Regulatory and Legal Framework for Foreign Trade
The statutory stack
Pakistan's foreign trade regime sits on four pillars: the Foreign Exchange Regulation Act, 1947 (FERA), which criminalises dealings in foreign exchange outside permitted channels; the State Bank of Pakistan Act, 1956, under which SBP administers exchange control; the Imports and Exports (Control) Act, 1950, under which the Commerce Division issues the Import Policy Order (IPO) and Export Policy Order (EPO); and the Customs Act, 1969, which governs valuation, clearance and the goods declaration. The Foreign Exchange Manual (FEM) is SBP's operating rulebook - it does not create law, it tells banks and traders how SBP will apply the law.
Who may do what
Only Authorised Dealers (ADs) - banks authorised by SBP under FERA - may handle trade-related foreign exchange. Exchange companies handle retail currency and remittances but are not ADs. Two permissions matter in exam terms: general permission (transactions listed in the FEM that ADs may approve themselves) and specific/SBP prior approval (everything else). The default rule is restrictive: if a transaction is not expressly permitted, it requires SBP approval.
Operational layer
Documentary flows are lodged electronically - the Electronic Import Form (EIF) and E-Form for exports - increasingly through the Pakistan Single Window (PSW), with customs clearance through WeBOC. Trade disputes and documentary rules are handled by the ICC publications (UCP 600, URC 522, URDG 758) only because contracts and the FEM incorporate them.
Traps and rule of thumb
Exam questions love mixing up the IPO/EPO (policy, Commerce Division) with the FEM (procedural, SBP), and assuming the Customs Act regulates payments - it does not. Another trap: treating an exchange company as an AD. Rule of thumb: identify the actor (SBP / AD / Customs / Commerce) before identifying the rule; the same shipment is touched by all four under different instruments.