KARACHI: In a bid to prevent under-invoicing in exports and boost the foreign exchange earnings of the country, the Director of Customs Intelligence and Investigation (I&I) Karachi, Engineer Habib Ahmed, has suggested that a Minimum Export Price (MEP) should be set for all goods exported from Pakistan in consultation with the relevant trade associations.
According to Engineer Habib Ahmed, I&I Karachi received serious complaints from another intelligence agency regarding under-invoicing in exports, which prompted them to investigate the matter. They discovered that the existing mechanism of fixing the MEP, which is the lowest price at which goods can be exported out of Pakistan, only covers eight categories of items, which account for only 13% of the total exports of the country.
This means that there is no formal benchmark of minimum export price for the items that contribute 87% of the country’s exports, leaving room for under-invoicing and loss of foreign exchange.
Engineer Habib Ahmed also revealed that their analysis of the country’s exports showed that there was no consistent correlation between the volume of exports in terms of net weight and the amount of foreign exchange remitted through these exports, indicating possible discrepancies in the declared values of the goods.
An official from the Customs Valuation department, who wished to remain anonymous, said that there was a need for a valuation ruling for all export items, which would ensure fair and uniform valuation of the goods and prevent under-invoicing. He estimated that this measure could result in an increase of at least $500 million in the export receipts of the country.
However, implementing the MEP regime for all exports may face some challenges, as the current staff of the Model Customs Collectorate (MCC) Export Port Qasim and MCC Export Karachi may not be sufficient to handle the increased workload. According to another official, 90% of the exports at these two MCCs are processed through the green channel, which means that they are cleared without physical examination or scrutiny. He said that both MCCs have only seven appraisers each, which is very low, and that they need at least 20 appraisers to cope with the demand. He also said that these seven appraisers are very experienced and skilled, but they are reluctant to work in the export section, because it is very risky and sensitive.
The proposal of Engineer Habib Ahmed has been forwarded to the Customs Valuation department for further consideration and action. It remains to be seen how the MEP regime will be implemented for all exports and what impact it will have on the country’s economy.