Pakistan restricts B2B barter trade mechanism to Afghanistan, Iran, and Russia

The Pakistan government has introduced key amendments to the Business-to-Business (B2B) Barter Trade Mechanism, 2023, limiting its application to trade with Afghanistan, Iran, and Russia, and expanding regulatory oversight on participating entities.

According to a notification issued under the Import and Export (Control) Act, 1950, the revised framework aims to tighten compliance measures, introduce definitions for trading consortia, and ensure alignment with international sanctions protocols.

The amended order now explicitly states that the B2B Barter Trade Mechanism shall apply only to trade between Pakistan and Afghanistan, Iran, and Russia. It also adds clarity on the types of entities allowed to engage in such trade and introduces stronger accountability requirements.

Key amendments

Under the revised mechanism:

• A new definition of “consortium” has been added, referring to two or more private Pakistani entities entering into a barter contract with one or more private entities of a single foreign trading partner.
• The term “sanctioned entity” has been defined as any individual or company barred from trade activities due to United Nations or other international sanctions, as notified by the Ministry of Foreign Affairs.
• The barter trade will now be based on the value equivalence of imports and exports, with a quarterly reconciliation requirement. Traders must net off the value of goods within 120 days of the transaction; failure to comply may lead to cancellation of trade authorization and further legal action by customs authorities.
• In case of a trading consortium, all entities involved must ensure compliance with the barter authorization and be collectively responsible for netting off the value of goods.

Certification and compliance

The previous requirement for foreign entities to be certified as “non-sanctioned” by a Pakistani diplomatic mission has been replaced. Now, an undertaking by the Pakistani entity, consortium, or concerned Chamber of Commerce must certify that the foreign company or individual is not a sanctioned entity.

Additionally, references to specific commodity lists in earlier appendices have been updated to align with the current Import and Export Policy Orders.

The amendments also emphasize that import and export must be mutually balanced in value, with minor variations allowed under a separate tolerance mechanism. A sub-paragraph allowing flexibility in certain cases (sub-para 6) has been omitted.

The Federal Board of Revenue (FBR), through its designated Collectorates of Customs, will monitor implementation and ensure compliance with the new regulations.

These reforms are part of the government’s broader strategy to facilitate trade with regional partners through alternative financial arrangements while maintaining transparency and adherence to global norms.