Vegetable ghee/cooking oil: ECC allows export from EPZs, MBs, EOUs to Afghanistan

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has reportedly allowed export of vegetable ghee/cooking oil from Export Processing Zones (EPZs), manufacturing bonds (MBs), and export oriented units (EOUs) to Afghanistan, well-informed sources told Business Recorder.

Sharing the details, sources said, on July 20, the Ministry of Commerce briefed the ECC that para 7 of Export Policy Order (EPO), 2022 specifies the conditions for exports to Afghanistan and through Afghanistan to Central Asian Republics (CARs) via land route.

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As per sub-paragraph (6) of para 7 of EPO, 2022, exports from EPZs, manufacturing bonds and export oriented units, except vegetable ghee and cooking oil, were allowed but these exports are not entitled to zero-rating of sales tax, drawback of customs duty, or rebate of federal excise duty. Simultaneously, para 72 of EPO, 2022 stipulates that export from EPZs shall be in accordance with Customs Export Processing Zones Rules, 1981.

Moreover, in terms of schedule-II of ibid, export of vegetable ghee/cooking oil was allowed subject to the condition that there shall be a minimum value addition of 15% and printing of labels in Dari and Pashto in case of exports to Afghanistan.

However, exports to Afghanistan were not allowed from manufacturing bonds and export oriented units. Schedule-III of EPO, 2023 contained the negative list of items for export to Afghanistan under duty drawback scheme, wherein vegetable ghee/cooking oil was also included. Ministry of Commerce had been approached by Aziz solvent & Extraction (Pvt) Ltd, a unit inside Risalpur EPZ with the request that export of vegetable ghee/cooking oil from EPZs to Afghanistan may be allowed, since export of vegetable ghee and cooking oil was otherwise allowed from all production units to anywhere in the world, except from units in EPZs, manufacturing bonds, and export oriented units, to Afghanistan.

Moreover, the Federal Board of Revenue (FBR) had launched a uniform Export Facilitation scheme (EFs) by merging all the existing export schemes including Manufacturing Bonds (MBs), Export Oriented Units (EOUs) and Duty Taxes Remission on Exports (DTRE) and these schemes shall be inoperative from August 14, 2023. Furthermore, they had also apprised that the export of vegetable ghee was allowed only DTRE scheme from across the country, however, no export from MB’s, EOU’s or EPZ’s was allowed under the Export Policy orders and there was an urgent need to address the issue of ghee manufacturers currently availing export facility under DTRE scheme only and requested Ministry of Commerce to align the EPO for smooth implementation of EFS 2021.

Ministry of Commerce further noted that in this regard, an inter-ministerial consultative meeting was held in Ministry of Commerce, wherein in the presence of representatives from Federal Board Revenue (FBR), Ministry of Industries&Production, Export Processing Zones Authority (EPZA), and Ministry of National Food security & Research (MNFS&R), it was agreed upon that export of vegetable ghee/cooking oil from EPZs, manufacturing bonds, and export oriented units to Afghanistan may be allowed.

It was further agreed upon that to bring uniformity in policy, Schedule- l of EPO, 2022 may be omitted. Moreover, provisions in paras 7(6) and 7(71 of EPO, 2022 regarding export to Interactional Security Assistance Force (ISAE), Defense Energy support center (DESC), and Defense Logistics Agency (l)LA) in Afghanistan, have become redundant; therefore, it may be appropriate to omit paras 7(6) and 7(7) of EPZ, 2022. Moreover, the applicant also filed writ Petition No. 4637 of 2022 in the Peshawar High Court, challenging the vires of para 7(61 of EPO,2022, while Para 12 of ibid stipulates that export from EPZs shall be in accordance with Customs Export Processing Zones Rules, 1981.

The court in judgment of April 2023 has held that given Para 12 of EPO, 2022, the restriction on export imposed vide para 7(6) of ibid is “inconceivable,” and directed Ministry of Commerce to carry out appropriate changes in policy as per law. Ministry of Commerce submitted following proposals for consideration and approval of the ECC: (i) Para 7(6) and 7(7) of EPO,2022 may be omitted; (iii) schedule-II of EPO, 2022 may be amended to the extent of removing the exception regarding export of vegetable ghee/cooking oil from EPZs, manufacturing bonds, and export oriented units, to Afghanistan; and (iii) Schedule-III of EPO,2022, containing the negative list of items for export to Afghanistan under duty drawback scheme, including vegetable ghee/cooking oil, may be omitted. The ECC approved the proposal of Commerce Ministry except schedule-III of EPO, 2022, containing the negative list of items for export to Afghanistan under duty drawback scheme, including vegetable ghee/cooking oil.

Copyright Business Recorder, 2023