Duties, taxes under IP-PTA: MoC, FBR urged to sort out tariff issues, devise mechanism for accurate assessment

Embassy of Pakistan in Indonesia has declared Federal Board of Revenue (FBR) as the relevant/competent authority to resolve tariff related issues on the import of palm oil for accurate assessment of customs duty, federal excise duty (FED) and withholding tax under Indonesia-Pakistan Preferential Trade Agreement (IP-PTA).
Sources told Business Recorder here on Saturday that the Embassy of Pakistan in Indonesia has asked the Ministry of Commerce (MoC) and Federal Board of Revenue (FBR) to sort out tariff issues between the two countries and devise a mechanism for accurate assessment of customs duty and other taxes under IP-PTA.
Sources said that the Embassy of Pakistan has informed Pakistani authorities that being in the first year of operationalisation of Indonesia-Pakistan PTA, issues relating to the customs duty and other taxes assessment need to be streamlined. In view of the position explained, the FBR, Commerce Ministry and the industry to convene a meeting and have their views to sort out the issue and devise a mechanism for duty assessment under IP-PTA. The matter may be resolved urgently as huge consignments imported by the industrial undertaking and the commercial importers are awaiting clearance at sea port.
According to the embassy, a 15-member delegation of the industry visited Indonesia to attend 10th Indonesian Palm Oil Conference and 2015 Price Outlook "Transforming Palm Oil Industry, Enhancing Competitiveness' at Bandung, Indonesia. The delegation had a meeting with Pakistan Ambassador and the commercial officer at the Embassy in Jakarta in which they highlighted the difficulties they are facing in import of palm oil from Indonesia.
They informed that Pakistan Customs assess value of consignments by comparison of Contract Price, Reuters Price prevailing on date of contract or FOB Price mentioned on certificate of origin whichever of the three is the highest. The industry has termed it infringement of IP-PTA. In the meeting held with Indonesian Palm Oil Manufacturers Association (GIMNI), they requested them to get certificate of origin (COOs) of 500,000 metric tons consignments revised/amended. GIMNI pointed out the Indonesian Ministry of Trade will not accede to such request as it is against the stipulations of the agreement. There is no basis for revising COO due to discrepancies in Reuters Price, Contract Price, and FOB Price. The industry requested for meeting with the Indonesian Ministry of Trade officials but the embassy explained it to them that this issue needs to be sorted out with Federal Board of Revenue in Pakistan.
The Indonesian government has abolished tax for shipment of palm oil products to overseas for October 2014 which was 9 percent for September, a move aiming at boosting competitiveness amid weakening global prices. The price of palm oil has declined from $740 per metric ton to $650-660 per metric ton in the period of September to November 2004. Therefore, Pakistani importers have placed orders to import huge quantities at cheaper rate. The industry has requested that FBR may assess the duties under provisions of IP-PTA, otherwise cancellation of contracts with Indonesia will result in monetary losses and may result in international litigation.
The industry also held a meeting with Custom Authorities at Port Qasim prior to proceeding Indonesia, with a request to assess duties on the basis of contract price as the prices reflected on COO are significantly higher.
Experts said that under Article Five of said agreement the duty and taxes on imports are bound to be assessed in line with General Agreement on Tariffs and Trade, 1994 (GATT, 1994) and World Trade Organisation (WTO) Agreements. However at present customs authorities in Pakistan are insisting to assess the same either on Contract Price, Reuter Price prevailing on date of contract or FOB price reflected in Certificate of Origin (COO) with a condition of "whichever is higher". Consequently the importers are perturbed and planning to cancel the further contracts in case of imports from Indonesia. The consignments of more than 500,000 MT have either already been landed at Port Mohammad Bin Qasim or en-route on high-seas/loading at Indonesian sea ports.
Customs authorities in Pakistan deem the highest value available on documents (Sales Contract, Reuters Price Sheet and Certificate of Origin) for the purpose of calculating duty/taxes. Resultantly importers in Pakistan are experiencing sizeable losses due to FOB value reflected on COO which is not being revised in accordance with sales contract in case of import from Indonesia only.
As per industry evaluation and assessment the infringement of said agreement while assessing duty/taxes by Pakistan Customs shall put importers on weaker ground in context to international trading practices and principles, they added.
The technical barrier needs to be addressed as early as possible since shipments on high seas and on loading ports in Indonesia are of similar nature. It is even otherwise important to maintain the strength of imports from Indonesia for the reason that trade barrier is only on shipments from Indonesia, they added.