MOTORCYCLE PRODUCTION IN PAKISTAN 2011-12

Published on page# 20 & 21 in August-2012 issue of MOBILE WORLD Magazine 

www.mobileworld.com.pk/motorcycleproduction2011-12.html

Custom Targets Motorcycle Industry

EDB activates Euro-II issue

Custom Sabotage Exports

M/s Sitara Auto Impex Karachi exported two consignments containing 180 units of 70cc Sitara Motorcycles to Afghanistan on 29-07-2011 and 12-10-2011 respectively. Later, M/s Sitara Auto Impex imported 500 Kits of 70cc Motorcycles in CKD condition claiming adjustment and release of 180 Kits free of customs duty out of the aforesaid 500 Kits in terms of Serial No.13 of SRO 656(I)/2006 dated 22-06-2006

This is well known fact that the country is suffering from huge local and foreign debts crisis and a big trade imbalance has created scarcity of foreign exchange reserves. In these circumstances there is no alternative except the use of all resources to increase export and reduce import. However, the bureaucratic hurdles by customs authorities and the FBR are discouraging export culture in the country just to accelerate economic crisis and making situation from bad to worse. Following is a case example of working by the Customs authorities.

M/s Sitara Auto Impex Karachi exported two consignments containing 180 units of 70cc Sitara Motorcycles to Afghanistan on 29-07-2011 and 12-10-2011 respectively. Later, M/s Sitara Auto Impex imported 500 Kits of 70cc Motorcycles in CKD condition claiming adjustment and release of 180 Kits free of customs duty out of the aforesaid 500 Kits in terms of Serial No.13 of SRO 656(I)/2006 dated 22-06-2006.

In order to ascertain the bonafide of claimed exemption Afzaal Ahmad Wattoo, Assistant Collector, Model Collectorate of Customs Appraisement, Karachi wrote a letter on 9th March 2012 to Deputy Collector of Customs (HQ), Quetta requesting to confirm the genuiness of the exports and to check whether rebate against the aforesaid two exported consignments was claimed/ sanctioned.  

Meanwhile, the Assistant Collector of Customs Appraisement asked the exporter to furnish the documentary proof that:

i. no duty drawback was claimed/ received against export goods declaration GDs No.3765 dated 12-10-2011 and GD No.1080 dated 29-07-2011,

ii. Foreign Exchange Repatriation certificate issued by the bank, and

iii. The copy of L/C along with the Form-E.

On 21st March 2012, Muhammad Hadi, Superintendent, Custom House, Chaman, issued his confirmation that both the shipping bills were checked with his office record and found to be correct.

However, on 5th April 2012, the Deputy Collector of Customs Appraisement, Karachi informed Deputy Collector Customs, Chaman that the reply of the query of his office regarding rebate claimed/ sanctioned against two Shipping Bills bearing numbers 3765 and 1080 were found unanswered. "It is therefore, again requested to confirm the same enabling this Collectorate to finalize the instant case. An expeditious reply will be highly appreciated as consignment is held up for want of aforesaid confirmation and heavy demurrage is incurring in the goods. Matter may be treated as most urgent," the Deputy Collector concluded.

On 4th May 2012 the Deputy Collector, Custom House, Chaman wrote a letter to Assistant Collector (Rebate & Refund), Quetta, requesting that verification regarding sanctioning of rebate against these shipping bills may be sent to Deputy Collector Appraisement under intimation to this office.

On the other hand, M/s Sitara Auto Impex on 8th May 2012 informed the Assistant Collector of Custom Appraisement Group-VII, Karachi that the documents demanded by him were already submitted prior to the issuance of his letter and these all were available on record. Thereafter, he had issued a letter bearing No. SI/MISC/604/2012-4 dated 05-04-2012 to the Deputy Collector of Custom, Custom House Chaman for verification of claim refund admissible against GD No.3765 dated 12-10-2011 and GD NO. 1080 dated 29-07-2011.

The exporter disclosed that the matter of Rebate Verification was in domain of Assistant Collector, Rebate Quetta, but Karachi customs wrongly addressed the letter to Assistant Collector Chaman, which delayed the matter at length. "Now, the Assistant Collector Chaman had forwarded his letter to Assistant Collector Rebate Quetta vide C.No. CHC/EXP/VRF/GD/2012/5608 dated 04-05-2012, since then the matter was lingering without our default," M/s Sitara Auto Impex said.

They further added that without prejudice to the above it may further be appreciated that on account of paper work, verification and re-verification we are suffering a lot on account of illegal payment of demurrage and other charges which we are not liable to be paid/ borne by us under the law.

"You are requested to kindly issue a letter addressed to the learned Assistant Collector, Rebate and Refund, Custom House Quetta with the copy to the undersigned so as we may pursue the case directly on presentation of the copy endorsed to us. We hope that your honor will appreciate our genuine difficulties and issue the letter at an earliest," the letter concluded.

The next day Sitara Auto addressed another letter to Assistant Collector of Customs Appraisement Karachi, saying that they have exported 180 units motorcycles to Afghanistan, the confirmation of the export has been duly verified by the Assistant Collector, Custom House, Chaman vide his letter bearing No.CHC/EXP/VERF/GD/08-10/4770 dated 21-03-2012.

"We have imported 500 CKD Kits of 70 CC Motorcycles under SRO656(i)/2006. These Kits are lying with you unreleased for the reason that the verification of the export and its rebate is not available on the file, though one part of the verification is duly verified that we have already exported 180 units to Afghanistan. It may kindly be appreciated that due to non clearance of the 500 CKD Kits lot of demurrage and other expenses are payable by us without any fault" they said.

Finally they suggested that aforesaid Units may kindly be released on submission of Bank Guarantee/ Pay Order. The aforesaid Bank Guarantee or Pay Order may kindly be encashed in case if it is proved that they have already taken rebate on the exported motorcycles.

The most interesting fact is that rebate of about Rs4.5 lac was yet not paid or adjusted by the custom authorities while the Exporter was compelled to get release its imported goods after paying an additional amount of Rs6 lac towards demurrage just because of delaying tactics by Customs on May 22, 2012.

-Nasir Mahmood,

nasirmahmood05@yahoo.com

-Published on page#-19 & 20 in June-2012 issue of MOBILE WORLD Magazine

Euro-II implementation deadline nears

The Smoke, Carbon Monoxide and Noise parameters were to be implemented on all imported and new models of locally manufactured petrol vehicles w.e.f. 1st July 2009, while the existing models of petrol driven vehicles locally manufactured were directed to immediately switch over to Euro-II emission standards but not later than 30th June 2012

According to Ministry of Environment's S.R.O.72(KE)/ 2009, 30th June 2012 is the deadline fixed for all types of vehicles in Pakistan for switching over to Euro-II emission standards. 

The S.R.O. 72(KE)/2009 dated 16th May 2009, Karachi was published in the Gazette of Pakistan on Tuesday, August 18, 2009. 

It was issued in exercise of the powers conferred under clause (c) of sub-section (I) of section 6 of the Pakistan Environmental Protection Act, 1997 (XXXIV of 1997), under which the Pakistan Environmental Protection Agency, in anticipation of approval by the Pakistan Environmental Protection Council had directed some amendments in its Notification No. S.R.O.742 (I)/93, dated 24th August 1993.

These amendments were issued under the title of National Environmental Quality Standards for Motor Vehicle Exhaust and Noise. 

These standards were issued with immediate effect for In-use Petrol Vehicles like Passenger Cars, Light Commercial Vehicles, Motor Rickshaws and Motorcycles etc. including Heavy Duty Diesel Engines and Large Goods Vehicles.   

These Smoke, Carbon Monoxide and Noise parameters were to be implemented on all imported and new models of locally manufactured petrol vehicles w.e.f. 1st July 2009, while the existing models of petrol driven vehicles locally manufactured were directed to immediately switch over to Euro-II emission standards but not later than 30th June 2012.

What is EURO II Emission Control Unit (ECU) & how it works?

With the advancement and development of universal modern industry, the problem of environmental pollution is getting worse. Besides emission of industry, emission pollution of vehicles and motorcycles is increasingly noticed. The corresponding emission rules of law are also increasingly strict. From 2009, the minimum emission value of two-wheel motorcycle is regulated in Pakistan by EPA (Environmental Protection Agency, of Pakistan).

Exhaust pipe emission includes CO (Carbon Mono oxide), HC (Hydro Carbons), NOx (Nitrogen Oxide) and CO2 (Carbon Dioxide). Emission from vehicles are controlled through as per standards of Pakistan Environment Protection Agency (PAK-EPA) under clause (e) of session 6(1) of the Pakistan Environment Protection Act, 1997, and with the approval of the Pakistan Environment Protection Council, established national environmental quality (NEQS) as follows:

Structure and working principle of EURO-II (emission control unit, ECU):

Emission control unit mainly includes air pump, air cleaner, connecting pipe and accelerant-catalyzing device. The air pump, in accordance with the principle of engine ripple control, controls the air flow volume. Fresh air could be inhaled into the exhausted pipe and mixed with the un-burnt CO, HC which exhausted from combustion room. This device could help to reduce the exhaust emission of motorcycle and to reach the Euro-2 emission standard.

With reference to Motorcycle Industry in Pakistan so far seven (7) different models were already converted on Euro-II standards that were:-

1.     Ravi Premium R1-70cc

2.     Ravi Hamsafar-70

3.     Ravi Piaggio Storm 125cc 

4.     Honda CG-125 Deluxe

5.     Honda CD-100

6.     Suzuki Sprinter ECO

7.     Yamaha YD-100 Junoon 

-Staff Correspondent

-Published on page#-10 in May-2012 issue of MOBILE WORLD Magazine

Government amends definition of 'New Entrant' for Automobile Industry

The additional customs-duty leviable under this notification shall not be charged on sub-components and components, imported in any kit form by an assembler or manufacturer declared to be a new entrant by the Engineering Development Board (EDB) for the vehicles specified in the said Table for a period of three years from the start of assembly or manufacturing of respective vehicles

The Ministry of Finance, Economic Affairs (Revenue Division) issued S.R.O. 1098 (1)/2011 on 16th December, 2011. The notification said "In exercise of the powers conferred by sub-section (5) of section 18 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to direct that the following further amendment shall be made in its Notification No. S.R.O. 693(1)/2006, dated the 1st July, 2006, namely:-

In the aforesaid Notification, after the TABLE, the following proviso shall be added, namely,-

"Provided that in line with Auto Industry Investment Policy (AIIP) of the Auto Industry Development Programme (AIDP) approved by the Economic Coordination Committee (ECC) of the Cabinet in Case NO. ECC-168/13/2007 dated 13.11.2007, the additional customs-duty leviable under this notification shall not be charged on sub-components and components, imported in any kit form by an assembler or manufacturer declared to be a new entrant by the Engineering Development Board (EDB) for the vehicles specified in the said Table for a period of three years from the start of assembly or manufacturing of respective vehicles, subject to following conditions, namely:-

(i) The new entrant assembler or manufacturers shall chalk out a plan for progressive manufacturing of the vehicles spreading over a maximum period of three years within which he shall catch up with the localization or indigenization level of respective vehicles, as approved by Auto Industry Development Committee (AIDC) of the EDB;

(ii) The continued non-levy of said additional customs-duty shall be contingent upon the achievement of progressive annual indigenization as determined by AIDC of the EDB. In case of any material deviation by the new entrant, the AIDC shall determine the stoppage or withdrawal of the incentive of non-levy of said additional customs-duty, allowed as such, retrospectively;

(iii) The new entrant shall abide by all the terms and conditions laid down in the separate notifications issued by the Ministry of Industries and FBR for assembly or manufacturing of the said vehicles under Auto Industry Development Programme (AIDP) and Tariff Based System (TBS);

(iv) The additional customs duty shall be levied on the sub-components and components which become indigenized by the New Entrant assembler or manufacturers, in accordance with the said plan for progressive manufacturing; and

(v) The term 'new entrant' shall bear the same meaning as declared or notified by the Ministry of Industries."

-Published on page#-8 in December-2011 issue of MOBILE WORLD Magazine

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

Govt. urged to restore R&D on Two/ Three wheeler export

The Manufacturers of Two/ Three Wheelers have urged the government to restore R&D on Motorcycles export and provide $200 on export of Auto CNG Rickshaw. It was pointed out in a representation to Aitazaz A Niazi, Chief Executive Officer, Engineering Development Board during his visit to Karachi Chamber of Commerce & Industry at the end of last month.

The manufacturers said upon withdrawal of facility by R&D by government, export of Motorcycles were 80% gone done. “Demand of Auto CNG Rickshaw is quite good but we are unable to compete in price,” they added.

The Manufacturers also complained that PAMA was not giving membership to Major Pakistani Brand OEMs. They said PAMA (Pakistan Automotive Manufacturers Association) which is claiming to be the representative body of Two/ Three Wheelers Assemblers are not giving membership to Super Power Brands, Super Star Brands OEMs. Their applications were pending with PAMA for more than one year. The reason behind this negligence was one of the major Japanese Brand Assembler who was already a member of PAMA and stopping it as his position in Two/Three Wheelers Sub Committee must be dominated.

The EDB CEO was urged to intervene in this matter and get all pending applications processed at PAMA. He was appreciated to look into the concerned matters and being EDB as facilitator to resolve their issues.

It has been noted with great concern that In House Facilities Policy of Two and Three Wheelers was recently decided without taking input from Major OEMS of Pakistani Brands. There was no consultation with Major OEMs of Pakistani Brands on AIDP of Two/ Three Wheelers and recent Budget exercise. “We hereby request you to kindly include Pakistani Brand Assemblers in consultation which is presently more than 65% of stakeholders,” the representation said.

The OEMs of Two and Three Wheelers drawing attention of EDB Chief towards problems faced by the industry stated that recent Valuation Advice issued by Custom Authorities for Motorcycle Components in which more than twenty two items were valued at excessive prices were only for OEMs, while Commercial Importers are excluded from this Valuation Advice.

Upon excluding the Commercial Importers from this Valuation Advice it will force OEMs to purchase these components from Commercial Importers and thus promoting import of these parts through Commercial Imports. It was very strange; hence he was requested to review this advice with regard to excessive values put in it. They urged that commercial importers should also be included in it to provide level playing field to those OEMs who believe in imports under quota regime.

They observed that some of the OEMS were involved in Sales Tax evasion as a consequence they are giving tough competition in prices below the cost by not paying the Sales Tax on Motorcycles. This will badly affect the OEMS which are regularly and properly paying sales tax.

To sort out this issue they suggested that Centralized and Computerized Data Base at EDB should be created. Data from all Provincial Registration Offices should be obtained on monthly basis and input in the Centralized Data Base. On the other side data of sales with Engine and Chassis Number duly reconciled with Monthly Sales Tax Return is to be obtained from OEMs and input in the Centralized Data Base. Both data should be matched through software which helps in stopping the evasion of Sales Tax.

Regarding Delay in enhancing the quota it was said that annual quotas for imports to OEMs are given on the basis of last year production performance. It is well known fact that demand of Motorcycles is increasing day by day therefore OEM has to go again and again for enhancement of quota. It takes lot of time and lot of documentation involved in it which results in delay in allotting the quota; consequently OEM suffers with demurrages.

Hence, it has been requested to allot annual quota on the basis of assessed capacity of OEMs as determined by EDB. It will facilitate the OEMs to concentrate on production and at the end of year OEM is liable to give accountability of imports made.

-Nasir Mahmood

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.