OC Hybrid procedure causing difficulties for KEPZ industries

KARACHI: Karachi Export Processing Zone (KEPZ) industries are facing severe difficulties following the implementation of a new customs procedure known as “One Customs Hybrid” (OC Hybrid).

The system, introduced a few months ago, requires Goods Declarations (GDs) for Less than Container Load (LCL) and Air imports to be filed at Collectorates outside KEPZ, leading to prolonged delays in goods examination and clearance. The resulting slowdown in customs processing is creating distress among investors and industrialists who have traditionally enjoyed duty-free import privileges for their units established in KEPZ.

For decades, KEPZ has been operating as an offshore territory, offering its investors and industries the advantage of importing raw materials, plant, and equipment duty-free. This was facilitated by a dedicated Customs Station within KEPZ, which efficiently handled the examination of goods and processing of GDs. However, the recent introduction of the OC Hybrid system has disrupted this streamlined process.

Under the new system, import consignments that previously received clearance within three working days are now facing delays of up to 6 to 7 working days. Furthermore, shipments arriving through air freight are also experiencing setbacks, requiring 3 to 4 working days for processing. Industrialists and their agents are now forced to navigate through multiple Customs Stations, significantly complicating the clearance process, contrary to the notion of simplification and swift clearance that was promised.

Pilot Asif Sheikh Javaid, representing the Export Processing Zones Committee of FPCCI, has expressed grave concerns over the situation, deeming it alarming for KEPZ trade and industry. He highlighted that this is the first time in KEPZ’s history that industrialists and their agents have to chase their consignments across different Customs Stations. Asif Javaid firmly believes that the OC Hybrid system is in direct contradiction to the principles of simplicity and efficiency.

In light of the mounting issues faced by KEPZ industries, he appealed to the newly appointed Chairman of the Federal Board of Revenue (FBR) to personally intervene and instruct the relevant departments to establish a similar customs procedure for the clearance of LCL and Air imports, akin to the one already implemented for Full Container Load (FCL) imports. Such a measure would help streamline the process and mitigate the delays that are currently plaguing the trade in the zone.

Additionally, Asif Javaid called for a review of the 80/20 Rule, which mandates the ratio of goods sold domestically versus exported for KEPZ factories. According to him, the existing 80/20 ratio is proving to be financially impractical and causing substantial losses for many industrial units. He proposed a revised ratio of 70/30, which he believes would prevent industries from falling into financial distress and becoming unproductive.

The uncertainties surrounding the OC Hybrid system and the urgent need for intervention from the FBR Chairman are raising concerns among KEPZ stakeholders. As the situation continues to evolve, industrialists and investors are anxiously awaiting a resolution to ensure the smooth functioning of trade and manufacturing activities within KEPZ.

Copyright Business Recorder, 2023