Coal Import from Afghanistan into Pakistan

Introduction:
The organization, Zadran Limited, imports coal from Afghanistan in to Pakistan, via
road. The imported coal is mainly supplied to the cement factories in Pakistan, specially
within the viccinity of Taxila, where the main office of Zadran Ltd is established. There
also lies a downloading and stocking facility in Pakistan, where the iimported coal is
stocked.

The process of purchase and import of coal is quite a complex process, including
the complexities of variations in exchange rates, spot prices, taxes, duties and ever
changing political and security situations as well. Moreover, in the absence of many
adhoc processes during the purchase and transportation of coal from Afghanistan into
Pakistan, some of very important financial record is either not generated properly or is
totally missed to be reflected on the books.

The purpose of this document is to capture the processes and identify the key
points of financial transactions and required documentation for an authentic accounting
purpose. The organization has been subject to many scrutinies and penalties by the
regulatory authorities in Pakistan (FBR) during he past years due to the gaps in their
accounting procedure and missing or inappropriate documentations work.

This document is in a format of process flow diagrams and then details of the
processes, captured, as per the description of the employees of the organization. The at
best, also caters for the modalities involved in the processes, in orde to highlight them for
a proper accommodation in the designed possess after a GAP analysis and TO-BE
modelling. This document is prepared with the goal of defining the processes in order to
design a proper accounting system (on software or otherwise) in order to meet the
regulatory standards to which the organization is subjected to in Pakistan and
Afghanistan as well.
Process Process Name Description
ID

1 Purchase Order Coal is purchased on spot price. There is no proper generation of a

purchase order in a document form, rather the purchase order is
made on phone.

A PO is required to be generated with the information of the seller,

freight and labor involved.

2 Purchase of Coal After the purchase has been authorized by the office in Pakistan, the
partner in Afghanistan purchases the coal. Again, no documents are
generated here for the record but rather the transaction is recorded
on registers.

A proper invoice is required to be generated along with a Waybill or a

Bill of Lading.

3 Loading of Coal & After the purchase of coal from the seller, the coal is loaded into the
Freight charges trucks for shipping into Pakistan.

The loading and freight charges are also decided on spot. Moreover,
there is some toll tax to which the carriage vehicle is subjected to, on
its way to the destination of shipment.

Currently there is no system of properly accounting these costs as

well. A Bill for freight and the toll should be generated here.

4 Afghan Border At the border of Afghanistan, the shipment is subjected to Export

Control (Export duty. Export duty is levied upon by assessed value of the coal and
Duty) not the invoice price.
There should be a receipt of the transaction

5 Clearing Agent At the Border, the shipment is handled by the Customs Clearing
agent added into the WeBOC.

At this point, the Goods Declaration form is generated for the levy of
Customs and other duties and taxes by the Pakistani Border Control
Authorities.

Also to mention, as previously there is no mechanism of creating an

invoice a the place of purchase of he coal, so the Clearing agent
also generates a fake invoice as well as a fake bill of lading for
theconsumption of regulatory purposes at the border.

6 Pak Customs The taxes and duties levied at this point are:
 1. Customs duty
2. Advance Custom Duty
3. Sales Tax
4. VAT
5. KP Cess
6. Cargo Freight Insurance (if insurance is not done previously)
7. Electronic Import Form (EIF) -- via WeBOC

7 Weighing and The cargo is scanned and weighed at NLC dry port checkpoints at
Scanning at NLC the border. They also charge a parking fee per truck.

The problem here is that the Weighing slips, the parking fee tickets
and the scanning receipts are taken by the guards on the route, later
on. So this documentation is also missing in the records.

8 Change of vehicle After the scanning and weighing process is completed at NLC
Dryport, if the freight carriage vehicle has a contact and also
possesses the required pass to travel into Pakistan, then the
carriage vehicle proceeds to the destination.

If, by the lack of permit or contract, the carriage vehicle cannot travel
into Pakistan, then the truck is unloaded at the border terminal and
another truck is hired to carry the coal to the destination.

In the second case, there should also be generated a bill for the
freight charges, which is currently not the practice.
Another thing to note here is that even some of these payments are
made by the Customs Clearing Agent.
The other record missing here is the toll tax on the way to the
destination of downloading by the vehicle travelling in Pakistan from
the Afghanistan border.

9 Clearing Agent In case the carriage vehicle is hired by the clearing agent, the agent
is required to generate an invoice for the freight, loading & unloading
charges. However, currently, the invoice system is missing and the
transactions are recorded on a register.

10 Ship to site After the vehicle is ready to pass beyond the border, the decision to
be made is to either enroute the vehicle directly to the site of the
customer or it should be directed to the stockpiling/storage site.

11a Payment by Clearing In case the shipment is directed to the cusomer site, the payment is
Agent made by the Clearing Agent at the border terminal.
A bill is supposed to be generated at this point for freight and other
loading and unloading charges etc.

11b Unloading at storage In case the shipment is directed to the storage site, it is downloaded
 site there.

The freight is payed to the drive upon delivery at the site, along with
the charges of unloading to the laborers. A bill is required to be
generated at this spot as well.

12 Storage of The coal stockpiling and storage site is a rented facility, for which
Stockpiles rent is paid. Also, the other utilities e.g. water, labor and electricity
are also to be accounted for. Therefore a proper bill for the facility is
also required to be reflected in the accounting system for capturing
expenses.

13 Loading & Freight For transportation at the customer’s site, the coal is loaded into
carriage vehicles. Here, the cost of labor and freight are to be
captured in the form of a Bill.

14 Shipment to The carriage vehicle delivers the coal to the customer’s site and the
Customer site delivery is confirmed by a receipt signed by the authorized
representative of the customer or the organization. The receipt
serves as the baseline for generating an invoice for the customer to
process payment for the coal.