KARACHI: MCC Exports (Port Qasim) has proposed several amendments in the Customs Rules, 2001 to improve control on the movement of cargo in export processing zones (EPZ) as well as increase efficiency and effectiveness in various operational areas.

It may be mentioned here that Customs has no control in EPZ, which is a hub of smuggling and revenue evasion.

Collector Saif Uddin Jonejo formed aacommittee comprising ADC Rana Tasleem, DC Ali Aijaz, Principal Appraiser Shafi ullah to frame the proposals.

A proviso is proposed to be added to Rule 226(2) that all relevant provisions applicable to transshipment and associated Customs Computerized System shall apply to introduction of imported goods into zones.

This will improve controls particularly movement of cargo to the Zone through bonded carriers and ensure smooth transition to introduction of WeBOC to Karachi EPZ.

It is proposed that at the end of Rule 226 (9) the condition for warehousing period may be introduced with conditional extension in the said period but in no case more than two years. At present no time limit is regarding period for goods introduced into the zone. The proposed change shall bring uniformity with manufacturing bond and export oriented units where two years warehousing period is applicable.

MCC Export Port Qasim has proposed amendment in Rule 228(4) of Customs Rules, 2001 requiring the investor or industrial-undertaking in the export processing zone to maintain records in line with requirement for manufacturing bond. Accordingly, Export Processing Zones manufacturers shall be treated at par with the bonded manufacturers in tariff area. The importer shall maintain proper accounts of the imports, production, export and wastages of the raw materials and finished goods to the satisfaction of the Collector of Customs.

Introduction of Rule 228(4A) in Customs Rules, 2001 is recommended, according to which the units in the zone dealing in only trading / same state goods may be treated at par with private bonded warehouse and requiring license. The proposed amendment is based on practical exposures and shall facilitate beefing up controls and improvise procedure with a view to increase efficiency and effectiveness in various operational areas.

Insertion of a proviso is proposed to streamline compliance with rule 228(5) requiring 80:20 formula regarding exports abroad and in the tariff area respectively.

Insertion of Rule 228(6) in Customs Rules, 2001 is proposed for the regulation of units in EPZ dealing in used textile clothing.

The Export processing Zone Authority Ordinance, 1980 (Ordinance IV of 1980) vide Section 11 empowers the EPZA, with the approval of Federal government, to frame schemes and lay down procedure in respect of sanctioning, establishment and operation of industries in Zones. As per Section 2(e) of the Export Processing Zones Authority Ordinance, 1980, an “Industrial Undertaking” is defined as “an industry; undertaking or establishment engaged in the production, distribution or processing of such goods or the providing of such services as may be specified in this behalf by the Federal Government.

In addition to the above, Rule 5 of the EPZA Rules, 1981 specifies three types of Industries to be established in EPZ Karachi including export oriented industries requiring sophisticated technology, advance marking arrangements, using local raw materials and labor; supporting enterprises to provide essential services to industrial undertakings in the Zone and consignment and distribution services for receiving and storing foreign goods meant for re-export.

Perusal of the above provisions of law reveals that units dealing in used and second hand clothing are, prima facie, not entitled to operate as Processing/Recycling Units. However, EPZA unanimously decided to create another category of existing trading units dealing in second hand clothing as Processing / Recycling Units and the facility of 20 percent export to tariff area was also extended.

It is pertinent to mention that second hand clothing units, per se, do not perform any processing/recycling. In view of the above MCC Exports Port Qasim proposed that the legal sanctity/existence of these units as explained above may please be examined as this Collectorate is of the opinion that in view of the EPZA Ordinance / Rules 1980, these units are not entitled to be licensed in EPZ Karachi as Processing / Recycling Units. As these units are generating enormous wastage creating problems for the EPZA, Customs and other investors, these may not be allowed any wastage.