Transit trade agreement: Islamabad and Kabul failed to implement

Pakistan and Afghanistan have reportedly failed to implement the much talked about transit trade agreement as Pakistani insurance companies are unwilling to extend financial guarantees on goods on behalf of Afghan banks, sources told Business Recorder here on Monday.
Pakistani insurance companies are concerned about the possibility of pilferage of transit goods during transportation process. "Insurance companies have also conveyed to the government that in case of missing goods, high cost of insurance has to be borne by the companies. If the containers do not reach their destination in Afghanistan, there would be very high risk in such cases.
Customs department would immediately encash the guarantees equal to the amount of duty/taxes involved on the transit goods as per procedure laid down in the Afghanistan-Pakistan Transit Trade Rules," sources added. In official documents, Afghanistan Pakistan Transit Trade Agreement (APTTA) is operational from June 12, 2011.
Initially, Afghanistan had agreed to extend financial guarantee of international banks for the consignments but later on it changed its stance and forced Pakistan to accept guarantees of Afghan banks through Pakistan''s insurance companies, with the argument that banks'' guarantee is more expensive than the insurance guarantee.
Commerce Minister Amin Fahim, who is to visit Kabul on Tuesday to attend the fourth ministerial meeting of Economic Co-operation Organisation (ECO), is expected to meet his Afghan counterpart to discuss issues which have not yet been implemented on the pact, finalised after considerable US pressure. Senior Joint Secretary, Commerce, Hamayat Ullah Khan, the key negotiator in APTTA, is already in Kabul to sort out issues.
"There is anger among Afghan exporters, importers and government over the blockade of 4000 containers on both sides due to non-provision of guarantees as stipulated in the agreement," said an official of Federal Board of Revenue (FBR).
Both countries had agreed on financial guarantees equivalent to the amount of customs duty applicable on the goods imported under APTTA for Afghanistan, and insurance guarantee equivalent to the amount of customs duty from ''AAA'' and ''AA'' insurance companies. Last week, the Ministry of Commerce and FBR had held a detailed meeting to tailor a strategy to convince insurance companies to promptly issue insurance guarantees to the importers of Afghan transit goods to make APTTA functional.
Officially, Pakistan had agreed to accept financial guarantees of Afghan banks, to be endorsed by the Pakistani ''AAA'' and ''AA'' rating insurance companies. However, there is concern that APTTA can bankrupt the insurance companies in case consignments do not reach their destinations. Installation of biometric system at the entry points and tracking chips on the trucks are other issues which have not yet been achieved.