As many as 1000 imported cars are stuck at the ports waiting for clearance from the government, which has not been granted yet because the cars are in violation of the commerce ministry’s rules.
The government imposed many restrictions on the imported used cars in January 2019. Prior to this, around 34,000 vehicles were imported in Pakistan. After the introduction of restrictions, only 1800 cars could be imported out of which 1000 are stranded at the ports, waiting for clearance as the imports were in violation of commerce ministry’s rules.
However, the government’s restrictions have been counterproductive, as they have caused a huge loss in terms of revenue collection. It is still unclear how many cars will manage to obtain clearance after payment of heavy penalties.
Meanwhile, the local auto industry is also facing hard times given its car sales declined by almost half last month. The government is also under pressure to allow the commercial importers to continue imports, though under the restrictions, but with a few amendments to its rules.
The Federal Board of Revenue (FBR) is also in favor of relaxations for the commercial importers while imposing certain Quantitative Restrictions (QRs). The department is concerned about the revenue collection from imported cars and believes that allowing the commercial importers to operate will ensure competition in the auto industry of the country.
Restrictions for the Imported Cars
Previously, the commerce ministry had introduced a few restrictions on the import of three-year-old used cars. The ministry imposed a condition of bank account details of the importer and only a close relative for the clearance of the vehicle. Despite the restriction, malpractices have continued.
Only 5 percent genuine overseas Pakistanis imported vehicles under the rule. Rest of the vehicles were imported by the importers’ mafia on the passports of Overseas Pakistanis. Because of the rules violations, these cars have not been cleared and thus standing at the ports.
The government is facing pressure to award a one-time relaxation to clear the stranded vehicles at the ports. This is a catch-22 situation for the government, if it grants the relaxation, it will give an impression that the government gave in to the influence and money of the importers. And if the government stands its ground, it will still be blamed for creating a crisis on the pressure and influence of the local auto manufacturers.
A meeting has been arranged to discuss the possibility of announcing a new scheme for commercial importers. The concerned departments including Commerce Ministry, Finance Ministry, and Federal Board of Revenue (FBR) presented their suggestions as well.
Import Policy Order 2016
The Finance Division maintained that the Import Policy Order 2016 was rolled out to facilitate the overseas Pakistanis. The Commerce Division gave them permission to import cars under several schemes like transfer of residence, personal baggage, and gifts scheme.
However, the commercial importers kept misusing the scheme, paving way for money laundering and outflow of foreign exchange. To counter that, the Commerce Division amended the imports mechanism. It levied a condition that all the taxes and duties will be paid in foreign exchange by either Pakistani nationals or a local recipient bearing bank encashment certificate showing the conversion for foreign remittance under the conditions:
- The remittance used to pay taxes and duties shall belong to the account of a Pakistani national sending the vehicle from abroad.
- The remittance used to pay taxes and duties will be received in the account of a Pakistani national. If the person does not have an account, the account of his family member would suffice.