Directorate General of Customs Valuation (DGCV) has drastically increased customs duty with an average of over 400 percent on unbranded garments, forcing commercial importers to find other illegal means to bring imported attires into the country.
According to market sources, an unprecedented increase in customs duty with an average of over 400 percent on unbranded garments as compared to previous valuation ruling is compelling importers to divert around 175 containers, which had been grounded at Karachi ports, to UAE for bringing all these containers under the guise of Afghan Transit Trade (ATT) cargos into the country.
To a question, sources ruled out the possibility of any negative impact on garments' import after duty increase, saying that all garments consignments would now enter into the country under ATT cargos. Moreover they said that this initiative would create negative impact on customs revenue collection, besides encouraging smuggling and corruption; adding that customs department may deprive of over Rs 1.5 billion revenue from garments importers.
They further said that valuation ruling on unbranded garments was previously based on per dozen basis but the customs department had now imposed duty on per piece basis, escalating customs duty with an average of over 400 percent. "After new valuation rulings, garments importers have to pay customs duty to the tune of Rs 5 million approximately on each container worth around Rs 1-3 million," they lamented. "Although these unbranded garments will now come into the country under ATT cargo, the retail price of the garments will inflate by 50 percent," market sources said.
They informed that if this new valuation ruling was not withdrawn then customs department would not be able to generate the revenue of over Rs 1.5 billion collected against the clearance of around 1800 garment containers per annum. Meanwhile, a customs official, who was closely involved in evolving this new valuation ruling, on condition of anonymity said that department did not increase customs duty on unbranded garments but rationalise its value as per international prices.
He said that department as per court directives was bound to issue new valuation rulings after 90 days, besides it was also revealed that values as determined in the valuation ruling 825/2016 dated April 5, 2016 did not correctly reflect international prices. Therefore, the department has withdrawn the said valuation ruling, he maintained.
Moreover, he said that this was the first time when department had taken Pakistan Readymade Garment Exporters and Manufacturers Association (PRGEMA) on board for rationalising the valuation of unbranded garments as per international prices; adding that this new valuation ruling would also protect local garment industry. He also answered that the garments importers instead of diverting their consignments to other countries could file appeal against this new valuation ruling but when the customs department had rationalised duty tariff as per international prices they started using pressure tactics to revert this ruling. He further said that these garments importers had been enjoying lowest duty tariff for last three years but no benefit was passed on to the customers so there was no harm to reduce their profits through this new valuation rulings.