FBR revises import values of Chinese arms & ammunition

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KARACHI: The Federal Board of Revenue (FBR) has revised the Customs values for the import of 9-MM and 30-Bore pistols of Chinese origin.

Directorate General of Customs Valuation issued Valuation Ruling No.608/2013 to reflect the prevailing prices of arms prevailing in the international market.

The Federal Board of Revenue (FBR) directed Directorate General to determine the Customs values of the said goods.

The Chinese origin pistols of 9-MM caliber would now be assessed at $120 per piece while Chinese origin pistols of 30-Bore caliber would be assessed to duty/taxes at $70 per piece.

The ammunition/cartridges for 9-MM and 3-Bore pistols will be assessed to duty/tax at $0.058 per piece.

It may be mentioned here that Pakistan Customs has no modern mechanism for determination of duty and taxes on import of arms and ammunition and the authorities were relying on the customs values fixed 15 years ago.

The fact finding mission constituted by Supreme Court of Pakistan lead by Ramazan Bhatti, former Member Customs noted in his report that the imported arms and ammunition that were mostly of Chinese origin were being assessed to customs duty and other taxes on the basis of values ascertained by the department almost 15 years ago.

“Since then, the Directorate General of Customs Valuation has ascertained customs values of a few types of arms but it is unclear as to whether the elements of freight, insurance and landing charges have been added in the ascertained values,” the report said and added that similarly, no exercise had been conducted by the department over the years to ascertain the actual values of arms and ammunition being imported through the work back method of assessment by comparing the market prices of the frequently imported weapons.

The report further said that in cases where the customs assessed values exceed the value allowed in the import authorization of the ministry of commerce, the information was not being shared with either the letter of credit opening bank or the ministry of commerce to adjust/account for the excess values at the time of issuance of next authorizations.

“Similarly, the department is also not taking any punitive action against the importers/dealers that exceed the prescribed authorized limits,” it said.
The result is that the importer opens L/C for the entire amount shown in the authorization each year and succeeds in bringing in the quantities without any fear of punitive action or reduction of value quota for the next import. “There is no evidence that the subsequent L/C was reduced on the advice of Customs,” it added.

The report suggested that a vital area requiring closed attention is the lack of any forensic audit of the imports of arms and ammunition at all Pakistan level in order to confirm and verify the clearance from different Customs stations against the import authorization issued by the ministry of commerce. “This reconciliation exercise should not be a one-off phenomenon but a permanent regulator needs to be appointed under the law with the clear cut mandate to conduct periodic audits of the imports of arms and ammunition in the country,” it said and added that the most relevant agency for this purpose would be the ministry of commerce which issues the import authorization in the first place.

The commission is of the view that the ministry of commerce should issue import authorization to arms dealers on the basis of the last year’s actual sales and declarations made to the income tax authorities.
Similarly, the ministry should feed the import authorization directly in the customs database through dedicated user ID so as to ensure foolproof computerized debiting and crediting of authorized quantities. “The importer should also be bound to ensure full compliance of the provisions of Rule 126 of Chapter X of the Customs rules 2001 for maintenance of manual or electronic accounts as per the formats prescribed therein for a period of not less than three years,” it suggested.

The report highlighted another area that required urgent attention is the minimal arms license fee in vogue, which needs to be enhances substantially in accordance with the status of the importers/dealers as ascertained in terms of the payment of federal and provincial taxes.

The commission recommended that there should be maximum ceiling of three licenses to be issued to single individual after proper verification of his tax compliance status from the Federal Board of Revenue and non-availability of any adverse report from the Police department.