MoC calls for tougher measures against smuggling via Afghan transit trade

September 22, 2023 (MLN): In order to tighten the reign of increasing smuggling-prone items imported by Afghanistan in transit through Pakistan, the Ministry of Commerce (MoC) has requested the Federal Board of Revenue (FBR) to take stricter measures.

Accordingly, FBR is requested to introduce the requirement of a Revolving Insurance Guarantee for all Afghan Transit goods that has to be substituted by FBR with Bank Guarantee at the rate of 100% of the assessed value.

In addition, FBR is also advised to charge a processing fee at the rate of 10% ad valorem on the Afghan Transit goods showing an unjustified increase in forward transit cargo (Anne-A) as Afghanistan's Customs Duties on these goods are negligible.

The same issue was discussed in the meetings held in the Ministry of Commerce in last two weeks, data and recommendations of FBR and joint presentation by the Ministry of Commerce and Federal Board of Revenue given at the Prime Minister's Office which was also shared with the Apex Committee of SIFC on September 08, 2023.

As the volume of Afghan Transit Trade (forward) via Pakistan increased by 67% during FY23 to $6.71 billion from $4.016 billion during FY22.

To note, this huge trade deficit created by the surge in imports of Afghanistan is neither plausible nor understandable keeping in view its limited exports and other funding sources, especially after the imposition of multiple types of sanctions on the interim Afghanistan Government.

Comparative analysis of the major forward Afghan Transit Trade items of the previous two years clearly shows that the increased volume of major import items of Afghanistan transiting via Pakistan i.e. fabrics, tyres, black tea, home appliances, toiletries cosmetics etc. is attributable to a low volume of imports by Pakistan of these very items due to imposition of import restrictions by Pakistan on import of non-essential and luxury goods during the same period.

Furthermore, a substantial increase in the incidence of smuggling of these items has not only caused a loss of revenue but has also rendered the import curtailment measures of the government ineffective, curtailed revenue and caused injury to the domestic industry.

Thus, the Ministry of Commerce is submitting a summary to ban above above-noted items in Afghan Transit Trade, for which SRO will be issued after approval of the competent authorities.

Moreover, as customs duty in Afghanistan is extremely low as compared to Pakistan, and this facility is being misused by the connivance of businessmen from both sides, the implication of the proposed measures is crucial.

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