FRIDAY SEPTEMBER 30: Exchequer suffers Rs 55 billion loss: 28,900 ATT containers go missing: FBR

ISLAMABAD: The Federal Board of Revenue made a startling disclosure on Thursday that 28,900 commercial Afghan Transit Trade containers are missing which were disposed of within Pakistan, causing estimated revenue loss of Rs 55 billion to the exchequer.
Submitting a detailed report on the missing containers scam, Hafiz Muhammad Anees FBR Member Taxpayers Audit Wing and head of the investigation committee informed the National Assembly Standing Committee on Commerce that based on various inquiries and confirmations, as many as 28,900 commercial Afghan Transit Trade containers have been identified for which proof of their crossing the Pak-Afghan border could not be found. Since proof of their border crossing could not be found on the basis of 'cross border' certificates in the record of border stations, prima facie conclusion is that they have been smuggled and disposed of inside Pakistan. The estimated revenue loss works out to around Rs 55 billion.
He said the showcause notices to importers, clearing agents, border agents and the National Logistics Cell (NLC) in over 10,000 of these containers have been issued and the remaining are being issued. Since adjudication of these cases is a prerequisite for recovery of revenue loss, the same is being actively pursued.
After identification of missing commercial AT containers, the FBR is currently in process of reconciliation of non-commercial AT cargo on similar lines as followed for commercial containers. An initial list of about 19000 containers has been complied and sent to border Customs Collectorates of Peshawar and Quetta for further verification from the record, he stated.
As a consequence of the seriousness shown by the FBR in investigating and curbing smuggling an appreciable fall in illegal imports (intended for smuggling) in the garb of Afghan Transit Trade has been witnessed in recent months. Study conducted by the FBR reveals that as against 25,309 commercial ATT containers imported during the period February 1, 2010 to June 20, 2010, the quantum of such imports in the corresponding period of this year has fallen to 11,632 containers, signifying a massive fall of 54 percent. Similarly, non-commercial ATT imports have also fallen by 32 percent from 2365 containers' imported during February 1, 2010 to June 20, 2010 to 1604 containers imported in the corresponding period this year, Hafiz Anees stated.
Consequent to the reports highlighting massive pilferage of Afghan Transit Trade (ATT) containers inside Pakistan, the Honourable Supreme Court of Pakistan took cognisance of what is known as the "ISAF Container Scam" vide suo motu Case No 16 of 2010, and issued notices to various stakeholders including the Federal Board of Revenue. After preliminary hearings, the Honourable Supreme Court vide its orders dated 30.09.2010 directed the Federal Tax Ombudsman (FTO) to conduct probe into the matter and submit answers to fifteen (15) questions specifically highlighted by the Supreme Court.
FBR Member said that the FTO submitted its report in the Apex Court in January 2011, and concluded that it was impossible for an ATT container to complete a round trip from Karachi to Torkham or Chaman and back to Karachi in 08 days. Based on this criteria, the FTO reported that during the period from January 1, 2007 to October 15, 2010, as many as 7922 containers had completed the said round trip in eight or less than eight days, and the goods imported therein thus never crossed Pak-Afghan border and were instead pilfered/dropped within Pakistan. Revenue loss on these 7922 containers was estimated at Rs 19 billion. Based on benchmark of ten (10) days, the number of missing containers was worked out as 15314 and revenue loss was estimated at Rs 37 billion.
On receipt of FTO's findings, the Chairman FBR constituted a Probe Committee in January 2011, vide Office Order No 2(2)/80-M-I dated 25.01.2011 with the mandate that it shall "conduct inquiries/investigations to determine the criminal prosecutions/departmental action (where applicable or warranted) and shall propose remedial measures". The Committee is headed by Hafiz Muhammad Anees, Member Taxpayers Audit, FBR, who has also been appointed as Incharge of the matters pertaining to recoveries etc. Simultaneously, officers/officials who had worked in various positions pertaining to operational, supervisory or policy handling of Afghan Transit matters under the FBR were identified and removed from important positions, he said.
The committee undertook the task in right earnest and based on the data of missing containers provided by the FTO, issued notices to customs officers, shipping agents, port operators, NLC etc asking them explain their position in this regard besides conducting personal hearings to elicit their point of view. The systems and procedures were also analysed for their effectiveness and conformity to the notified procedures, and the flaws and departures were highlighted for rectification. After conducting preliminary investigation, it was realised that for a meaningful and comprehensive investigation, the scope of probe should scrutinise all ATT imports made during the period January 1st 2007, to December 31st, 2010, for determining exact quantum of en-route pilferage/smuggling of ATT cargo. For this purpose, comparison of Afghan Transit imports at Karachi with that of clearance data of Afghan Customs was identified as first option for the said purpose and this required co-operation of the Afghan Government, Hafiz Anees explained.
Request for assistance was sent to the Afghan Government through Pakistan's Finance Minister, followed by various reminders and two visits of FBR delegations in March and May, 2010. After refusal of Afghan Government to share its customs clearance data with the FBR and assurance of conducting reconciliation on the basis of data provided by FBR, the details of imports affected under AT were shared with Afghan Government in May, 2011. However, despite sending reminders for early response no reply has been furnished by Afghan customs. The partial data provided by the Afghan Government has been compared with the data of the clearance Collectorates and the Quetta Collectorate. On the basis of this exercise it was found that 3,689 containers did not cross over to Afghanistan and were pilfered en-route and consumed inside Pakistan.
In the backdrop of above stated circumstances, the FBR Probe Committee undertook a massive exercise of reconciliation of Afghan Transit record of the consignments originating at Karachi with those arriving at border stations of Chaman and Torkham to identify the missing cargo. Afghan Transit Trade Invoice (ATTI) being the prescribed document under the Afghan Transit Trade Agreement of 1965 was identified as the main instrument for reconciliation. The reconciliation was a mammoth exercise in the context that most of the record was being maintained manually (including that of ATTIs and required digitization of over 300,000 records/documents pertaining to customs clearances at Karachi, Torkham and Chaman, and running various tests/analyses to identify the missing/pilfered containers, he said.
Sharing data about the ATT imports, Hafiz Anees further stated that the decrease in illegal ATT imports is starker in high-risk, smuggling prone 15 items. Statistics reveal that import of Polyester Fabric has fallen from 2803 to 737 containers (74% fall); Tyres & Tubes from 392 to 84 containers (79% fall); Black Tea from 2350 to 1390 containers (41% fall); Electric Consumer Goods from 1206 to 445 containers (63% fall); Blankets from 262 to 93 containers (65% fall); Crockery, Table & Kitchenware from 232 to 123 containers (47% fall); Soap, Shampoo & other Toiletries from 788 to 368 containers (53% fall); Prive Vehicles from 1020 to 569 containers (44% fall); Oil & Lubricants from 1495 to 886 containers (41% fall); Refrigerators & Air Conditioners (from 339 to 124 containers (63% fall); Sugar from 956 to 225 containers (76% fall); Computer Monitors from 65 to 36 containers (45% fall) and Ball Bearings from 49 to 15 containers (69% fall).
A simultaneous diversion of illegal trade to regular import channels of these 15 items has contributed to additional revenue of Rs 3.6 billion during the period of February-June 20th, 2011, at import stage. Overall impact on all categories of imports is in excess of Rs 4 billion during the said period. The dividends in the shape of domestic taxes and industrial output gains are in addition to the gains quantified at import stage. The above additional revenue has been worked out after factoring in the normal growth.
The investigating committee has highlighted some serious illegalities, irregularities and systemic issues, which contributed to the perpetuation of the crime. The role of officers/officials in the Scam is also being determined and the culprits would be brought to justice without any exception. Criminal proceedings are also afoot. A list of about 190 containers has been forwarded to the Directorate General of Intelligence & Investigation - FBR for lodging FIRs against the culprits including customs officials. Investigations are afoot and FBR is monitoring the progress being made. More FIR cases are being identified for determining criminal liability of the delinquents.
The FBR reiterates its resolve of a fair and comprehensive investigation into, the Transit Trade affairs and for taking appropriate punitive and preventive measures to save the national economy from the evil of smuggling in the garb of Transit Trade, he further added.
Talking about new procedure of checking transit containers, Member FBR said the custom officials thoroughly check the Nato/Isaf containers manually and it required automation checking. Under new agreement with Afghanistan, various measures have been taken for safety and proper crossing of containers to Afghanistan. The committee also informed that scanners were installed at Karachi but so far these scanners have not been installed at Torkham and Chaman borders.
He further stated showcause notices have been issued to those involved in missing containers case while complete report be finalised soon. The FBR has also issued charge sheets to the involved customs officials in the missing containers scam. Tax officials were of the view that these were the record of last four years and before this may be a lot of containers got missing in the country.
Chairman of the Standing Committee of Commerce Engineer Khurram Dastgir Khan stated that there is a massive failure on the part of the concerned authorities, who failed to check large scale smuggling of missing containers. The figure of 28900 missing commercial Afghan Transit Trade containers involving revenue loss of Rs 55 billion clearly reflects growing quantum of smuggling. The situation is even worst than our expectations that the volume of smuggling is much higher compared to our estimates. The customs officials involved in the scam must be taken to the task, he added.