Realization of export proceeds in Pakistan
Realization of Pakistan Export proceeds in Bank Account Pakistan:
Realization of foreign remittance in bank against exported goods is sometime cumbersome process. But it could be simplified if documentation is in line with the exports.[1]
When goods are shipped outside country, an invoice is created on the basis of which export documentation is completed, E-form and Goods of declaration is produced which shows the details of the shipments such quantity, unit price, total value and cosigner's and consignee's name, country of origin, Destination country etc.[2] [3]
Goods which are exported through LC-Letter of credit are considered more secure than sending through TT-Telegraphic transfers. But there is cost for opening LC with bank which is borne by applicant with mutual consent with beneficiaries who are the actual recipient of export foreign remittance. An applicant of LC could transfer the opening of LC cost to the beneficiary as well. Where it happens the cost of charges are adjusted in the export invoice.[4]
When goods are export through LC, bank keep in touch with applicant foreign bank for the receipt of bill / invoice payment. Normally, payment maturity date is printed on the LC which tell when payment will be made by bank. Beneficiary bank in Pakistan get in contact with the foreign bank when payment is close to the maturity.
Where LC is used for payment, a set of export documents is send by the bank in Pakistan to the foreign bank which is entirely different when payment is made through TT. Exporter send documents directly to customer who in turn send document to their bank for payment.
Most of foreign customers now use supplier portals to keep track on the supply chain which also provide details of the payments of i.e. date of payment, total value of payment and the bank where they are sending the payment which is exporter / beneficiary bank.[5]
Day of Realization of the Export receipt
When customer make payment through their bank, a soft message is send to bank in Pakistan by foreign bank who once receive payment informs exporter to provide detail of payment such as invoice number and amount to be realized against invoice(s) if there is more than one invoice.
Foreign proceeds are received in the local bank's Nostro account who then transfers the foreign remittance which could be in a currency other the local currency Pak Rupee in the exporter bank account.[6]
Bank sends a soft message to exporter on the day it receives export receipt who in return send details of all the invoices which is to be realized against the foreign proceeds. There is nominal foreign bank charges on routing the payment through foreign bank which is not on individual invoice but on the whole sum of funds transferred to Nostro account deducted by foreign bank. Once local bank has all the details of the invoice(s), it realizes proceeds in the exporter bank account without charging any transfer fee.
Job doesn't over here yet for exporter and local bank. Bank has to make sure that the invoice which is used for the realization of export proceeds is paid in full. If there is a partial payment against an export invoice, bank confirms that covenant set by the State bank of Pakistan doesn't break, which means if payment receive within the covenant it is accepted by the State of Pakistan, inquiry will be raised if it breaks the covenant which currently stands at 10 %.
Exporter gets 6 months from the date of maturity to make realization in their bank. If invoice doesn't get paid by then State bank of Pakistan send a show cause notice to exporter bank and exporter for the definite explanation. Payment has to be as per the GD and E-form which is declared to the Custom authorities of Pakistan and State bank of Pakistan. Once the foreign funds are transferred in exporter bank account, they will be available for their use.
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