Used cars’ scheme for overseas Pakistanis: ministry facing ‘ifs and buts’ situation

ISLAMABAD: The commerce ministry is reportedly facing a ifs and buts situation on future of three used cars import schemes meant for Overseas Pakistanis amid growing concerns that these schemes are being exploited for the commercial import of five-year-old used vehicles, well-informed sources in the Commerce Ministry told Business Recorder.

“This matter has been debated at the level of the Tariff Policy Board (TPB) and at inter-ministerial forums, but no final decision has been taken,” the sources said, adding that the views of the Finance Division and the Federal Board of Revenue (FBR) are still awaited.

However, the proposal of alteration in duties in small cars and big cars has been shelved by the government on the justification that there is no need of any change in current applicable tariff on them.

Used imported cars: Personal baggage and gift schemes may be merged

According to sources, Ministry of Industries and Production (MoI&P) argued that as import of old and used motor vehicles in general is not allowed at present, different schemes viz. Gift Scheme, Personal Baggage Scheme and Transfer of Residence Scheme have been put in place under an SRO to allow Pakistanis living abroad to bring used motor vehicles to Pakistan under varying circumstances.

Statistics on import of motor vehicles provided by the FBR indicate that a large number of used motor vehicles were imported into Pakistan during FY 2024-25 under these schemes.

This ministry strongly views that with the removal of restriction on commercial import of used motor vehicles, there is no need for the continuation of these three schemes except the Transfer of Residence Scheme. These schemes are otherwise prone to extensive misuse and work as a substitute for the commercial import of old and used motor vehicles albeit through manipulation and non-transparent means.

The MoI&P, contended that to protect users’ interests, promote public safety and protect environmental degradation, it is important that imported used motor vehicles meet specified minimum standards for safety, quality and tail pipe emissions. For this purpose, MoI&P has already placed a bill for the promulgation of “Motor Vehicles Industry Development Act 2025” before the National Assembly.

After its promulgation, this law will provide a robust basis for the regulation of both locally manufactured and imported motor vehicles including used motor vehicles.

Pakistan signed 1958 UNECE Agreement in 2021, the EDB declared as WP 29 Secretariat, 17 basic safety regulations adopted. The federal government has designated Engineering Development Board as Secretariat. However, these regulations are, at present, only applicable to locally manufactured vehicles.

According to the MoI&P, these regulations shall also apply to all imported used vehicles including those imported under the Transfer of Residence Scheme. In like manner, all other WP 29 regulations or any other standard in relation to safety, quality and environmental aspects of motor vehicles adopted in future shall be applicable to imported used vehicles.

At present, Pakistan does not have an appropriate facility for evaluating motor vehicles against the said regulations and standards.

Therefore, till the time sufficiently strong facilities are established within the country, import of every used motor vehicle shall be subject to a pre-shipment inspection certification issued by an appropriate authority such as Japan Automotive Appraisal Institute (JAAI), Japan Export Vehicle Inspection Center (JEVIC), Korean Testing Laboratory (KTL), and China Automotive Engineering Research Institute (CAERI) designated by the EDB. This certification shall clearly mention that the imported motor vehicle meets the said regulations and minimum standards.

In addition, the certification shall also clearly mention that the imported vehicle has not met a serious accident, its odometer is not replaced or tempered, the interior is tidy without staining, exterior is clean with no bumps or dimples, engine condition is sound with exhaust emissions lower than permissible level, wind shield and glasses have no cracks or breakage, it is otherwise road worthy with air-bag installed and have verified manufacturing date.

Further, with a view to deal with emerging situations, the EDB may add any other area on which a pre-shipment certification shall be required. In addition, imported used vehicles shall be subject to a third party post shipment inspection through an appropriate testing facility at the cost of the importer.

It was further noted that rather than individual persons, only a company incorporated under the Company Act, with import of motor vehicles as its principal line of business shall be allowed to import motor vehicles on commercial basis. Minimum capital requirement of a company shall be such as may be decided by the Federal Cabinet in view of intended size of its business.

Further, it is important that such a company shall undertake its business through regular banking channels and maintain a complete record of all imported motor vehicles in the interest of transparency.

Further, such a company shall be allowed to import used motor vehicles only if it has established a sufficiently robust network for providing after sales services including assurances relating to availability of spare parts. This is important for safeguarding buyer’s long term interest.

Presently, imported used vehicles are depreciated at a rate of 1% per month. However, it is proposed that this rate shall be revised to 0.5% with maximum overall depreciation allowance capped at 36 percent.

The MoI&P further argued FBR may like to revise the minimum Import Trade Price (ITP) for the levy of duty and tax in consultation with the local industry.

It was also agreed with IMF under EFF that initially an additional duty of 40 percent will be imposed on import of used motor vehicles over and above present rate of duties. This additional duty will be reduced by 10 percent every year till 2030. This aspect needs to be mentioned as pre-condition of IPO in consultation with the FBR.

The sources said, National Electric Vehicle (NEV) adoption levy of 1 percent, 2 percent and 3 percent for vehicles with different engine capacity and classes of vehicles will continue to apply on used motor vehicles imported on commercial basis as well as under the Transfer of residence scheme.

Copyright Business Recorder, 2025