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Customs valuation rulings hitting auto parts industry

LAHORE: The ever-increasing smuggling and under-invoicing of auto parts and accessories is severely affecting the business of local manufacturers of spare parts besides causing loss to billions of rupees to the national exchequer.
Pakistan Association of Automotive Parts and Accessories Manufacturers PAAPAM) Chairman Usman Malik invited the attention of Federal Board of Revenue (FBR) towards this issue of Customs value determination of imported auto parts at the Directorate General of Customs Valuations Karachi, arbitrary Customs valuation rulings of imports by customs authorities were turning the country into a trading hub by favouring commercial importers on one hand while on the other affecting collection of federal taxes at the import stage.
Malik said the low valuation of imports has adversely affected sales tax, withholding tax, Customs duty and Federal Excise Duty on imported items during 2013-14 and the major reason of less revenue collection was the absence of foolproof mechanism for accurate assessment of duties and taxes at the import stage. 
Millions of rupees’ under-invoiced auto parts are coming into the country from China. Chinese motorbikes manufacturers are importing spare parts under commercial imports through outsourcing, which is a real challenge to the local vendors.
He said almost all types of auto spare parts including rings, pistons, gas kits, filters and radiators were being imported from Thailand and Dubai in astonishing quantities at extremely lower valuation. 
Pakistani markets are flooded with under-invoiced and smuggled goods of all descriptions and the dealers are selling these parts at 50-60 percent lesser rates than the parts being made locally. 
Major discrepancy in prices has been witnessed on imports from UAE in various sectors, causing about Rs 150 billion losses each year due to under-invoicing in imported goods. 
Assessing values of parts have been made without taking into consideration, the material cost or manufacturing overheads etc that is why these values are extremely on the lower side.
Local manufacturers are required to go through a most primitive and completely obsolete system of deductive values. This method itself is a product of corruption and lack of understanding on part of Customs valuation teams. On the other hand National Tariff Commission is also unmoved, whereas this subject should also fall in ambit of anti dumping laws.
Malik said PAAPAM actively participated in the meetings held by the Customs Valuation Department for the determination of assessment values, but he dismayed to note the ruling neither recognised PAAPAM as a key stakeholder nor did it incorporate the our viewpoint expressed in the meetings. 
Unless the methodology required for establishing a realistic price of a part is not changed, the mafia of importers in collaboration with Customs valuation department would keep depriving country of billions in revenue generation from collection of duties.
He suggested a special committee consisting of officials from FBR, Engineering Development Board, representatives of PAMA and PAAPAM be formed to suggest measures for eradication of this malpractice and to condense the influence of commercial importers, safeguarding the interest of automotive industry. PAAPAM wanted access to cheaper and quality goods for consumers in Pakistan, but its solution does not lie in duties reduction or arbitrary valuation rather it lies in excessive industrialisation and transfer of high technology in the country.

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