Raw material imports under SRO655

The Pakistan Association of Automotive Parts and Accessories Manufacturer (PAAPAM) have appealed to the FBR Chairman to immediately withdraw regulatory duty (RD) on imports of raw materials (CRC/HRC/Pipes/Tubes) by auto parts manufacturers under SRO 655. The following reasons have been given: 1) application of RD has escalated material costs rendering them uncompetitive, 2) that RD has been applied in a non cascading manner as RD not put on finished auto parts, 3) raw materials imported because they are either not manufactured in the country or not of auto grade, 4) damage being caused to auto parts manufacturers and potential closure of plants and loss of jobs and livelihood.
The situation, however, is quite the contrary.
1. Application of regulatory duty raises the effective duty on higher value added raw materials like those supplied to the auto sector in line with the cascading principal for tariff's. Purpose of RD is to discourage imports when the same material is available locally. If PAAPAM continues to import that it will be expensive however, they can buy locally.
2. Presently there is 12.5% RD on HRC and 5% on CRC which is not in line with the cascading principal as CRC is a higher value intermediate product and RD should be higher to support the higher level of investment already made (ie US $200 million) to produce and supply auto sector grade CRC to allow for import substitution and reduce costlier imports.
3. The auto grade material is manufactured in Pakistan and is already being supplied to the Auto sector to produce various parts for the motor cycle industry for example frames, chain covers, shock absorber covers, mufflers, rims, fenders, fuel tanks, etc.
4. The main issue is that PAAPAM members are importing raw material way in excess of their local OEM requirements and supplying it in the local market earning a decent spread on this. Application of RD effectively blocks them out from earning these margins. And their claims of being severely hit and destroyed are over stated.
5. The level of protection afforded to the auto industry has been adequately high as evidenced by the level of profits earned by the key players over the past 5 years which have increased while IIL profits have lowered.