Under-invoicing of Chinese goods to cost Rs 250 million: disciplinary action to be taken against appraisers

The Federal Board of Revenue (FBR) has decided to take disciplinary action against senior customs appraisers of Karachi involved in clearance of a Chinese consignment at a declared value that would have cost the treasury Rs 250 million. In this connection, the Model Customs Collectorate (MCC), Appraisement, Karachi, has submitted the incidence report to the FBR for compliance.
Sources told Business Recorder on Friday that the appraiser and principal appraiser had wrongly assessed amounts of duties and taxes on the import of the consignments from China. The Collectorate verified the value of the declared goods from the Chinese customs authorities, reflecting a massive variation in the actual value and the declared value.
The Chief Collector of Customs (South) Region intimated this to the concerned Customs Group, engaged in the processing of import documents of the importer. However, the group did nothing on the information submitted by the Chief Collector.
The incident clearly reflects that the menace of under-invoicing is still rampant in connivance with customs officials engaged in examination and processing of customs documents for assessment of goods. Information of gross misdeclaration conveyed to the Customs Group is being cleared without due investigation. The massive under-invoicing of imports has been detected by customs from time to time, but scams of gross misdeclaration are still taking place at different ports.
DETAILS OF THE SCAM ARE AS FOLLOWS: an Islamabad-based company temporarily imported a consignment containing new/used dredges, anchors, tugs and pontoon for the project of Pakistan Deep Water Container Dredging and re-cyclation work vide goods declaration IGM No 2024 and sought release through their authorised clearing agent.
The importer claimed concessions of customs duty and sales tax under SRO 567(I)/2006 as amended vide serial number 40 of SRO.565(I)/2008 and SRO 551(I)/2008. The concerned customs group recommended to release the goods under Rule 217 of SRO 450(I)/2001 as per declared value against submission of bank guarantee wherein 80 percent customs duty be charged as bank guarantee and 20 percent as cash.
Under the relevant rule 217 of the Customs Rules, where the importer so elects temporary import of construction machinery, imported for approved projects in Pakistan, may be allowed subject to certain conditions.
The importer shall pay 20 percent of the duty, taxes and surcharges involved at the time of clearance, and shall also furnish a bank guarantee, for an amount equivalent to 80 percent of the amount of customs duty, sales tax, surcharges involved, and additional surcharge at the rate of 14 percent per annum on the amount of guarantee.
Meanwhile, the Chief Collector (South) had received a credible information by an independent source that value of the goods declared by the importer was half of the actual value. The copy of the invoice received from the independent source was handed over to the relevant Collector of Customs for carrying out an investigation in this case of under-invoicing.
However, the concerned customs group did not give due consideration to the goods despite the fact that the information of under-invoicing was passed on to it The Customs Group did not make any effort to properly scrutinise and get fair value from any source.
Subsequently, the case of under-invoiced value of around $18 million was recommended to be accepted and the file was sent to the Chief Collector for information. The Chief Collector thoroughly examined the case and contacted his Chinese counterpart to help in the investigation.
The Chinese Customs agreed with the Chief Collector's higher valuation and, accordingly, accepted the value of $37,021967.89. If the misdeclaration of customs value had not been detected in time by the Chief Collector South, the government would have suffered loss to the tune of approximately Rs 250 million.
The licence of the involved clearing agent has been suspended. The MCC, Appraisement Karachi has also placed appraising officer under suspension, who proposed assessment on declared value. The collectorate has requested FBR to take disciplinary action against the involved senior/principal appraisers in the scam.