There is nobody better than the expert team at Josh and Mak International to guide you through the minefield that are the customs and trade remedy laws in Pakistan! Granted, things have improved in recent years but there is still much complex legislation in place that can prove a headache for business people. We have done our best to explain the majority of things clearly and succinctly in this guide but give us a call for any further information you require.
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Primary domestic legislation in regard to trade remedies in Pakistan
The domestic legislation that exists in Pakistan and relates to trade remedies comes in 3 parts; the Anti-dumping Duties Ordinance 2015, the Safeguard Measures Ordinance 2002 and the Countervailing Duties Ordinance, 2015. This legislation have replaced their predecessors and are pursuant to all the concluded investigations which have been carried out. Additionally, in relation to trade remedies, the National Tariff Commission has promulgated several of their own rules including the Countervailing Duties Rules 2001, the Anti-dumping Duties Rules 2001 and the Safeguard Measures Rules, 2003.
The Pakistani attitude to international trade in Pakistan
Pakistan is part of several trade agreements that are both bilateral and multilateral. Pakistan is also a signatory on 8 trade agreements which includes the South Asian Free Trade Area Agreement. Additionally, Pakistan is the holder of GSP Plus status until the year 2017 and this allows us to export 20% of goods at zero tariff and a further 70% to the EU market at preferential rates. This status was granted after the resolution was passed in the European Parliament by a margin of 406 to 186.
The bilateral trade relations between EU and Pakistan have been governed since 2004 by the Cooperation Agreement from 2004. Enhancing both bilateral trading and investments in part of the 5 year EU-Pakistan engagement plan that began in 2012. Pakistan is also a major beneficiary of those trading opportunities which are offered by the EU’s GSP; Generalized Scheme of Preference.
Pakistan has remained resilient when it comes to WTO and have complied with all its decisions and determinations. One example of this resilience is the shrimp/turtle case which was prepared and then presented by Pakistan, India, Thailand and Malaysia against the US. Another example against the US was the so called Pakistan Yarn case which arose from the US imposing higher restrictions on Pakistani yarns being imported into the country in comparison with with the restrictions it placed on Mexico, another major yarn producer. This tool place in 1998 and resulted in a victory for Pakistan. There haven’t any controversial cases against our country where Pakistan didn’t comply with the WTO’s determinations or decisions.
Pakistan also fully complied with the harsh restrictions and reforms the EU put in place on the trading of rice, which had a direct impact on Pakistan exporting super basmati and resulted in heavy losses. Back in 2004 the EU, then known as the European Community, entered negotiations with WTO and the conclusion was that super basmati would be included once again in the EU’s duty rebate list on the condition that DNA testing would be carried out subject to agreement.
In November of 2014, Pakistan gave notice to the WTO Secretariat pertaining to the request for a consultation with the European Union relating to the EU’s countervailing measures they had imposed on the importing of PET, Polythene Terephthalate, from Pakistan and also about some aspects of the investigations which were underlying to these PET measures.
Trade defense investigations and remedies in Pakistan
Within Pakistan, the commission was established under the National Tariff Commission Act, 2015 which replaced the National Tariff Commission Act of 1990. This is the main investigation authority which has the task of carrying out trade defense inquiries and imposing such trade remedies which are pursuant to Pakistan’s trade remedy laws. In such matters as countervailing and anti-dumping only the commission has the authority to conduct investigations and impose duties but in the case of safeguards, the commission will conduct an investigation and then submit its recommendations to the federal government who will either make a decision or order further action.
The procedure for a domestic industry to start a trade remedy case in Pakistan
Applications will be considered to have been submitted on behalf of a domestic industry if it’s supported by industry producers who, collectively, account for over 50% of the total productive output of a product like a domestic that is produced by the section of the domestic industry which are either expressing their support of the application or opposing it. Investigations will not be initiated in the event that domestic producers who express their support of the application account for below 25% of the domestic industry’s total production. The commission could initiate its own investigation if there is sufficient evidence of dumping and/or injury.
Any application had to be accompanied with any evidence pertaining to the dumping and injury as defined in the Anti-Dumping Duties Ordinance 2015. Once the commission has received the complete application it will inform the relevant embassies of those exporting companies to inform them of the application and within 45 days of receipt they will give the applicant their decision and whether it has been accepted or rejected and, in the case of the latter, provide their reasoning behind the decision.
The same investigation methods are employed for the imposition of any safeguard measures but, the information and data that is sent to the commission in order to initiate their investigation must include the information listed below as well as documentary evidence on the surge or imports as well as on such factors that illustrate the serious injury that could occur within the domestic industry such as;
- The amount and rate of increases in imports of the product in both relative and absolute terms
- The domestic market share taken by this increase in imports
- The changes they will bring about in terms of production, sales, productivity, profits & losses, employment and capacity utilization
How foreign importers will defend trade remedy cases in Pakistan?
In regards to any investigation the interested party, which could include foreign producers or exporters of the product under investigation, once the commission has received an application that complies with those requirements stated in section 20 & 27 of the Anti-Dumping Ordinance 2015 they will give prompt notice to the governments of the exporting countries to inform them of the receipt of the application. When, and if, grounds for investigation have been determined, notice will then be given to all the importers, exporters and any of their representative association that the commission knows of, as well as representative from the exporting country, other interested parties and the applicant themselves. They will publish copies of the notice within the Official Gazette and in at least one issue of a daily newspaper in both English and Urdu.
This notice will contain the proposed conduct schedule for the investigation including the estimates time limits for the submission of any written arguments, the proposed hearing date if one had been requested and the proposed date when they will reach their final determination. Any interested parties must register with the commission within a 15 day period of the initiation notice being published. Within 45 days of it being published any interested parties are required to submit their responses to both the questionnaire from the exporter and any comments on the application relating to dumping, causation or injury. It it’s an exporter who is responding to the questionnaire they can request a time extension in order to submit their response/s, but must offer just cause for this extension. The commission does, however, typically grant 2 weeks extensions for such submissions.
Except for special circumstances, the investigations duration doesn’t usually exceed 1 year and never longer than 18 months, once it has been initiated. Following the investigations initiation, the commission will make its preliminary determination within a time frame of 60-180 days following the initiation.
The commission will publish the notice of this preliminary determination within the Official Gazette as well as within at least one issue of a daily newspaper in both Urdu and English.
The commission will also forward, to the relevant exporting country, a copy of this notice of preliminary determination. They will also forward it to any other parties known to be interested and following this those interested parties will send their arguments in written form to the commission within the designated time frame, and only after this will the commission make its final determination. This will be made with 180 days from the date on which they made their preliminary determination. The commission then issues a notice of this final determination, publishes it in the Official Gazette and at least one issue, in English and Urdu, on a daily newspaper.
In the case of investigations for anti-subsidy, the applicant will make a written application to the commission accompanies with the complete information and the description of the alleged subsidized product. This must include its current classification of customs tariff, details of the exporting country, the name of every known foreign producer or exporter and list of people who are known to be importing the product.
Prior to an investigation being initiated, notice will be sent to exporting country inviting them for consultations aimed at both clarifying the current situation and being able to reach a solution that is mutually agreeable.
WTO rules on the trade remedies which are applied within national law of Pakistan
Pakistan is a member of the WTO but, as it is also a dual state, WTO agreements don’t take precedence over the country’s national law. Strict compliance is typically made with WTO commitments and agreement, and our trade remedies are generally in keeping with WTO agreements. The rules regarding trade remedies in Pakistan are based on the relevant WTO agreements and includes the rules on subsidies, countervailing measures and anti-dumping and offers safeguards within the legislation for remedies on domestic trade. The Pakistani national legislation on national trade in actually based on the WTO agreements.
The appeal procedure against unfavorable trade remedy decisions in Pakistan
Appellate tribunals have been established by the Pakistani government within which aggrieved parties can appeal against investigation initiation, preliminary determinations and/or a positive or negative final determination. All appeals against either investigation initiation or preliminary determinations will be filed within a 30 day time frame from the date of the notice, whilst the tribunal will will expeditiously decide on the matter within 45 days. Appeals against positive or negative final determinations will be filed with 45 days of the date the notice was published in the press, and the decision will be announced within 90 days of the appeal being filed. Any of the decision made at the tribunal can be appealed against in the High Court with the time limit being 30 days from the tribunal order, the High Court will then make its decision within 30 days of the appeal being filed.
Tribunals have made decisions on numerous appeals and, at the time of writing, most appeals have favored the importers or exporters on legal technicalities rather than on the merits of the actual investigation.
How affected parties can seek reviews of the quota or duty in Pakistan
As stated within the Anti-Dumping Duties Ordinance 2015, importers will be granted refunds of the collected anti-dumping duties should the commission determine that the dumping margin, the basis on which anti-dumping duties are paid, has either been eliminated or has been reduced to a level that is less that the current anti-dumping duty. Importers can submit their application for a refund of anti-dumping duties that have been collected within any 12 month period but the commission must not receive it later than 60 days after the end of this period.
Anti-dumping duty refunds are normally paid out within 12 months and always within 18 months from the date the commission received the refund application. Importer can make an application for a refund of duties collected to the commission if they can show that the total of the countervailing subsidies, the basis on which the duties were paid, has either been eliminated or has been reduced to a level which is less that the level of the current duty.
As stated in the Countervailing Duties Ordinance, 2015, importers can submit applications for the refund of collected countervailing duties that were collected within any period of 12 months to the commission within 60 days of that period ending.
Refund application will be considered to have due support evidence only when precise information is included relating to the amount of refund claimed for countervailing duties and all the customs documentation is included which related to the calculation and the payment of such an amount and also includes any evidence of the amount of countervailing subsidies for any producer or exporter which the duty applies to.
In usual circumstances, a review will be carried out once the 5 year period on with the duties were levied has lapsed. However, interested parties can apply for a review on the basis of change or circumstance or the commission could also review the duties as long as a period of 24 months has passed since the duties were imposed.
Practical strategies for compliance with a countervailing/anti-dumping/safeguard quota or duty?
Importers can make refund applications in certain instances but the main trend has been in resourcing from other countries. Exporters haven’t sought any interim reviews on the basis of changed circumstances which, at times, has led to them exiting the market altogether. It is, however, practical to make the payments due of remedial duties and then apply for a refund on the 12 month basis. Upon completion of a 24 month period the application can be sent to the commission and come under review of the levied duties based on a change of circumstances.
Normal rates of customs duties in Pakistan
The normal rates of customs duties can be found in the First Schedule to the Customs Act, 1969. The duty rates published within the Act are legal and binding and can be viewed on the Federal Board of Revenue’s website at www.fbr.gov.pk.
Special tariff rates for free trade agreements and the countries given preferential tariffs in Pakistan
Special and preferential duty rates are stipulated within the First Schedule of the Customs Act 1969. The countries listed on the preference list are; China, Indonesia, Malaysia, Mauritius and Sri Lanka.
How GSP treatment for a product can be gained or removed in Pakistan?
Pakistan doesn’t grant any preferential tariff rates under GSP as it retains the MFN, Most Favored Nation, principle. As an original member of the WTO. Pakistan offers MFN treatment for all the other member of the WTO except India and Israel.
Duty suspension and how it can be obtained in Pakistan
In line with the Customs Act 1969, the federal government has the power of exempting and trade areas or good from duty levies. The government will then give notification of this exemption within the Official Gazette and provide details of the duty exemption on any goods which are being imported into, or exported out of, Pakistan. The exemption can apply or all or any part of the custom duty. In order to be granted exemption from duty, the applicant can contact the Ministry of Finance and state the reasons why they should receive such an exemption. The federal government has the prerogative to grant exemption and it can’t be obtained by right.
Challenging customs decisions and the procedure to follow in Pakistan
If any person is aggrieved by the order or decision made by the customs officer they can, under the Customs Act 1969, appeal to the collector within 30 days of being informed of the order or the decision. The collector offers the chance for the appellant to be heard and then may, after any further inquiries, pass a final order within 120 days following the date that the appeal was filed.
If that appellant is aggrieved by the order which the collector has passed, they can file an appeal against that order with the Appellate Tribunal. The appeal must be filed not more than 60 days from the date on which the collectors order was passed. The opposing party, which is usually the customs authorities, then have the chance of filing a memorandum listing their objection within 30 days of the receipt of the notification that the appeal has been filed against them.
Should the memorandum of objections be admitted into the tribunal, the tribunal will then, after a thorough examination of the matter, pass an order. Should either of those parties involved not be satisfied with the order made at the appellate tribunal a reference will then be made to the High Court.
The trade remedy complaints handled by the Ministry of Commerce in Pakistan
It is the responsibility of the Ministry of Commerce to deal with all matters that relate to foreign trade barriers within either the WTO or other international agreements. There is a wing dedicated to the WTO at the Ministry of Commerce and it is here that any aggrieved person can file their complaint. Additionally, upon intimidation of trade barriers imposed by a fellow member country the MoC, via this WTO wing, will liaise with the country who have imposed such barriers, the WTO and the domestic industry to reach resolution.
The procedure used when filing a complaint against foreign trade barriers in Pakistan
There’s no specific procedure in place for filing complaints against trade barriers. However, should exporters of certain trading materials be of the view that measures that importing countries are taking are actually injurious to Pakistan the exporters then have the option to bring the issue before the Ministry of Commerce. They will then investigate the matter further and, following their inquiries., begin negotiations with that importing country.
How the authority decides whether to launch an investigation or not in Pakistan
As there is no codified procedure in regards to making applications or launching investigation against any trade barriers, there are not specific guidelines in place relating to the evidence or material that the Ministry of Commerce will consider. The ministry must, however, be provided with the instruments promulgated by the country that is levying the trade barrier as well the submission of the exporter which outlines the impact those barriers will have on its exports along with any comments on the merits of that trade barrier.
The measures that can be taken against foreign trade barriers outside the WTO in Pakistan
No specific measures are able to taken due to the absence of a legislative instruments designed to counter trade barriers. However, via the Federal Board of Revenue, the government could levy regulatory duties on imports from that country which is imposing the trade barriers. The same will be undertaken and then notified in pursuance of the provisions stated in the Customs Act 1969.
The support from the private sector which the government expects in WTO cases in Pakistan
Any matters that the government pursues before the WTO are done so at its own expense. The main support comes courtesy of the commission and the Ministry of Commerce’s WTO wing. The private sector, however, may be called upon to provide liaising institutions complete with all relevant evidence and documents.
Notable trade barriers, except retaliatory measures, that Pakistan imposes on imports in Pakistan
Per the agreement that Pakistan has with the WTO, the country in compliant with both sanitary and phyto-sanitary measures. Pakistan has, for implementation purposes, also passed these domestic laws;
- The Pakistan Plant Quarantine Rules 1967
- The Agricultural Pesticide Ordinance 1971
- The Pakistan Plant Quarantine Act 1976
- The Phyto-sanitary Act 2012
Any goods which Pakistan imports have to comply with the country’s measures in both sanitary and phyto-sanitary areas. All of the goods will be inspected before they receive custom clearance on entering Pakistan. Every import is subject to pest risk, analyses, inspection and, should it be needed, treatment before the issuing of any import permits and/or release orders.
Pakistan doesn’t, however, have any defined federal laws in terms of regulating the sanitary/phyto-sanitary control on imports. Bio-safety guidelines were developed but there’s no provisions for the monitoring or regulation of the maximum residue limits imposed on domestic or imported produce.
An import license isn’t actually required to import goods into Pakistan. As per Chapter 13 of the State Bank of Pakistan regulation, the Federal Ministry of Commerce, under the Imports and Exports (Control) Act 1950 regulates the importation of goods into Pakistan as well as any notification issued there under.
No imports are permissible from either Israel or from any of the other countries which the Ministry of Commerce may notify. The importation of goods which originated in any of these countries, or their sources, is strictly prohibited. All imports from India are, as notified, regulated from time to time by the Ministry of Commerce. Before they establish any letters of credit or have registered contracts, the authorized dealers must take all necessary precaution in order to ensure those goods being imported are classifiable under the trade control schedules for imports.
The general controls which are imposed on exports in Pakistan
The Imports and Exports (Control) Act 1950 regulates all general controls pertaining to exports. Under this act the government is allowed to, from time to time. Impose any restrictions and controls or prohibit and control the export or import of goods with any description, procedures or trade practices. The act also covers license applications.
As in Chapter 12 of the State Bank of Pakistan regulations, it also states that no person is able to export any goods out of Pakistan unless they have registered as as exporter with the, formerly known as the Export Promotion Bureau, Trade Development Authority of Pakistan.
As stated in the Export Policy Order 2013, under the banner of the Imports and Exports (Control) Act 1950, any goods so described within Schedule I will not be allowed to be exported. Those goods which are listed in Schedule II will be subject to those conditions which are mentioned within the order.
As stated in this policy, the government has the power to relax or impose restrictions on exports or exports/imports.
Additionally, in pursuance of the Customs Act 1969, Section 16, the federal government could, via an order published in the Official Gazette, restrict, prohibit or otherwise control exporting of goods of any description. It can impose total export bans, restrict exports, levy export duties or ask for licenses to export certain goods.
The authorities which handle the controls in Pakistan
The controls are handled by the following authorities or departments;
The Ministry of Commerce
The Ministry of Finance
The State Bank of Pakistan
Separate controls which are imposed on specific products and relevant licenses in Pakistan
The Export Control Act on Goods, Technologies, Materials and Equipment related to Nuclear and Biological Weapons and their Delivery Systems Act 2004 is the provider for all export controls on both technologies and sensitive goods. Any technologies and goods which are exported under the banner of this act also go on a separate list maintained by the government and which the revisit occasionally. It is under this act that the government issues all export licenses. The procedure involved for getting a license and registering with the Strategic Export Control Division can be found in the Export Control (Licensing and Enforcement) Rules 2009.
There are many other legislative instruments in place regarding further controls and restrictions on other goods and we will happily go through them with you.
How Pakistan has implemented the WCO SAFE Framework of Standards
Pakistan became a member of the World Customs Organization, WCO, in November 1955 and adheres to their SAFE Framework Agreement which the WCO council adopted in June of 2005. Pakistan is also one of 59 countries who have signed the WCO Revised Kyoto Convention.
Pakistan complies substantially with the World Customs Organization but legal reforms are needed in the customs procedures and laws in order for us to fully implement the initiatives and the recommendations from the WCO.
Pakistan is implementing an AEO, Authorized Economic Operator, program as there are no other similar programs currently implemented.
Where the information is listed on those countries which are subject to export controls in Pakistan
Information on those countries which are subject to exportation controls is posted in the Official Gazette of Pakistan as well as the Export Policy Order with updates and amendments being the responsibility of the federal government.
There are no export restriction to named institutions or persons overseas in Pakistan
Pakistan has no scheme which bans or restricts the export of goods to named institutions or persons overseas. However, a general restriction can be found in the Export Policy Order 2013, section 11, and this prohibits the exportation of chemicals classed as Schedule I and II to those countries which aren’t party to the Chemical Weapons Convention.
The possible penalties for violating export controls in Pakistan
Anyone who violates the Pakistani export control will be punished with a prison sentence of up to 1 year, a fine that could amount to 1m rupees, or both. Additionally, the federal government or any other authorized officer could suspend, deduct, adjust or completely cancel all or any part of the quota of that exporter who has failed to use their export license in strict accordance with the conditions under which it was issued.
Furthermore, the Customs Act 1969 states that goods which are exported in direct violation of the restrictions and prohibitions contained within the act will be detained, confiscates or seized by any officer who doesn’t rank below the Assistant Collector of Customs.
Sanctions and embargoes in Pakistan
The federal government has the power to impose both sanctions and embargoes with the same being published within the Official Gazette. Companies, individuals and organizations can all be subject to a financial sanction.
Pakistan has typically adhered to the embargoes and sanctions that have been imposed on countries via the UN Security Council and those imposed by the US. Pakistan has never imposed its own sanctions on any particular country.
Legal Trends and updates for customs and trade remedy in Pakistan
In recent times, the laws pertaining to remedy laws have undergone promulgation as ordinances, and these are considered to be an extra-parliamentary measures. Ordinances are valid for 4 months from the date of the promulgation but the president does have the authority to extend this legislative tool by re-promulgating any ordinances by extending their terms for another 4 months.
Other recent changes include the Finance Bill 2015 which was passed and enacted in June 2015 and there could be some amendments to laws such as the Customs Act `969 which would affect the Federal Board of Review’s powers to issue any regulatory orders.