ISAF containers scam: FBR compiling new report

The Federal Board of Revenue (FBR) is compiling a new report including facts and data on the International Security Assistance Force's containers scam in which at least 7,922 transit containers were pilfered that caused estimated revenue loss of Rs 19 billion during 2007-10.

Sources told Business Recorder here on Monday that the FBR has started the exercise on urgent basis to complete the report for the Supreme Court of Pakistan. The chairman Federal Board of Revenue (FBR) would appear before the SC on the next date of hearing and both the cases i.e. Pakistan Revenue Automation Limited (PRAL) and ISAF containers scam have been tentatively fixed for next month.

During the aforementioned period, a total of 558,141 ISAF containers were transited to Afghanistan. Of these 166,949 (30%) containers belonged to the US military, 52,929 (9%) to ISAF/ NATO and the remaining 338,263 (61%) were commercial ATT consignments, revealed the Federal Tax Ombudsman (FTO) report on the ISAF containers scam issued in 2011.

In this scam, the goods imported therein thus never crossed the Pak-Afghan border and were instead pilfered/ dropped within Pakistan. According to the order, the Supreme Court (dated January 9, 2010) issued notice be the attorney general for Pakistan with the direction to the chairman FBR to appear in court on the next date of hearing and explain as to what precisely the PRAL has to do in the working of the FBR and whether work, which is being performed by this company, could not be performed by the FBR itself. A report in this regard shall be made available to the court by the chairman FBR. Another suo motu case i.e. SMC is pending before the SC regarding International Security Assistance Force (ISAF) container scam, order added.

Former Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle had issued (January 2011) a report on the ISAF containers scam in the suo motu case No. 16/2010.

In the past, National Accountability Bureau (NAB) had also investigated the customs clearing agents for their alleged involvement in the ISAF containers scam.

A number of recommendations of the FTO report on the ISAF containers scam were made part of the Finance Bill (2012-13) including change in the definition of smuggling under the Customs Act, 1969 to punish those involved in the pilferage of transit goods which would be treated as an offence of 'smuggling.

In the suo motu Case No. 16/2010 regarding the ISAF containers scam, the Supreme Court vide order No. 16/2010-SMC dated October 7, 2010 referred the matter, under Section 9 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, for investigation to the Federal Tax Ombudsman. Incorporated in the Supreme Court's Order was a set of 14 specific questions ranging from the nature and extent of misuse of transit trade facilities, procedural vulnerabilities causing the misuse and fixing responsibility thereof to suggesting effective countermeasures to control such scams in future. According to the findings of the FTO report dated 2011, the quality of data held by PRAL was found to be highly unreliable. The available cross-checks within FBR were also found to be highly vulnerable to fraud and corrupt practices of various actors involved in Afghan transit trade. It was soon realized that the abuse was massive, though difficult to quantify with a high degree of precision. The FTO report recommended that the ISAF/UN/NATO should adopt the same technology and transport precautions as are being used by the US forces (e.g. RFID seals and effective tracking/monitoring through GPS).

It was estimated that at least 7,922 transit containers were pilfered within Pakistan during almost four years. However, this could be just a tip of the iceberg. The estimated loss to national exchequer during 2007-June 2010, based on 7,922 containers, was worked out at Rs 19 billion. It was gathered that the customs procedural framework being highly porous suffered from serious vulnerabilities.

While responsibility in general terms has been fixed, the individuals involved in various mega scams of recent years are to be identified through criminal investigation for which a mechanism is provided under Section 17 of the FTO Ordinance, the FTO report said. One-Customs manual clearance system was found particularly prone to huge transit scams. The senior management of customs failed to take necessary steps to put in place appropriate countermeasures against repeatedly occurring scams. The then FTO report stated that leadership of customs rather than initiating appropriate disciplinary/criminal proceedings against the real culprits repeatedly tried to put a different gloss on these scams. The modus operandi in these mega scams remains the same; fake/forged documents, primitive and manual clearance and processing systems, wide discretion in the hands of unscrupulous customs officials, lack of transparency and effective accountability, involvement of seniors otherwise responsible for oversight. The picture that emerges is of gross inefficiency, maladministration and corruption in an organization that is geared to further principally individual and communal self inertest of a few individuals at the cost of Pakistan and her people, it added.

On receipt of FTO's findings, the chairman FBR constituted a probe committee in January 2011, vide office order No. 2(2)/80-M-I on January 25, 2011 with the mandate that it shall "conduct inquiries/investigations to determine the criminal prosecutions/departmental action (where applicable or warranted) and shall propose remedial measures". The in-charge of the matters pertaining to recoveries, etc, in the FBR, led the committee that identified officers/officials in various positions including operational, supervisory or policy handling of the ATT matters and removed them from important positions.