ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet has directed Commerce Ministry and State Bank of Pakistan (SBP) to review the import of used tractors after import of 20,000 units, sources close to Secretary Commerce told Business Recorder.

The issue of used tractors is yet to be approved by the Federal Cabinet as some ministers are opposing the proposal but Finance Minister is holding local tractor industry responsible for forcing this decision.

On January 17, 2023, Ministry of Commerce informed the ECC that in pursuance of the Prime Minister’s announcement of the Kissan Package-2022 Ministry of National Food Security & Research (MNFSR) had prepared and presented a detailed Package to the ECC for approval, which also included a proposal regarding ‘import of up to 5-year-old tractors with duty reduction’.

PAAPAM rejects ECC’s decision to import second-hand tractors

The Ministry further stated that the summary was first approved by the ECC on November 14, 2022 and subsequently ratified by the Cabinet on November 28, 2022. It was added that the first meeting of the Committee to oversee implementation of the Kissan Package-2022 was held on November 24, under the chairmanship of Minister for National Food Security & Research.

However, regarding the decision of ECC/ Cabinet on import of 5-year used tractors the committee had directed Ministry of Commerce and Ministry of Industries & Production to “prepare a position paper and workable proposal within 10 days”.

The ECC was informed that the Ministry of Industries & Production shared a proposal/ position paper with respect to (a) “import of used/ old tractors in CBU condition classified under PCT codes 8701.9220,8701.932O, 8701.9400 and 8701.9500 with depreciation allowance in value at the rate of l% per month but not exceeding 50% of value of tractor”; (b) date of first registration of tractor in the country of export shall be taken as date of manufacturing’; and (c) “FBR shall make corresponding changes in relevant Customs General Order (CGO) for finalization of the customs value of imported tractor”.

Ministry of Commerce further noted that in line with the directions of the Cabinet Division, comments of FBR were also invited on the Summary, which endorsed the proposals and proposed to maintain the existing mechanism for depreciation (as provided under CGO 14/ 2005, i.e., 2 % per month and up to maximum of 60%, to facilitate the end users-Kissan]. Moreover, FBR also suggested including PCT 8701.9290 in the proposal to make it all inclusive for agriculture tractors.

ECC approves import of ‘old’ tractors

To the extent of proposals of MOI&P with regard to allowance of depreciation and determination of age, it was pointed out that elaborate criteria (formula) for determination of age of vehicle and depreciation in value were already provided under Import Policy Order 2022 and CGO No. 14/2005.

It was added that to reduce cost of tractors, depreciation in value may be allowed at 2% per month with the cap of 60 %, as already provided under CGO No. 14 of 2005. Similarly, the formula for determination of age may be adopted as already provided under IPO 2022 with the additional caveat that the same may be supported either by a certificate from OEM or a certificate of first registration or a PSI certificate. Also, in line with the suggestion of FBR, PCT code 8701.9290 had been incorporated in the summary.

It was stated that import of second hand/ used vehicles of Chapter ST (of Pakistan Customs Tariff) was prohibited (banned) vide Sr. No.10 of Appendix-C, Import Policy Order (IPO), 2022 except those which were specifically exempted therein.

The Secretary, Ministry of National Food Security and Research observed that the true spirit of the Kissan Package was to encourage mechanization in Pakistan. It was also shared that the essential category of tractors up to 25 HP were not included in the proposal.

Minister for Planning, Development and Special Initiatives was also of the view that indigenization of tractor industry in Pakistan should be encouraged. Moreover, for import, the parameters for standardization should be also be established in the first place.

Finance Minister/ Chairman ECC responded that a number of initiatives were offered but the local tractor industry remained non-responsive. Moreover, currently the focus was to approve the policy and to settle the issues at the implementation level. The ECC also discussed to put a quantitative limit on the import of tractors and directed the State Bank of Pakistan and Ministries/Divisions concerned to oversee and go for review, if required.

Ministry of Commerce submitted following proposals for consideration and approval of the ECC: (1) to allow import of up to 5-year-old tractors, an amendment has to be made in IPO 2O22. To affect this amendment, a new clause may be added in column 2 (exceptions) against Sr. No. 10 of Appendix-C, Import Policy Order 2022, as given below: “(xv). import of agriculture tractors (PCT Codes - 8701 .922O, 8707.9290, 4707.9320, 8701.9400 and 8701.9500)), not older than 5 years, shall be allowed”.

(2) Age of a tractor may be determined as per the criteria (formula) already provided under para-3 of Appendix-E of IPO 2022 for calculation of age of vehicles, i.e., “Explanation. The age of the vehicle shall be determined from 1st January of the year subsequent to the year of manufacture till the date of shipment as per Bill of Lading”.

For the purpose of determination of year of manufacture for used tractor, the shipment shall accompany a certificate from OEM or a certificate of first registration or a PSI certificate, issued by one of the PSI companies listed at Appendix-H of IPO 2022, verifying the year of manufacturing.

With regard to the part of proposal/decision regarding “duty reduction” for import of second-hand tractors, Commerce Ministry proposed that depreciation as already provided under CGO No. 14 of 2005, which provides ‘2% depreciation per month up to maximum of 60%’ in the assessable value for import of used/ second hand agricultural tractors, may be adopted.

ECC approved recommendations of Commerce Ministry with direction that Ministry of Commerce shall review position of import of tractors under Kissan Package, 2022 in consultation with State Bank of Pakistan, after importing 20,000 tractors and submit it to the ECC for consideration.

Copyright Business Recorder, 2023