FBR Finds No Irregularities in Alleged Unlawful Clearance of Goods Worth $847 Million Under PSW

The Federal Board of Revenue (FBR) has found no revenue loss on account of the alleged unlawful clearance of goods worth $847 million during the import ban under the Pakistan Single Window (PSW) or “WeBOC” Customs clearance system.

The findings of the FBR after scrutiny of sample data concluded that no revenue loss has been observed by the investigating committee. In this regard, the FBR has received a report from the concerned fact-finding committee.

Sources told ProPakistani that the issue pertains to the alleged unlawful clearance of goods worth $847 million during the import ban.

The scrutiny of the clearance data revealed the following issues related to the alleged misuse of the financial instruments module of Pakistan Single Window (PSW).

Firstly, clearance of a large number of consignments valuing over $800 million against Open Account without tagging of Form-I (FI) by the concerned banks.

Secondly, the use of the Chapter-99 facility to avoid tagging of the FI; although the claimed exemption of Chapter-99 against duties/taxes was removed by Customs during goods declaration (GD) processing.

Thirdly, the use of a single FI repeatedly against the multiple GDs with a huge difference between the declared unit price and the self-assessed/customs asses unit price.

The issues were identified by the filed formations and Directorate General of Reforms & Automation, Karachi. The Board had constituted a committee to conduct a fact-finding inquiry on the alleged clearance of consignments without meeting the requirement of Financial Instrument.

The committee has submitted an interim report to the FBR. After scrutiny of the sample data set, no revenue loss has been observed by the committee.

The findings of the committee revealed that the data of misuse of the Open Account mode of payment was extracted without any check or reference regarding the time period of one year (which is also further extendable by the SBP) allowed to the importers for attachment of Fl under the law for this mode of payment.

No GD can be filed on the basis of the Open Account mode of payment unless the Fl is attached with the GD in case of the WeBOC system or the importer is allowed by their banks on the basis of their profile and detailed scrutiny of bank customers’ risk profile/ KYC parameters in case of PSW system.

In order to ascertain whether any GDs were filed without the approval of the relevant bank through misuse of the system glitch, the committee shall scrutinize the details of such GDs.

In case, if any GD was filed in the PSW/WeBoC system without the authorization of an Open Account by the relevant banks due to any system glitch, that GD would also be referred by the system to the relevant bank of the importer which is legally required to settle the Fl in terms of legal provisions as provided under Chapter 13 of the SBP Manual.

The committee is, therefore, of the view that it is not correct to conclude that any GDs where Fl has not been tagged, are in violation of SBP regulations as they did not consider the allowed/extendable time period under law for settlement, to be made by the banks, which is an ongoing process as verified for a sample data.

Out of the total pointed-out import value of $21 million, there is no legal violation in respect of GDs involving an amount of around $15 million. No Fl was legally required in these cases due to non-involvement of any foreign exchange rem ante from Pakistan against these imports and further, no loss of revenue is observed in these cases. The contraventions have already been framed against GDs, with an inadmissible Chaptter-99 claim for avoiding tagging of FI, involving an import value of over $1 million for the imposition of penalty.

The data of remaining GDs involving an amount of around $6 million is being shared with the relevant field formations for initiating similar action. The Collector of Customs Appraisement Peshawar had already proposed a remedial measure in the shape of a CRF, to address the misuse of the Chapter-99 facility, which is pending action by the Directorate R&A Karachi.

The FBR further found that there is no violation of any Customs laws in the use of a single Fl in multiple GDs as well as the declaration of “Unit Invoice Value” and “Self Assessed Value” by the importer with any difference between the two, as long as the documents provided to the customs substantiate the declared values. However, “post clearance due diligence” is to be carried out by the relevant banks to confine) the regulators’ requirement.

The committee has further reported that both PSW and Directorate General of R&A were proactive in taking corrective measures to fix system vulnerabilities and during proceedings of the committee they have not come across any evidence to suggest that there was any deliberate attempt to circumvent foreign exchange regulation, FBR added.

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