The Federal Board of Revenue (FBR) has restricted clearance of all consignments of Residue of Fatty Acids (ROFS) and Mixture of Fatty Acids to "red channel" of Web Based One Customs (WEBOC) to thwart any attempt to clear used cooking oil (banned item) through ports.
Sources told Business Recorder here on Thursday that instead of regular laboratory reports, a comprehensive query template has been developed to get categorical and comprehensive report from the laboratories to exactly ascertain the fact whether the goods imported are used cooking oil otherwise. Industry sources were of the view that the ghee and cooking oil industry has expressed serious concern over emergence of used cooking oil import again, which is a banned item, but misdeclared as residue of fatty acid substances or acid oil.
The import of used cooking oil (already a banned item) by misdeclaring it as Residue of Fatty Acid Substances (PCT 1522.0090) or Acid Oil (PCT 3823.1990) has again surged after short break of few weeks. The practice is a source of serious and irreparable damage to national exchequer with obvious health problems to end consumers due to ingestion of carcinogenic substances. Earlier the scrutiny of import data of items ROFS and Mixture of Fatty Acid from Karachi port shows that huge quantity to the tune of 38,398 M. Tons valuing at Rs. 806.317 Million was imported from various countries including Saudi Arabia, UAE, Kuwait and others, countries where exist no edible oil refineries. It is pertinent to note that ROFS and Acid Oil are waste/by products collected in the process of refining various types of edible oil to formulate it fit for human consumption.
In this perspective the investigation report of Directorate General of Intelligence and Investigation (I & I) FBR endorsed the proposal of M/s Pakistan Vanaspati Manufacturers Association (PVMA) to the effect that import of the said products should not be allowed in drums to minimise chances of misdeclaration and that bulk import of fatty acids/soaps stocks etc should be restricted to industrial concerns only ie recognised manufacturers of soap and oleo-chemicals. 'The board is requested to approach Ministry of Commerce for imposition of proposed restrictions in the Import Policy Order (IPO)'.
Sources said that the investigation further revealed that besides oleo-chemical or soap manufacturers, the aforesaid goods are also being imported in large quantities by commercial importers. The data suggested that a considerable number of consignments are cleared through yellow channel ie without examination and lab test while consignments subjected to examination are released after lab test from customs lab and in few cases from PCSIR/HEJ etc. Although presently all consignments are compulsorily subjected to pass through 'red channel', as recommended in DG I&I FBR investigation report.
The "modus-operandi adopted by unscrupulous elements for misdeclaration" revealed that drums of used cooking oil and in large number of cases refined Palm Olein and RBD Palm Oil attracting higher rate of duty/taxes assessed currently on us$720/ M Ton are stacked in a container comprising of 80-90 drums, whereas on front 8-10 drums of Acid Oil or ROFS/PFAD are placed at the time of loading in exporting countries. Since it is not a practice to ground all 98 drums for examination, stacked in 40 ft container, besides drawing of samples from each and every drum, therefore only couple of samples from front rows are drawn and sent to laboratory for test reports.
They further added that duty/taxes on ROFS/Fatty Acid are assessed @ US$ 230/M.Ton by customs valuation, whereas ITP of said product as on 11th September, 2014 on Reuters is $ 620/M.Ton. Although both Edible Oils and ROFS/Fatty Acid/Acid Oil is subjected to identical rate of sales tax and income tax (WHT) @ 16-17 percent and 5.5 percent respectively. Duty of customs on ROFS ranges between 15-20 percent much below to duty on edible oil, ie, Rs 9,050-10,800 in addition to FED in value addition mode @Rs 1,000 a ton exclusively applicable on edible oil only. Therefore approximately on any single container the national exchequer experience a setback of Rs 400,000 minimum.
On the other hand, the industry in their correspondence time and again urge upon issue of import of used cooking oil imports, which later is blended by cottage industry and direct fillers mafia in refined edible oil with a ratio of 10:90 or 20:80 (10-20% used oil and 80-90% refined edible oil) thus consolidate unprecedented tax free profits as high as additional Rs 6/kg or Rs 6,000/M.Ton. Resultantly not only Government revenue is hurt to the tune of around Rs 1 billion per annum but also causing irreparable loss to human health, said PVMA in its correspondence addressed to FBR, PSQCA, Ministry of National Health Services, Regulation and Co-ordination besides Ministry of Commerce.
According to experts, they suggested that import of liquid cargo in containers costs (freight, handling, services, storage) much higher (almost thrice) when compared to its import in bulk, even then, if ROFS/PFAD/Acid Oil are imported in containers, there prevails sound chances that misdeclaration and evasion of duty/taxes is taking place. Small quantities of 50-100 M.Ton (2-5 container loads) can be easily imported in bulk or alternatively in flexi tank, why it is imported in drums/containers is obviously dubious, they added.
When contacted, Umer Islam Khan Secretary General PVMA, a watch-dog Association of edible oil sector added that used cooking oil is abundantly available and traded among cottage industry causing adverse effect in the production activities of licensed/registered industry by disturbing price mechanism of end products. PVMA is consistently persuing all concerned ministries and regulators for enforcing strict measures to be enforced with a view to eliminate import of used cooking oil, but till now no remedy is in sight. The practice is growing at a fast pace being very lucrative and non-attention of regulating authorities. We highly condemned the un-ethical practice and once again urge concerned custom authorities to immediately intervene.
The PFAD/Acid Oil/ROFS etc is a by-product of edible oil industry in Pakistan, which is readily available in abundance at prices at par or even below than International Trading Price (ITP), but even then their import in huge quantities points towards some unwarranted practices. We do not demand restriction on their import by enforcing technical or tariff barriers but call for transparent and rationalised imports to promote competition and healthy trade practices in line with WTO regime to protect local industry against dumping and unaccounted for concessions, besides placement of safe-guard mechanism for the protection of national revenue, Umer Islam Khan added.