Pile-up at the port

Karachi port is currently clogged with an unusually high number of imported used cars — a favourite for bargain-minded buyers in the country. In a matter of days, more such shipments are expected to arrive at the port. Since the importers are reluctant to get their cargo cleared in the wake of a government move to curb car imports, the port authorities are in a quandary. Until customs officials work out a government approved payment mechanism, the vehicles are likely to pile up at the port unhindered. Importers for their part are bidding their time in the hope that the government reverses the order passed last October. The government says it is determined to streamline the import of such cars and thereby reduce the pressure on the country’s dollar reserves, citing the ballooning trade deficit as a major concern.

Fresh regulations make the owners of these vehicles liable for duties and taxes supported by a bank encashment certificate, verifying the conversion of remittances into local currency. The country spends nearly $750 million a year on used car imports. The challenge is to prove that the country’s trade deficit can be reduced by curbing those imports. The chairman of the All Pakistan Motor Dealers Association makes a valid point when he argues for the crafting of a proper mechanism prior to the introduction of the new rules. Car importers must contend after all with punishing demurrage and other charges that accumulate otherwise.

It is not surprising that the clearance of used cars — which fetches up to Rs70 billion every year or Rs5-6 billion ever month — has almost stopped following the introduction of the amended import policy. The quantum of duty and taxes on imported cars is virtually 100% on the declared import price.

Published in The Express Tribune, January 17^th, 2018.

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