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7,000 used cars stuck at Karachi port as dealers and government lock horns

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Importers of used cars (that were handicapped by the governments’ refusal to give access to used cars at the port) are claiming that the government has allowed them to pay duties in rupees instead of dollars, but only in the case of vehicle deals that were settled by December 31st, 2017.

Earlier, over 7,000 imported used cars were stuck at the Karachi port waiting to be picked up while an equal number were due to reach the port in a few days, which had created a huge storage problem with the port looking like a Dubai auto graveyard. Importers, unwilling to pick up their cargo, said at the time the gridlock was a result of government measures taken in October to reduce car imports.

Pakistan imports over 60,000 used cars a year worth between $300 million to $500 million. However, according to the calculations of local car industry officials, Pakistan is spending close to $750 million a year on used car imports.

In a one-off, importers say, the government will relax the rules it earlier tightened to control the import of used cars and save foreign exchange. “The government has allowed importers to pay duties in rupees on all car deals that were settled before December 31st, 2017,” said All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad.

After a series of telephonic conversations, Shahzad claimed the government finally agreed on their demands and a notification will be issued on 22nd January. Skeptical of the move, the automobile industry believes the government may have succeeded in reducing some import of new vehicles, but it may not be able to generate enough revenues by increasing the regulatory duty on the import of cars.

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“I don’t think the government will be able to generate even Rs. 1 billion by increasing the duty because the country hardly imports 1,000 new cars per year,” All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad said.

The government believes, he said, that this will significantly reduce imports of used cars in coming months because this way only genuine overseas Pakistanis could bring vehicles into the country.

They claimed that customs authorities did not have the finalised payment mechanism under which importers could get their cargo cleared. However, officials said that importers were willingly not picking up their cargo as they expected the government to retreat from its measures taken in October.

Perturbed about the ballooning trade deficit, the government in the third week of October imposed regulatory duties on 356 essential and luxury goods. Similarly, it also changed some rules for used car imports in a bid to reduce the consumption of such goods and resultantly, reduce pressure on dollar reserves.

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According to the new rules, the owners or local recipients of all new and used vehicles will pay duties and taxes supported by a bank encashment certificate, showing the conversion of foreign remittances into local currency.

In November, Commerce Secretary Younus Dagha had told an online publication that the government did not stop the import of used cars and just wanted to discourage unnecessary imports at this time to curtail the growing trade deficit.

Importers say that the government should have devised some mechanism before implementing new rules for used car imports. Car importers wanted the government to delay the implementation of SRO-1067 (1) 2017, a circular issued on October 20th, until December 2017.

In November, Commerce Secretary Younus Dagha had told an online publication that the government did not stop the import of used cars and just wanted to discourage unnecessary imports at this time to curtail the growing trade deficit. For years, car importers have been importing used vehicles through three major schemes, personal baggage, transfer of residence and gift scheme.

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The government believes, he said, that this will significantly reduce imports of used cars in coming months because this way only genuine overseas Pakistanis could bring vehicles into the country. Pakistan imports over 60,000 used cars a year worth between $300 million to $500 million. However, according to the calculations of local car industry officials, Pakistan is spending close to $750 million a year on used car imports.

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