Customs Fraud Hits Motorcycle Industry Local Assemblers unable to reduce prices

Custom House Karachi through its Ruling U/S 25-A No. 310 dated 30-04-2011 issued Customs (C&F) values for Aluminum Alloy Wheel and Wheel Rims of all vehicles at the rate of US$ 3.38/Kg for China origin and US$ 4.00/Kg for all other origin. Similarly value for the Wheel Rim (other than alloy) of all the vehicles imported from China was fixed at US$ 0.43/Kg or less than half dollar per Kg. for all other origin too

Rampant corruption in Custom Department has made the life of local assemblers of Motorcycle Industry miserable that has badly affected not only the national exchequer but general buyers of Motorcycle Industry in the country.

According to details the Directorate General of Customs Valuation, Custom House Karachi through its Ruling U/S 25-A No. 310 dated 30-04-2011 issued Customs (C&F) values for Aluminum Alloy Wheel and Wheel Rims of all vehicles at the rate of US$ 3.38/Kg for China origin and US$ 4.00/Kg for all other origin. Similarly value for the Wheel Rim (other than alloy) of all the vehicles imported from China was fixed at US$ 0.43/Kg or less than half dollar per Kg. for all other origin too.

Earlier, the Directorate General of Customs Valuation, through its ruling No.296 dated 11-03-2011 U/S 25-A announced to fix the value of High Tensile screw & Bolts (whether with or without Nuts and Washers) imported from China at the rate of US$ 1.1/Kg.

Similarly, on 23-06-2011 under ruling No.345, the value for about 17 different Tractor Parts and Components of Chinese origin was determined between US$ 1.50 to 3.00/Kg. The list of these parts included Piston set valued at $2.5/Kg and Ring set @ $3.00/Kg while the value of all remaining parts including Cylinders, Cylinder Blocks, Cylinder Heads, Liners, Connecting Rods, Rear End Housing, Fuel & Oil Pumps, Gear Sets, Gaskets & Joints, and Crank Shaft Assembly etc was ranged from $1.50 to 1.70/Kg only.

In contrast to above all, the same Directorate General of Customs Valuation, Custom House Karachi issued its Ruling No.333 on 07-06-2011, which determined the Customs Value of Motorcycle Parts and Components of Chinese Origin amazingly at the highest side. For example the Aluminum Crank Case (R) valued @ US$ 5.45/Kg and Crank Case (L) at $5.87/Kg, Carburetor valued $13.00/Kg and CDI Unit $13.54/Kg. Similarly, Crank Case Covers of left and right again made of aluminum were fixed at the rate of $5.45 and $5.15/Kg respectively.

In addition to this, Rectifier Regulator was valued at $10.20/Kg, Insulator Carburetor $13.60/Kg, Spark Plug $6.61/Kg, Ring Piston Top $10.00/Kg, Spring Clutch Lever $11.00/Kg, Valve Inlet $16.42, Oil Through $25.00, Cover Cylinder Head right side $29.74, and Cover Cylinder Head Top $33.66/Kg etc.

Muhammad Sabir Shaikh, Chairman Association of Pakistan Motorcycle Assemblers (APMA), commenting on this situation said that Suzuki motorcycle has reduced prices of all its models and variants and the other two brands, Honda and Yamaha, were also in line to announce new reduced prices. But on the other hand assemblers of Chinese bikes are unable to do so due to high handedness of customs authorities and malfunctioning by FBR just to target the local Motorcycle industry which is the cheapest means of transportation for general public.

Instead, he said that Assemblers were considering increasing the prices of Chinese motorbikes, but hesitant to do so because of depressed market conditions. The prices of Chinese bikes will be increased gradually in coming months, he warned. Just because Assemblers are not in a position to absorb the increased costs while new ruling of Customs has aggravated the situation. They have no other choice except passing the increased cost pressure to the consumers.

Sabir said though government had announced reduction in General Sales Tax (GST) and removal of the Special Excise Duty (SED), the Pakistani assemblers affiliated with Chinese companies have not revised prices of their products due to latest ruling for Determination of Customs Value of Motorcycle Parts and Components of Chinese Origin, under section 25A of the Custom Act, 1969. The new ruling has made the Chinese parts very much costlier.

The higher valuation ruling was issued by Federal Board of Revenue (FBR) on motorcycle parts imported from China just to stop assembly of low cost Chinese-cum-Pakistani motorcycles. In result, the cost has increased by up to Rs1700 to Rs2000. So the local assemblers are not in a position to reduce prices, Shaikh added.

It may be mentioned here that local motorcycle assemblers had also decided to reduce prices, a few days after local car manufacturers cut prices to pass on the benefit of taxation changes introduced by government in the budget.

Pak Suzuki Motor Company had reduced prices of various variants of its Suzuki Motorcycle with effect from July 1. The reduction in the prices followed cut in General Sales Tax (GST) by one percent and abolition of Special Excise Duty (SED), which was collected at the rate of 2.5 percent.

However, Chinese origin motorcycle manufacturers have not reduced the prices. Suzuki Motorcycle has affected price cuts of Rs1900 to Rs2100. Suzuki Motorcycle Shogun price had fallen by Rs1,900 and the new retail price is Rs74,500. Suzuki Shogun motorcycle price was cut by Rs1,900 and the new price is Rs79,500. Suzuki Sprinter is now priced at Rs71,000 after a drop of Rs1,900. Sprinter ECO is available at Rs67,500 after price decrease of Rs1,900. GS125 price has been reduced by Rs2,100 and the new price is Rs82,500. GS150 is available at Rs88,500 after a reduction of Rs2,100.

-Nasir Mahmood

-Published on page#-11 in July-2011 issue of MOBILE WORLD Magazine.

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Punjab E&T dodges Bike Makers

APMA through its complaint had pointed out that on 11-06-2011 the DG E&T Punjab released only one company order/permission after many months while more than 20 other Manufacturers' cases were still pending with him. But on the other hand DG E&T in his letter has shown ignorance of the 20 Manufacturers' cases majority of which belongs to Karachi or other parts of Sindh province

The Director General E&T, Punjab, the EDB and PSQCA for their ulterior motives have made the Chinese Bike Assemblers rolling stone.

This was discovered from a reply of the Director General E&T, Punjab to APMA in response to their letter addressed to Chief Minister Punjab (published by MOBILE WORLD June 2011) against maladministration by DG E&T and urging him to restore the process of registration of their member vehicles in Punjab.

In his reply dated 20th July 2011, the DG E&T Punjab informed the Association of Pakistan Motorcycle Assemblers (APMA) that: "In order to streamline the process of verification, this office has already taken up the matter with Dr. Muhammad Zubair, GM (Tariff) EDB, Islamabad over telephone dated 08.07.2011 as well as vide this office letter No. 1-3/EDB/Tax-I dated 08.07.2011 regarding on-line intimation of issuance of EDB certificates, however, response from EDB is awaited. This office assures prompt disposal of all cases as per policy/instructions and completion of codal formalities."

The DG E&T further stated that there is no delay on the part of this office as this office grants permission for registration of different brands of two wheeler as well as three wheeler auto vehicles after getting verification of Certificate and CM Licence issued by the Engineering Development Board (EDB) and Pakistan Standard Quality Control Authority (PSQCA) respectively.

However, in case of three wheeler vehicles, permission from Punjab Provincial Transport Authority is also required.

He added that this procedure is strictly followed after one of the manufacturers i.e. M/s Prime Punjab, Lahore, got CM Licence from PSQCA as well as permission letter from PTA on the basis of a bogus/made up Certificate of EDB. This office after getting verification of CM Licence from PSQCA also issued permission for registration of auto vehicles manufactured by M/s Prime Punjab.

However, later on it was detected that CM Licence as well as permission from PTA were issued from the respective departments on presentation of a bogus certificate of EDB by M/s Prime Punjab. Accordingly, registration of all brands of Prime Punjab was stopped immediately.

He further said; As far as issuance of short time permission is concerned, it is submitted that this office grants permission up to the validity period of permission granted by the PTA, PSQCA or EDB, whichever is earlier.

Normally PTA grants permission in respect of three wheelers for three month only, whereas EDB grants permission up to 30th of June and PSQCA issues CM Licence on case to case basis.

It may be appropriate if the matter is taken up by APMA with the respective bodies to stop practice of issuing interim and short-term permission and instead long term/regular permission may be granted. This will not only facilitate the genuine manufacturers, but will also reduce the volume of work of this office.

The DG E&T Punjab concluded that this office is very conscious regarding issuance of permission in respect of 2-3 wheeler vehicles.

Although no specific name of the manufacturer, company/brand has been pointed out in your e-mails on the above subject, for which such permission, stated is pending in this office, however, please feel free to point out reference submitted by any of the manufacturer, which is pending in this office.

We are ready to support and respond to the request made by each manufacturer of auto vehicles.

It may be mentioned here that APMA through its complaint had pointed out that on 11-06-2011 the DG E&T Punjab released only one company order/permission after many months while more than 20 other Manufacturers' cases were still pending with him.

But on the other hand DG E&T in his letter has shown ignorance of the 20 Manufacturers' cases majority of which belongs to Karachi or other parts of Sindh province.

-Salman Saif

-Published on page#-19 in July-2011 issue of MOBILE WORLD Magazine.

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EDB targets 2/3 wheeler

The Engineering Development Board (EDB) has advised all the Provincial Secretaries (Excise & Taxation) including AJK and Federal Govt. Islamabad to provide company wise & brand wise data of 2/3 wheelers registered during 2009-10 & 2010-11, in accordance with its format.

Dr. Muhammad Zubair, General Manager (Tariff) EDB in his letter No. EDB/TBS-II/11 dated April 21, 2011 stated that OEMs of vehicles are allocated a quota of CKD kits for imports under concessionary regime for the assembly of vehicles during a year based on the production of previous year; and at the end of each fiscal year, the OEMs are required under the SRO, 656(1)12006 to submit the records of inputs used for the assembly/ production of vehicles during, preceding year.

"It has been noted that certain OEMs of 2/3 wheelers procure components from illegal sources and misreport production/ sales of 2/3 wheelers. Further, vehicles (2/3 wheelers) having the engine & chassis numbers are being registered under duplicate numbers in different cities. It has also been reported that certain unscrupulous assemblers have been found involved in getting their products registered with provincial registration authorities against invalid/ bogus manufacturing certificates, purportedly issued by EDB. This malpractice is not only affecting the genuine assemblers of 2/3 wheelers, but also defeating the regulator regime and depriving national exchequer of its legitimate share," the General Manager alleged.

He added that in order to put an end to illegal assembly/ manufacture of vehicles and consequent loss to the exchequer, EDB has established a database to maintain & reconcile the data of production & sales of 2/3 wheelers to ensure proper payment of taxes & duties chargeable thereon. To enable the Engineering Development Board to accomplish the aforesaid task of national importance & interest, assistance from the provincial registration authorities is solicited. It is accordingly requested to kindly provide the company and brand-wise data concerning the 2/3 wheelers registered during the year 2009-10 and 2010-11 (up to March 31st 2011), on the enclosed format, Dr. Zubair concluded.

Copies of this letter were also addressed to; the Member (Inland Revenue) Federal Board of Revenue, Islamabad, and Chairman, Pakistan Automotive Manufacturers' Association (PAMA), Karachi.

It may be mentioned here that various complaints regarding misuse of the EDB facilities as explained above were already on record with FIA and the Customs Department against local Car, Trucks and Tractor Assemblers but amazingly the EDB authorities had never bothered to initiate any such inquiries or called for collection of data about 4-wheelers, which smears discrimination against 2/3 Wheelers.

-Nasir Mahmood

-Published on page#-08 in June-2011 issue of MOBILE WORLD Magazine.

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APMA protests Suspension of Assemblers

The Association of Pakistan Motorcycle Assemblers (APMA) has strongly protested against suspension of various motorcycle assemblers by EDB (MOBILE WORLD April 2011 page-11) and urged the Board to approve importable lists/ allocation of quota for all assemblers in the first week of every financial year.

Muhammad Sabir Shaikh, Chairman APMA talking to MOBILE WORLD said if EDB starts this practice every assembler will import their CKD through PRAL as per Board's requirement. He urged the EDB to withdraw suspension letters and direct the PRAL not to block their import and allow clearance of the items importable according to law and also send the copy of withdrawal letters to PSQCA for issuance of our member licenses.

Earlier, in his letter addressed to Dr. Muhammad Zubair, General Manager (Tariff), Engineering Development Board dated 12th April, 2011 the APMA Chairman invited his attention towards letters bearing No. EDB/TBS-II/11 in the month of January and February 2011 to many assemblers/ members of the association, whereby Board had suspended the certificates under SRO 656/2006.

He said it was alleged that many of our members were not directly importing the CKD parts and taking input from the commercial importers for the assembly of motorcycles. "This is clear allegation on your part without any basis," Sabir Shaikh said.

"Our members have already placed many letters to your department for issuance of production certificates including importable lists/ allocation of quota for the year 2010-11 valid up to 30-06-2011, but you neither responded the said letters not corrected the said certificates. In result you issued letters to many assemblers suspending their certificates on the basis of non submission of documents/ lists. Due to suspension letters issued by you the PSQCA stopped renewal of our licenses since last 5 months," Sabir disclosed.

"It may please be appreciated that SRO No. 656/2006 was amendment on 11-06-2008. According to this SRO the assembler or the manufacturer shall directly import the components as per the duly approved list for import to all assemblers every year. But your office not issued approved importable lists at the first week of every financial year. Instead, your staff approved our lists at the end of the year, while next year EDB starts demanding input records from the assemblers as per approved importable lists. How it is possible? Because EDB approved lists provided in the end of financial year and the assemblers are importing parts during the financial year, before issuance of approved importable lists. Due to non-issuance of lists within the time reckoned, this discrepancy arose, which is a violation on the part of EDB, the manager tariff, DGM Tariff, and the GM tariff for which we cannot be panelized. These facts were brought to your kind notice verbally and written as well, but having no fruitful result," Chairman APMA stated.

He further added that the situation mentioned above is alarming and your department is not issuing the import list at the beginning of the financial year. You issue the lists as and when it is desired by you, for the reasons best known to you. How a person can import the items as provided in belated list is a common question to be answered by your good-self.

It may also be appreciated he said that according to revalidation certificates up to 30-09-2010 the first quarter of financial year, we are fulfilling all the conditions as enumerated in Para 2 & 3 of the certificate and nowhere any violation has been pointed out and penalty clause exist in the certificate as well. Under these circumstances the suspension letters issued is without any jurisdiction and smells malafide intention by your department, Shaikh alleged.

"As per information from your office you are issuing importable lists/ allocation of quota under Inter-Department Technical Committee (IDTC) which is created by EDB and manager tariff, DGM Tariff, GM Tariff and GM Policy of EDB are the member of this committee. It means that your Committee is deciding for the issuance of importable lists/ quota to assemblers and you people are the member of this Committee. Please don't make jokes with assemblers and facilitate them, don't destroy the small & medium motorcycle industry of the country," Muhammad Sabir Shaikh appealed.

He once again reminded; "As you know all over the year our many members always continuously approaching your office for the issuance of importable lists/ allocation of quota but your office does not issue approved importable and not allocating quota for the import through PRAL."

"We request you to please approve importable lists/ allocation of quota for all assemblers in the first week of every financial year if you start this practice every assembler will import their CKD through PRAL as per your requirement. We also request you to withdraw the suspension letters and direct the PRAL not to block import and allow clearance of the items importable according to law and also send the copy of withdrawal letters to PSQCA for the issuance of licenses to our members," Muhammad Sabir Shaikh, Chairman APMA concluded.
-Nasir Mahmood

-Published on page#-08, May-2011 issue of MOBILE WORLD Magazine.

www.mobileworld.com.pk

Need of separate Association for 2-3 Wheelers

PAMA is not true representatives of 2-3 Wheelers Assemblers as only seven assemblers of 2-3 Wheelers are their members whereas more than 60 Assemblers of 2-3 Wheelers are members of APMA.

This is a known fact that 2-3 wheelers are different category than four wheelers or heavy vehicles according to criteria given in the Trade Organization Ordinance. WTO also recognized it as separate category according to Harmonized Sector Code (H S Code) which is recognized by Pakistan in Custom Tariff through FBR. Out Transport/Traffic Codes also recognized 2-3 wheelers as separate category.

Separate Associations are also allowed by the DTO in Textiles Sector for Spinning, Weaving, Hosiery, Apparels and Garments etc.

On the other hand PAMA membership form is very tedious and cumbersome and they are demanding heavy admission fee which is Rs300,000 and Annual fee is Rs250,000 which is very high for Small and Medium Companies. PAMA is also not entertaining the new membership of 2-3 Wheelers Assemblers and using delaying tactics. This fact can be confirmed through an independent checking of their record.

PAMA instead of resolving problems of the 2-3 wheelers assemblers was creating more problems for small and medium assemblers of 2-3 wheelers as one of their member of Motorcycles Assemblers (Yusuf H. Shirazi, Atlas Group) who have dominating role in PAMA did not want that small and medium assemblers of 2-3 wheelers prosper in the country as they were providing 2-3 wheelers transport at 60% of its price with same quality.

In view of the above it was requested to the government to restrict PAMA being Association of Four wheelers or Heavy vehicles and register APMA as genuine representative of 2-3 wheelers.

Government should seriously consider that Small and Medium Assemblers have already exported 25,000 Motorcycles due to competitive price and to attract R&D Support. They have also order in hand for export of another 10,000 units but due to non availability of Research and Development Rebate as mentioned above they are unable to compete in export prices.

Hence it is imminent that government should resolve the problems being faced by APMA members on immediate basis to just enable Small and Medium Assemblers to play their role in boosting exports and earn valuable foreign exchange for the country.

Govt. involves PRAL into Motorcycle Industry

The Engineering Development Board has announced to involve Pakistan Revenue Automation (Pvt) Limited (PRAL) into "On-line Quota Debiting System" for the automotive sector with effect from 1st July 2009.

According to EDB sources from 1st July all the imports of raw materials, direct materials, sub-components, components, sub-assemblies and assemblies under three different SROs shall be importable through this system. All the importers under the above SROs shall clear their goods under the system through their Authorized Officer or Clearing Agent. An individual user ID and Password will be provided by the PRAL. The importable lists for the year 2009-10 under the above referred SROs will be placed on the system and hard copy of the lists will be forwarded to the importers after necessary approval by EDB. The status of the imports during the year will be reflected on the system which can be checked at any time. The import of the items will be according to the Certificate/ Lists approved by EDB. Any deviation in the entry for clearance will not be acceptable by the system, the sources said.

In case of any delay in the approval of importable items, Provisional Clearance of consignments shall only be allowed on recommendations of EDB.

Chairman, Association of Pakistan Motorcycle Assemblers (APMA) Muhammad Sabir Shaikh commenting on this development under the Budget 2009-10 said that it was amazing that the above-referred order was issued just to implement on SMEs of Motorcycle Industry only while Car, Truck, Bus Assemblers and various other sectors were excluded from this system. What were the reasons behind this policy? It was yet not understood. This is a clear indication that EDB and the FBR authorities were not happy with the present development and progress of Motorcycle Industry in Pakistan which had crossed the mark of one million unit production during last fiscal year.