Thursday September 28, 2023

Import guidelines for foreign suppliers of POL notified

Guidelines enabled foreign suppliers not only to store crude oil, but also POL products at Pakistan’s ports

By Our Correspondent
September 05, 2023
In this photo, an overview shows tankers parked outside a local oil refinery in Pakistans port city of Karachi.  AFP/File
In this photo, an overview shows tankers parked outside a local oil refinery in Pakistan's port city of Karachi.  AFP/File

ISLAMABAD: The government has notified the policy guidelines for the import by foreign suppliers through customs-bonded storage facilities in the country to enhance supply access of petroleum products to the local oil marketing companies (OMCs).

The guidelines have enabled foreign suppliers not only to store crude oil, but also POL products at Pakistan’s ports and anywhere in the country ensuring a sustainable supply of fuel. This would also help avoid any fuel availability crisis in future.

The guidelines would also aim to diversify the sources of supply and to avail freight economies of scale, paving the way for international oil suppliers to make investments in the storage and trade of crude and petroleum products.

Under the policy guidelines notified on September 1, foreign suppliers or their registered subsidiaries will be allowed to maintain an inventory of crude and petroleum products in bulk form, in their own private bonded warehouses or Customs Public Bonded Warehouse located anywhere in Pakistan (without foreign exchange remittances) pending its sale to local purchasers or its re-export from storages to other foreign countries.

The Economic Coordination Committee (ECC) that met on June 27, approved the policy guidelines for the import of foreign supplier’s accounts through customs-bonded storage facilities which was ratified by the federal cabinet on June 28.

As per the guidelines, foreign suppliers will have the option to establish their own registered business or operate through a subsidiary company registered in Pakistan, having bank accounts in the country to act under the relevant Pakistani laws for undertaking business activities.

Additionally, the subsidiary can develop its dedicated storage infrastructure and utilise customs public bonded warehouse facilities for storing crude oil and petroleum products under the Pakistan Oil (Refining, Blending, Transportation, Storage, and Marketing) Rules 2016.

The customs bonded warehouse of the consignee must be licensed by the Customs after meeting the requirements for operating as a public bonded warehouse for storing crude oil and petroleum products. Moreover, the consignee must be registered with the FBR Inland Revenue under the Sales Tax Act 1990 as an importer and exporter.

The consignee will have the options to develop their own dedicated storage infrastructure and utilise the customs public bonded warehouse facility on a rent basis located around port premises or anywhere in Pakistan for storing crude oil and petroleum products.

The consignee is not required to file an Electronic Import Form (EIF) with their goods declaration (GD) for in-bonding when storing goods received under the scheme. Instead, they can directly sell the goods to licensed purchasers, such as refineries or the OMCs, in either US dollars or Pakistani rupees against the opening of a Letter of Credit through scheduled banks.

However, for selling the bonded goods to local purchasers, the Consignee must file an EIF with their GD for ex-bonding. This step is necessary to clear the bonded goods for custody transfer to local purchasers for subsequent home consumption, with all applicable duties and taxes paid by the consignee on behalf of the purchasers.

The policy also addresses pricing mechanisms for the sale of petroleum products within the country. It stipulates that the pricing mechanism approved by the government and the Oil and Gas Regulatory Authority (Ogra) should be applicable.

Regarding sanctions, the policy asserts that no product falling under Appendix-A (Negative List) of the Import Policy Order can be supplied under this scheme. Moreover, the consignee is required to provide a Certificate of Origin for the product and an undertaking to relevant regulators (FBR) confirming that neither sanctioned products are imported nor any sanctioned entities have supplied such products. Conditions related to specific products falling under Appendix-R (Restricted Items) of the Import Policy Order must also be fulfilled by the consignee.

Since petroleum products procured under this scheme are primarily intended for local purchasers, the products must adhere to the specifications approved and notified by the government. Vessels transporting these products will only be allowed to discharge their cargo once the quality has been cleared by the Hydrocarbon Development Institute of Pakistan.

The policy further outlines that Ogra will ensure that the allocation and lifting of petroleum products from refineries are not compromised by local purchasers. Additionally, products available through this arrangement will not be included in mandatory days’ coverage until they are purchased and transferred out of the consignee’s bonded storage.

In addition to imports, the policy permits the re-export of crude oil and petroleum products received into the country for storage in customs public bonded warehouses. This can be done without requiring an LC, advance payment, or electronic export form.

The FBR will allow access to its MIS systems to Ogra for the visibility of petroleum products in the customs bonded storages on the supplier account and OMC account whichever the case may be.