CCP recommends cut in tariff on PET resin

Says duty structure puts competitors of sole manufacturer at a disadvantage.

ISLAMABAD: The Competition Commission of Pakistan (CCP), in a policy note to the Federal Board of Revenue and National Tariff Commission, has recommended a reduction in tariff on polyethylene terepthalate (PET) resin to uniform rates in order to eliminate discrimination in the industry.

CCP takes the move in the wake of concerns raised over classification of PET resin under Pakistan Customs Tariff (PCT) code and customs duty, which gives duty protection to the sole local manufacturer and supplier.

The sole manufacturer is a vertically integrated unit having presence in downstream market as well and the policy note examines whether the customs duty structure on PET resin and its downstream products places the competitors at a disadvantage.

While reviewing the tariff structure, classification and customs duty on PET resin were compared with the tariff structure followed in eight jurisdictions including developing and developed countries.

CCP observes that generally PET resins are categorised and duty is levied based on their properties, in particular, intrinsic viscosity. Similarly, another interesting feature that helps to understand the international trend in classification of PET resins is the manufacturing process.

PET resins, particularly PET bottle grade, film grade and yarn grade, are manufactured by using the same type of raw material.

Standard PET yarn grade and PET film grade have similar viscosity whereas standard PET bottle grade has a little higher viscosity.

However, in case of PCT code applicable in Pakistan, PET resins have been categorised based on product. Therefore, on film grade and yarn grade, even though having identical viscosity and manufactured through almost similar process using similar raw material, different customs duties have been imposed at the rate of 20% and 3% respectively.

The policy note states that the classification PET resins under PCT code and diverse rates of customs duty seem to extend protection to a particular undertaking by imposing discriminatory rates on similar products, which has resulted in a situation of applying dissimilar conditions to equivalent transactions.

Published in The Express Tribune, January 1^st, 2013.                 

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