preference giving countries. It is believed that harmonized commodity description, and coding system has been introduced by most of the countries.
Check the product coverage
Many exporters think that all products are covered by all the GSP Scheme but this not true. The exporters should first determine whether is products are covered in the GSP Scheme of the markets where he has an export interest. He must examine the products lists of GSP Scheme by reference to the precise tariff classification and products description on his goods.
Calculate the preferential margin
When the exporter becomes ascertained that his products are eligible for GSP, he should have calculated the preferential margin of his product which will enjoy preferential treatment in a particular market, so that he can calculate the prices for offering to the importer. For finding the margin he has to refer to the customs tariff schedule of the market country in both, the fall rate of duty and the GSP rate of duty. The deference between these two is the preferential margin. In some cases the preferential margin may be quite larger and the exporter would be able to include a relatively larger profit, in comparison to his price offered to the countries, other than GSP Scheme. When preferential margin is small exporter cannot derive immediate financial benefit form this tariff cut. However, in the long run he may be able to gain financial benefit by obtaining a new or a larger market for his product. If the exporter can continue to sell his products to the importer he will be able diversify and expand his export.
To check graduation lists
The exporter must determine if his product(s) subject to any quantitative lamination or graduated for any particular country. For example textile, leather and carpets are graduated since 1997-98, in European markets.
To study rules of origin
An exporter has to be sure that his product are fulfill the origin requirements of the particular GSP Scheme, in which he is interested and he must be satisfied that he is getting preferential treatment for his products.
The main objective of GSP Scheme is to encourage manufacturing activity. Awareness or rules of origin is necessary and it should be assured that the benefit of the GSP goes to the preference receiving country.
Prepare the documentary evidence
The application for GSP treatment is supported by appropriate documentary evidence regarding origin and details of the consignment of the products. GSP from ‘A’ is a certificate that is accepted by all preference giving countries. It must be certified and signed by a Government authority in preference receiving country. TDAP, in Pakistan is the authority to certify/sign and issue this document.
Where to seed advice
Exports who wish to know more about GSP Scheme in general, or who wish to obtain more detailed information bout the products covered by preferential margin, rules of origin, tariff classification for their products in various schemes or have problems in the administration of the scheme by the preference giving countries may seek assistance from TDAP and its regional offices in Pakistan.
Origin criteria for GSP
To qualify for preferential treatment under the GSP the products must be either:
1. General System of Preferences
Certificate of origin (Combined Declaration ^ certificate) Form “A”.
Countries that accept the form of above scheme “A” for the purpose of Generalized System of Preferences (GSP)
Australia, Canada, Japan, New Zealand, Norway, Switzerland, United States of America, Republic of Belarus, Republic of Bulgaria, Czech Republic, Republic of Hungary, Republic of Poland, Russian Federation, Slovakia.
European Union: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain Sweden, United Kingdom.
2. SAARC Preferential Trading Arrangement (SAPTA)
(Combined Declaration & Certificate) This form of the Scheme is acceptable among SAARC countries, which are: India, Pakistan Bangladesh, Sri Lanka, Maldives, Bhutan and Nepal
3. Preferential arrangement among developing countries negotiated in GATT certificate or origin.
(Combined Declaration & Certificate) Following are the signatories to preferential arrangement among developing countries in connection with above scheme form: Bangladesh, Mexico, Turkey, Brazil, Pakistan, Tunisia, Chile, Peru, Uruguay, Egypt, Republic of Korea, Yugoslavia & Romania.
4. Global system of trade preferences
Certificate of origin (Combined Declaration & Certificate) This form of the scheme is acceptable by Romania & Korea.
5. Certificate in regard to certain handicraft products (HANDICRAFT)
Issued with a view to obtaining the benefit of the preferential tariff regime in the European Community.
A: Export Houses
An Export House in Pakistan means a Trading Company registered as an Export House by the competent authority with its secretariat in TDAP.
Conditions of Eligibility for Registration
An application for registration shall:
Fruits and vegetable exports would be eligible for 10% wastage allowance.
Any two or more exporters who, having together had during the year preceding to registration, an export performance of not less than $ two million, have formed a consortium and get themselves registered as a trading company under the companies ordinance 1984 (XL VII of 1984) and as an exporter under the Importers and Exporters (Registration) Order 1993, shall also be eligible to apply for registration as an export House.
Earnings in foreign exchange on the following accounts shall also be taken into account for ascertaining export performance for the purposes of sub-paragraph (1), (2) and (3) namely:
Application Form and Fee, etc.
Grant of Registration and its Validity
Export by Export House
After the expiry of the first year of its registration every Export House shall export one or two of its products under the brand name and within five years of registration shall export all its products under its brand name.
Facilities available to Export Houses
The competent authority may permit an export house desiring to set up display centers already including warehouses where necessary, and may allow reasonable foreign exchange for the purpose.
Accounts and Return to be maintained and submitted
An Export House shall maintain proper accounts of imports and exports and submit to the competent authority a pre-audit annual return and a statement of exports which shall, inter-alia, the exports made on behalf of each supporting manufacture.
Cancellation or Suspension of Registration
The registration of and Export House shall be liable to be cancelled or suspended for a specific period under the orders of the competent authority if:
No order shall be made under sub paragraph (1) unless the concerned company has been given an opportunity to show cause against the proposed action.
A company aggrieved by the decision of the competent authority under this order may, within fifteen days of the receipt of the decision, prefer an appeal to the Secretary, Ministry of Commerce, Government of Pakistan.
|A: The Details of the Custom Export Tariff and Development Surcharge on Exportation of goods, are contained in the following Statement:
Levy of 0.25% Development Surcharge on Exportation of Goods Under No. XIII of 1991
Development surcharge on exportation of good:
Government of Pakistan
Ministry of Finance
Islamabad, 1st July, 1991
S.R.O604(I)/9: In exercise of the powers conferred by section II of the Finance Act, 1991 (XII of 1991), the Federal Government is pleased to exempt the Goods specified in the table below from the whole of the Export Development Surcharge leviable thereon, namely: