Import of used cars: what has paved the way for reverting ECC decision?

A recent development in country's automotive market seems to have paved the way for reverting ECC's decision of October 6, 2017 regarding import of three-year-old used cars, well-informed sources in Commerce Ministry told Business Recorder.
The Commerce Division revealed that ECC, in its meeting held on October 6, 2017 had considered the summary regarding "import rationalization" and had decided that "all vehicles in new/used condition to be imported under transfer of residence, personal baggage or under gift scheme, the duty and taxes will be paid out of foreign exchange arranged by Pakistan Nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency".
The Commerce Division further stated that the decision of the ECC was notified on October 20, 2017 through SRO 1067(1)/2017. The committee was apprised that the Import Policy Order (IPO) provides protection to the shipments in the pipeline against any abrupt policy changes. Para 4 of the IPO-2016 provides that "amendments brought In this Order (IPO-2016] from time to time shall not be applicable to such Imports where Bill of Lading (B/L) or Letters of Credit (L/C) were issued or established prior to the issuance of amending Order".
According to the Commerce Division, import of used vehicles takes place under the gift, baggage and transfer of residence schemes for overseas Pakistanis who ship such vehicles individually. Unlike the commercial importers, the individual overseas Pakistanis are not updated on policy changes on a daily basis. Consequently, a considerable number of consignments by the overseas Pakistanis shipped after the issuance of the SRO 1067(1)/2017 have been stuck at the ports. The Adviser to the Prime Minister on Finance, Revenue, and Economic Affairs has also suggested addressing the hardships of those who have already imported the vehicles.
Commerce Division further apprised that due to lack of clarity between Federal Board of Revenue and State Bank of Pakistan on the procedure for payment of duty/tax on import of vehicles, the requisite procedure was finalized on January 9, 2018. The Commerce Division proposed that those vehicles may be cleared by the custom authorities where bill of lading was issued on or before January 9, 2018. The sources said, duties and taxes shall be paid at the higher of the inter-bank and the open market foreign exchange rates, as recommended by the Advisor to Prime Minister.
During the ensuing discussion the Advisor to the Prime Minister on Finance, Revenue and Economic Affair, Dr Miftah Ismail maintained that all duties and taxes on imported vehicles in new or used conditions either under personal baggage or gift scheme would be paid out of foreign exchange arranged by Pakistani nationals themselves.
He further stated that immediate implementation of ECC's decision regarding the new mechanism to pay duties and taxes on the import of cars may create some problems for those importers who had already shipped their vehicles and now are stuck at the ports.
He suggested that in order to address the hardships of such importers, new requirements [payment of duties and taxes on imported vehicles through foreign exchange] may be given effect on those vehicles which would arrive after February 28, 2018. This would allow the pre-shipped vehicles to be cleared under the old regime.
Secretary, Textile Division stated that prices of local manufactured cars have increased considerably after ECC's decision regarding imposition of the new mechanism. Moreover, more than 7000 imported cars are being held at different ports. He urged for an early resolution of this issue to mitigate sufferings of the car importers. He added that it would not be prudent to withdraw any policy immediately after its approval from a competent forum. However, keeping in view the hardships of importers, the SRO 1067(1)/2017 may be withdrawn.
After a detailed discussion, the ECC decided to revert to the earlier mechanism in practice prior to ECC's decision of summary of the Commerce Division of October 5, 2017 taken in its meeting held on October 6, 2017 with the direction to the Commerce Division to deliberate on the issue holistically in consultation with all stakeholders and submit a summary with viable recommendations to the ECC for consideration.
The ECC further decided that the decision may be circulated to the Cabinet for ratification.