New FBR Amendments to EFS. Stricter Rules & Penalties Ahead!

The Federal Board of Revenue (FBR) has put forward significant modifications to the Export Finance Scheme (EFS) to combat misuse and improve tax adherence. These revisions, announced under SRO204 of 2025 in the Customs Rules 2001, introduce stricter monitoring systems, elevated financial security measures, and the possibility of rescinding EFS benefits for iron and steel scrap importers.

Reports indicate that the final version of the amendments will be ready within a week, following consultations with relevant stakeholders. A key proposal includes eliminating the Engineering Development Board’s (EDB) role in endorsing engineering goods and input-output ratios, with all references to the EDB expected to be removed within the next six months.

The proposed changes also impose new security protocols for manufacturers who also export. Companies with annual exports exceeding $20 million over the past two years would be required to provide indemnity bonds and post-dated cheques (PDCs). Companies exporting less than $20 million will be asked to submit PDCs that match their average duties and taxes on inputs from the last two years, in addition to bank guarantees for any deferred duties.

Entities with a history of non-compliance—such as outstanding recoveries, legal violations, or criminal cases—will face immediate suspension from the scheme. The amendments also introduce more stringent reconciliation and stock auditing practices, where non-compliance could lead to further suspensions.

For tighter oversight, FBR has rolled out enhanced monitoring measures, including real-time tracking of imports and exports through WeBOC/PSW systems, quality control checks at import/export points, and more frequent regulatory audits. The new rules shorten the utilization period for input materials to nine months, with exceptions only for special cases. Vendors will now need to be pre-approved, geo-tagged, and listed in the WeBOC system before transactions occur.

Additional domestic sales regulations have also been introduced, including a cap on factory rejects and B-grade goods at 5% of total production, with excess items taxed at import rates. Wastage claims exceeding specified limits will be subjected to greater scrutiny.

Financial penalties for breaching the EFS rules have been outlined, with immediate penalties for unauthorized removals or extended utilization periods. Delays in reconciliation statements could also result in restrictions on future acquisitions.

To ensure smoother operations, the chief collector for exports and IOCO must resolve cases within 60 days. New EFS applicants will be required to submit quarterly reconciliation reports for their first three years. Regulatory collectors will also be tasked with conducting regular stock-taking and monitoring the utilization of records to guarantee compliance with the updated regulations.