Dispute resolution: FBR chief takes step aimed at facilitating importers

ISLAMABAD: Chairman of the Federal Board of Revenue (FBR), Rashid Mahmood Langrial, on Wednesday, took a major step to facilitate importers and referred a case of Customs Classification dispute on import of textile item to Member Policy (Customs), FBR, for immediate resolution of the dispute.

The Senate Standing Committee on Finance also took up the matter raised by the Sarhad Chamber of Commerce and Industry (SCCI) regarding the classification of polyurethane (PU) leather. Pakistan Customs briefed the Committee that PU material falls under the category of textiles rather than leather, as it contains fabric backing on one side, and the importer is liable to pay the taxes as per the prescribed category. Whereas, the representatives of the SCCI informed that it is a type of leather, not fabric, and demanded to be treated under the relevant law for the import of leather. The Chairman of the FBR advised the affected parties to file an appeal with Member Policy, FBR, for further consideration and direction. The Committee endorsed the recommendation of the FBR Chairman.

During the meeting, the FBR rejected the stance of importers and classified Polyurethane (PU) artificial Leather based on textile substrates under textile chapters rather than plastics.

In this regard, tax authorities gave a detailed briefing to the Senate Standing Committee on Finance. The tax authorities informed the committee that the Pakistan Customs Classification Committee examined the correct HS classification of Polyurethane (PU) Artificial Leather after a complaint from the SCCI, which was referred through the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla.

The SCCI also approached the office of the Chief Collector of Customs (Appraisement), South Karachi, with the contention that the under-referenced goods are classifiable under 3921. The Classification Committee deliberated upon the issue and decided the matter vide public notice.

Importers argued that the goods should be classified under Pakistan Customs Tariff (PCT) 3921 (Plastics) because the PU layer gives the essential character, while the textile backing only provides reinforcement.

Laboratory testing showed that the products consist of textile fabric or non-woven material coated on one side with polyurethane. The textile forms the base structure, meaning it is not merely reinforcement, FBR officials said.

Legal Findings revealed that the samples did not meet the conditions for classification under Chapter 39, since the textile is not embedded in plastic, the PU coating is only on one side, and the sheets remain flexible when bent around a 7 mm cylinder.

The final decision of the Customs Classification Committee revealed that the knitted or woven textile coated with PU is classifiable under heading 59.03, and the non-woven textile coated with PU is classifiable under heading HS 56.03.

The public notice clarifies that PU artificial leather based on textile substrates is classifiable under textile chapters rather than plastics, and it supersedes earlier contradictory practices for the tested samples, the FBR added.

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