Policy Board considers imposing RD on non-essential items’ import

The government has tasked the Tariff Policy Board to consider the imposition of a regulatory duty (RD) on all non-essential items to discourage imports and ease pressure on foreign exchange.

The commerce ministry had recommended the economic coordination committee (ECC) in a recent meeting to impose a regulatory duty on non-essential items after detailed consideration.

While lifting the ban on the import of around 800 items, the government had planned to impose regulatory duty on the import of all non-essential items.

However, the Special Secretary of Commerce said during the meeting that the imposition of regulatory duty (RD) rates on all non-essential items would require further deliberation with all concerned and would be subject to the decision of the Federal Cabinet.

The ECC directed the Tariff Policy Board to consider the imposition of RD on all non-essential items and submit a summary to the Federal Cabinet.

The Ministry of Commerce informed the ECC that in order to curtail the rising current account deficit (CAD), the Ministry, with the approval of the Cabinet, had imposed a ban on the import of about 33 classes/categories of goods covering more than 860 products/tariff lines on May 19, 2022.

However, under proviso to para-4 of the IPO 2022, the imports for which Bill of Lading Airway Bill or Irrevocable Letter of Credit were issued prior to the notification of the SRO were exempted from the ban.

Also, in order to safeguard the local industry, the import of raw materials, intermediate goods, and industrial equipment/machinery required by industrial/ manufacturing concerns and foreign grant-in-aid projects were also exempted from the ban.

Business Community Protested against the ban on imports

FBR also issued a similar clarification to facilitate bona fide passengers. Immediately after the imposition of the ban, the business community including the Federation of Chambers of Commerce & Industry raised their concerns and started approaching Ministry of Commerce for relaxation of ban and release of their held-up consignments.

As an immediate relief, a summary moved by the Ministry of Commerce, ECC and Cabinet allowed the release of those shipments which had landed at any port in Pakistan on or before June 30, 2022, subject to payment of a penalty. To this effect, a formal notification was issued after receipt of a decision of the Cabinet.

The Ministry of Commerce stated that analysis of the import data showed that there was a declining trend of imports since the imposition of the ban on May 19th, 2022.

The overall imports of the banned items had shrunk by over 69%, i.e., from $399.4 million to $123.9 million for the period from May 2022 to July 19th, 2022.

The major contributors to this reduction of approximately $275.5 Million were auto CBU and mobile CBU imports with a 79% share in the total reduction.

While the remaining 21% reduction spreads over 810 tariff lines impacting multiple sectors of the economy including those businesses which were foreign investments in Pakistan.

RD on non-essential items

In pursuance of the decision of the Cabinet to review the ban after two months, owing to serious concerns raised by Pakistan’s major trading partners on the imposition of the ban and considering the fact that the ban had impacted supply chains and the domestic retail industry, several review meetings were held to analyze the impact of SRO on the overall CAD situation.

Pursuant to the detailed deliberations between the Ministry of Commerce, the Ministry of Finance, and other stakeholders, it was decided to lift the ban imposed on May 19, 2022, for all items and to consider imposing Regulatory Duty (RD) rates.

In view of the foregoing discussions, the Ministry of Commerce requested the ECC to reconsider its earlier decision and solicited approval from the ECC for the proposals.

It included lifting the ban on all items and releasing those shipments held up at any port in Pakistan after June 30 and before July 30, 2022, except for auto CBU, mobile CBU, and home appliances subject to payment of surcharge/penalty of 25%, and 35% for those consignments arriving after July 30th, 2022.

For the release of the comments of all three items, auto, mobile, and home appliances, which landed after June 30, 2022, and before July 30, 2022, are subject to payment of a surcharge/penalty of 100%.

The Economic Coordination Committee (ECC) of the Cabinet re-considered its earlier decision on the summary submitted by the Ministry of Commerce regarding “Prohibition/Complete Quantitative Restrictions on Import of Non-Essential and Luxury Items.”

It approved to lift of the ban on all items. To release those held-up consignments which landed at any port in Pakistan after 30, 2022 and on or before July 31, 2022, except auto CBU, mobile CBU, and home appliances CBU, subject to payment of 25% surcharge/penalty, and 35% surcharge/penalty for those consignments which arrived after 31 July 2022.

To release held-up consignments of Auto CBU, Mobile CBU, and Home Appliances CBU which landed at any port in Pakistan after 30th June 2022 and on or before 31 July 2022 subject to payment of 100% surcharge/penalty. The penalty will be imposed on the assessed value.