MoC too supports import of used cars

The Commerce Ministry has reportedly joined hands with the Federal Board of Revenue (FBR) in support of used cars' import with a justification that higher demand will result in exponential rise in black market commission referred to as "on money." The Economic Coordination Committee (ECC) of the Cabinet while according approval to release of around 10,000 used cars stuck at ports, directed the Commerce Ministry to deliberate on the issue holistically in consultation with all stakeholders and submit a summary with viable recommendations to the ECC for consideration.
Commerce Secretary Younus Dagha presided over an inter-ministerial meeting on this issue to devise future strategy on the import of used cars, keeping in view local production of cars. However, the representatives of different Ministries could not reach a consensus. It was decided that all the stakeholders should send their recommendations in writing.
Meanwhile, an inter-ministerial committee headed by Mian Asad Hayaud Din Additional Secretary (Incharge) Ministry of Industries has also called upon leading car assemblers to resolve the issue of black marketing and long lead times of locally manufactured vehicles.
Additional Secretary Industries enquired about underlying reasons for premiums or "on money" for locally manufactured vehicles and what the leading assemblers were doing to curb this market malpractice along with reducing lead times.
Chief Executive Officer (CEO) Indus Motor CEO Ali Jamali gave a comprehensive briefing to the committee on all the measures IMC has taken to discourage investors including cancellation of over 1200 orders from potential investors, suspending authorized dealerships involved in malpractices, customer education press campaigns and enhancing production capacity by up to 20% to improve the supply side commissioning by the second quarter of 2018.
He briefed the committee how habitual investors in the market make multiple bookings against single CNIC and at times use dodgy corporations as front face to make multiple bookings - however IMC puts in its best efforts to scrutinize every order to distinguish between genuine customer and potential investor. All vehicles sold by IMC and their delivery lead times by city are transparently displayed at the company website and also at all of its dealership, he added.
He argued that IMC remains committed to facilitate all genuine customers however he lamented that the government has not taken up industry proposals for the implementation of Dealer Wholesale-Retail mechanism which is global best practice for vehicle sales and levy of Rs100,000 to Rs200,000 transfer tax in case of any new vehicle is transferred within 6 to 12 months of its invoice date.
The Commerce Ministry, maintains that Pakistani citizens may be allowed to import used vehicles under normal import procedure due to the following reasons: (i) the present system of sale purchase relies on informal structures of remittances which need to be regularised. This needs to be regulated in a manner that it serves the actual purpose and nobody is able to play with it; (ii) as per regulations of State Bank of Pakistan (SBP), all importers of goods are required to make a declaration to the customs authorities on Electronic Import Form (EIF) to the effect that the payment against imported goods has been made in a manner as specified by the SBP. The outflow of foreign exchange shall be documented and it will be helpful to bring import of vehicles into formal sector of economy; and (iii) the demand of vehicles in the country is well beyond the production capacity of Original Equipment Manufacturers (OEMs). Higher demand versus supply will result in exponential rise in black market commission known as "on". Therefore, import of certain number of used cars is necessary to curb the monopolistic trends of local car industry.
Another proposal which came under consideration was related to retaining the existing schemes by rationalizing the payment mechanism of duty/tax.
The meeting was informed that foreign remittances should be arranged by non-resident Pakistani nationals sending the vehicle. The bank encashment certificate showing conversion of foreign remittance to local currency should accompany swift message issued from abroad. The swift message should bear the name of Pakistani national sending the vehicle as a reference as well as any of the three ie the family member as defined in appendix-E of IPO or customs agent clearing the vehicle or notified party on the Bill of Lading as the case may be.
It was also proposed that the foreign remittance should be received in the bank account of Pakistani national sending the vehicle or in the account of the family member as defined in appendix-E of IPO or in the account of customs agent clearing the vehicle or in the account of notified party mentioned in the Bill of Lading.
The FBR, in its views, made part of the Commerce Ministry's summary for the ECC, argued that import of vehicles under these schemes is one of the major revenue spinners. Approximately Rs 5 billion is collected per month. Thus, revenue of Rs 30 billion is at stake during remaining months of the current financial year. It further stated that on account of higher demand OEMs will import more kits for the manufacture/assembly of vehicles to meet new demand. The payments to foreign suppliers shall be made from the foreign exchange reserves of GOP, which would adversely affect the current account balance and the trade deficit will increase. Vehicles under these schemes do not involve foreign exchange of the government.