INTERVIEW WITH H.M.SHAHZAD, CHAIRMAN APMDA

KHALIL AHMED
(feedback@pgeconomist.com)

Sep 24 - 30, 20
12

PAGE approached H.M.Shahzad for his views on auto industry. The excerpts of his interview are as under:

In view of the expected announcement of the Trade Policy, the Local automobile industry has stepped up its lobbying in the press and media maligning the used car industry. Below, please find the facts briefly related to the achievements of the local industry since its inception through Suzuki more than 30 years ago and Toyota/Honda, 20 years ago. PAAPAM and the automobile industry must be taken to task for spreading disinformation.

The truth about the industry is as follows:

1. There are not even 100 venders who are capable of manufacturing components of international standards. Tyre, Battery, Radiator, Carpet, etc were being manufactured in Pakistan even in the sixties long before the big 3 assemblers and PAAPAM were born.

2. Hardly 4-5000 works are employed by these venders.

3. Loss of business claimed by them is of their own doing. The only correct way to increase business in through increased deletion and lower prices and not by seeking Government support for their failures and sins. Now through consensus of the vendor industry. Deletion Program has already been replaced by Traffic based system and parts are now importable from anywhere in the World like China, Thailand, Indonesia, etc.

ACHIEVEMENTS OF AUTOMOBILES INDUSTRY (TOYOTA, HONDA, SUZUKI) IN LAST 30 YEARS:

1. High Prices, (Increased 100% in last 4 years).
2. Poor Quality Vehicles.
3. No safety accessores.
4. Vehicles booked on full payment and Delivery in 4 to 6 months.
5. Heavy premium on ready delivery.

USED CAR INDUSTRY

1. Competitive price at equal or lower than local cars for the public.
2. Readily available. No premium. No booking.
3. All safety features and accessories.
4. High quality Better than new local cars. No complaint in any forum.
5. Revenue of Rs.33 billion paid in duties/taxes in 2011-12.
6. Thousands of show rooms all over Pakistan employing hundreds of thousands of people.

Last but not the least, the latest announcement by the FBR which has reduced the depreciation in the import and used cars through CGO-13-12 dated 31 August has put the whole business community and public in a state of confusion and disbelief. However, it has been done in a hurry because even the CGO 14/2005 is not correctly quoted/interpreted. It was already amended on 26th March 2011 by CGO 02/2011 fixing 60% as the limit for depreciation. It appears to be a partisan decision without giving us an opportunity to present our case and causing a heavy loss of revenues to the Govt. and depriving the public of low priced cars.

HM SHAHZAD PRESENTED SOMETHING TO FBR AS FOLLOWS:

1. Kindly refer to above subject. A Customs General Order (CGO - 13/2012 dated 31.8.2012) for abrupt changes in practice for allowing depreciation of customs value for import of old & used vehicles was issued on 31.8.2012 without any consultation with stakeholders. It is admitted fact that old & used vehicles are importable by overseas Pakistanis under certain parameters; therefore, primary stakeholders are those Pakistanis whose rights have been usurped by this CGO. However, the Pakistani workers aboard who are entitled for import of used vehicles are also entitled to sell their properties as free citizen of Pakistan as per their volition. The fact of the matter is that more vehicles imported by overseas Pakistanis are traded by them which give them some incremental savings, while rest are used by themselves. The All Pakistan Motor Dealers Associations being at the centre point for trading of such vehicles has become secondary stakeholder protecting interests and rights of overseas Pakistani workers who had planned for important of such vehicles or whose vehicles were in the pipeline when the subject CGO was issued abruptly. It is generally believed that FBR issued the CGO to appease the local manufacturers sacrificing norms of change in customs practice. It is unfortunate that law which provides similar rights for overseas Paksitanis and local manufacturers has been tilted over night in favour of powerful ignoring the poor workers. This is discrimination pure and simple.

2. The change in practice in customs procedure, customs valuation, and extent of exemption or anything pertaining to Import Policy Order cannot be effected overnight by usurping the rights of some stakeholder for appeasement of others. FBR is the hightest form of creation and implmentation of fiscal measures and taxation policy. AS custodian of public policy practice on taxation FBR has to be neutral and is expected to treat all the stakeholders evenly.

3. The implementation of CGO 13/2012 dated 31.8.2012 is flawed, contrary to settled case laws and miliates the international best practices on the issue. The tax administration of EU countires or USA, Australia always bring changes in customs practice pertaining to tariff classification, vlaue, quotas, or import restrictions after giving due notice and time to the stakeholders. Similarly, Kyoto Convention on harmonization of customs procedure also depict standard for change of practice. However, unfortunately FBR ignored all these nationals as well as international bindings warranted to be considered in cases of change of any practice. The CGO is claimed to be issued to implement the provisons of Import Policy Order 2009 vide Appendix-E, para 3 (Explanation) which states that:

"Explanation.- The age of the vehicle shall be determined from the 1st January of the year subsequent to the year of manufacture till the date of shipment as per bill of Lading".

4. The very pertinent question which arises in the prudent mind are:-

(a) The above preovisions were incorporated in the Import Policy Order, 2009, what caused not to implement them in the years following 2009 till August 2012 and what has prompted to implement it now?

(b) Whether FBR on its own has found it approporate to implement such provisions or the action has been taken on behest of decision of ECC or Ministry of Commrce?

(c) Whether it has not been the settled policy of government, FBR Ministry of Commerce to allow suitable time to all importers before implementation of any change in tariff classification, exemption restrictions or taxation. If so why abrupt change has been deemed fit to be imposed overnight and who is beneficiary of that?

5. The CGO 13/2012 dated 31.8.2012 has been used to bring an effect for enhancing customs valuation of second hand cars thus increasing their duties. The very pertinent question is whether any CGO can be used for enhancing the quantum of duties by increasing value?

DETAILS OF ALL VEHICLES IMPORTED IN CBU CONDITION
July, 2011 to June, 2012

(Rs. In million)

S.NO. CATEGORY TRANSFER OF RESIDENCE SCHEME PERSONAL BAGGAGE SCHEME GIFT SCHEME OTHERS (NEW VEHICLES) TOTAL
. . QTY. VALUE C.DUTY QTY. VALUE C.DUTY QTY. VALUE C.DUTY QTY. VALUE C.DUTY QTY. VALUE C.DUTY
1 Motor Cars upto 1000cc 444 110.1143 57.7867 24063 5998.834 3172.692 3 0.824 0.434 20 6.99 3.495 24530 6116.762 3234.408
2 From 1001 to 1300cc 124 54.066 32.436 7758 3295.766 1978.008 2 0.822 0.492 . . . 7884 3350.654 2010.936
3 From 1301 to 1500cc 371 224.433 134.529 17230 10442.313 6271.812 4 3.094 1.856 267 304.554 182.733 17872 10974.394 6590.930
4 From 1501 to 1600cc . . . 27 28.641 21.480 . . . . . . 27 28.641 21.480
5 From 1601 to 1800cc 86 74.698 56.024 3901 3521.495 2640.868 5 6.258 4.693 348 1013.819 760.362 4340 4616.270 3461.947
6 From 1801 to 3000cc . . . 92 155.925 233.886 1 1.154 1.731 76 194.45 291.674 169 351.529 527.291
7 Above 3000cc 1 1.632 2.447 66 197.372 296.057 . . . 15 84.021 126.22 82 283.025 424.724
8 Jeeps (4x4) 8 14.574 21.871 763 1691.629 2506.022 1 2.985 4.478 27 129.622 197.472 799 1838.810 2729.843
  Total 1034 479.517 305.094 53900 25331.975 17120.825 16 15.137 13.684 753 1733.456 1561.956 55703 27560.085 19001.559
9 Buses . . . . . . . . . 20 15.124 3.025 20 15.124 3.025
10 Trucks / Spraying Lorries 895 745.425 223.628 12 14.914 7.411 . . . 10 5.173 1.552 917 765.512 232.591
11 Dumpers/Mixer/P-Movers 77 85.312 20.278 . . . . . . 4 20.248 1.012 81 105.560 21.290
12 Agricultural Tractor . . . . . . . . . . . . 0 0 0
13 Vans 27 27.681 10.087 1400 1451.633 490.778 . . . 377 916.923 183.385 1804 2396.237 684.250
14 Pickups 6 8.605 5.163 297 389.756 233.755 . . . 87 122.959 75.240 390 521.320 314.158
15 Motorcycles / Scooters 99 20.323 13.210 . . . . . . 34 10.500 6.824 133 30.823 20.034
. . . . . . . . . . . . . . 59048 31394.661 20276.907