Steel sector seeks uniform duty on imports

RIZWAN BHATTI

KARACHI: Steel sector seeks a 20 percent uniform customs duty on import of steel products to curtail miss-declaration and save the domestic industry from international price volatility.

Market sources told Business Recorder on Saturday that usually different countries of the world used import tariffs (customs duties) as a shield to protect domestic markets from international volatility, besides earning revenue. However, in case of Pakistan the import tariff situation has been totally different and it is creating problems for domestic steel industry rather than solve them.

Presently, all steel products are being imported under HS code 72. However, in all the sub-headings further sub-divisions have been created in two categories, i.e. secondary quality and prime quality steel products.

Customs duty on import of secondary quality iron and steel products including bars and rods is levied at the rate of 20 percent whereas customs duty on import of prime quality steel products is levied at the rate of 10 percent only.

Sources said that major steel products belong to single category and there are not secondary or primary. This is a misnomer only adopted by Pakistan while rest of world has single categories of steel products, they added.

 The double duty structure on import stage is encouraging miss-declaration as major steel import are being declared prime quality steel to pay 10 percent custom duty, resulted in billion of rupees losses to the national exchequer.

An analysis of the import data as provided on Federal Board of Revenue (FBR) also indicate that more than 99 percent of imports of iron and steel have been made as prime quality attracting lower rate of Customs duty i.e. 10 percent.

Sources said that import under secondary products is also creating problems for local steel industry particularly Pakistan Steel Mills, which is providing quality steel products to industrial and other customers and as quality wise Pakistani iron and steel products are internationally accepted.

Over the last few years the steel industry has faced uncertainty and price volatility throughout the world and it is being expected that this uncertainty and price volatility will continue in the foreseeable future, they mentioned.

“The quantitative behavior of steel imports is also not uniform and the import volumes have been seen to be surging in the period of low steel prices in the international market. Whereas, during periods of high international prices there is no or limited import of steel products”, they added.

This creates market distortions through carry over stocks by domestic manufacturers as well as commercial importers, besides that government is also loosing precious revenues as customs duties are collected on low value base, instead of average value base, they informed.

Domestic steel industry believes that market uncertainties like double duty regime is also discouraging new investment in steel sector and the country fails to realize its true economic potential.

In the current situation it’s a big anomaly and needs to be immediately corrected. Therefore government is requested to take this issue in the next fiscal budget 2012-2013 and a single duty rate should be announce to curtail the miss-declaration on import of steel products, they suggested.

“The differential treatment in customs duties on import of all steel products should be abolished in the next fiscal year budget and all iron and steel products should be treated as a single category”, they demanded.

“In addition, with an aim to get more revenue and save the domestic market from international price volatility, a single rate of customs duty, i.e., 20 percent should be levied on import of steel products”, they proposed.

They said that acceptance of above proposals would not only correct and aberration in Pakistan Customs Tariff but also would go a long way in promotion of and further investment in local industry, besides generating more revenue for national exchequer.