FBR opposes MoC proposals: changes in DTRE, export schemes for Afghanistan, CARs

The Federal Board of Revenue (FBR) has opposed a number of proposals of the Ministry of Commerce for introducing, in the upcoming Trade Policy, major changes in the Duties and Taxes Remission for Export (DTRE) scheme and export schemes for Afghanistan and Central Asian Republics.
Sources told Business Recorder here on Friday that the Commerce Ministry has compiled the suggestions of the private sector and forwarded the viable proposals to the FBR for consideration, taking into account customs rules and procedures. The proposals of the Commerce Ministry were based on the input of exporters and other stakeholders engaged in imports-cum-manufacturing under the DTRE scheme.
Other proposals of the business units were related to the relaxation in the export procedures for the re-export of imported goods via land route to Afghanistan and onwards to the Central Asian Republics. The FBR has finalised its comments on the proposals and forwarded the same to the Commerce Ministry.
The first proposal is that pharmaceuticals, when exported to Afghanistan and invoiced in Pak rupees, be also allowed export rebate that is in line with other convertible currencies. Commenting on the proposal, the FBR said that the proposal for extending the facility of rebate on pharmaceuticals exported to Afghanistan against Pak rupees is not supported as the same shall be detrimental to the earning of precious foreign exchange of the country.
It has been further proposed that the DTRE procedures as contained in Customs Rules, 2001 may be suitably amended to treat registered export houses at par with manufacturer-cum-exporter. The FBR responded that the export houses cannot be categorised as 'manufacturer-cum-exporter' since export houses have no manufacturing activity. 'Export Houses' can be accorded a separate category akin to commercial exporters with suitable facilities and safeguards in the DIRE Rules when concept is defined and rules thereon are made by the Trade Development Authority of Pakistan (TDAP).
Another proposal is the re-export of imported goods via land route to Afghanistan and onwards to Central Asian Republics, subject to the following condition: "After value-addition of the imported goods, particularly consumable items meant for re-export, the same should not be allowed in bulk quantity via land route to Afghanistan or Central Asian Republics but rather in small packets with inscription on its packing 'For Export Only' in order to check its smuggling/back flow across the Pak-Afghan border to Khyber Pakhtunkhwa province".
After thoroughly examining the proposal, the FBR informed the Commerce Ministry that the ground conditions indicate that whether the re-export of imported goods via land route to Afghanistan and onwards to CARs is allowed in bulk quantity or in small packets, the phenomenon of smuggling back into Pakistan of such goods is physically impossible to control. It is, therefore, suggested that such re-export of imported goods may be allowed on case to case basis. The Commerce Ministry is requested to provide a list of imported goods supposed to re-export via land route to Afghanistan and onward to Central Asian Republics alongwith its modalities to enable FBR to offer further comments regarding feasibility of the proposal.
Commerce Ministry further proposed to the FBR that the import of raw material for re-export to Afghanistan and Central Asian Republics via land may be allowed, for which there is no manufacturing unit established in Afghanistan in order to check the back flows/smuggling of the items across the Pak-Afghan border.
The price competitiveness of the produce of manufacturing units established in Khyber Pukhtoonkhwa province should be safeguarded vis-à-vis low priced smuggled (re-exported) goods from Afghanistan. The FBR was of the view that the proposal of re-export of imported raw material to Afghanistan and onward to CARs via land route is not supported because Afghanistan lacks major industrial setup and as such the imported raw material to be exported to Afghanistan will find its way back to Pakistan through unauthorised routes.
This will deprive the state exchequer of legitimate revenue in shape of duty/taxes on import of raw material. However, if at all it is to be allowed, then it is not to be allowed in respect of raw materials for which no manufacturing unit is established in Afghanistan. Determination of the fact of existence or non-existence of such units in Afghanistan should be on the basis of certificate issued by the Commercial Councillor in Kabul.
It would be more appropriate if such re-export of imported goods may be allowed on case to case basis. The Ministry is requested to provide a list of imported goods supposed to be re-exported via land route to Afghanistan and onward to Central Asian Republics, along with its modalities to enable FBR to offer further comments regarding feasibility of the proposal.
It had been further proposed that the units registered under DTRE are unable to import input items listed Appendix B whereas other importers can do so after fulfilling the conditions mentioned therein. Recently, the Ministry has allowed DTRE importers to import items listed in Appendix B but it needs to be reflected in IPO. Last sentence of para 11 of the IPO may be re-worded as below:
"However, the above noted classes of manufacturing exporting concerns are allowed to import items listed in Appendix B of the IPO for actual requirements for production of export items subject to conditions listed therein". The FBR has informed the Commerce Ministry that the Tariff Section is requested to prepare/furnish comments on the proposal as the issue relates to Import Policy Order, sources added.