The Trade Policy for FY2000 was announced on 14th July 1999 as a part of the medium-term strategy initiated in the last year's trade policy. The main thrust of the policy was to increase export earnings, reduce trade deficit and support the balance of payments position. The policy is aimed at preparing the country for the challenges and obligations of agreements with WTO as the competition for market share will intensify with the entry into a new millennium of globalization. Keeping in view the above objectives, various concessions, tax incentives and relief measures Were announced, to expand and diversify the export base, propel the foreign exchange earnings and trim the trade deficit. The salient features of the trade policy are as follows:

Exports
Polyester Staple Fiber (PSF) was included in the No Duty No Drawback Scheme.

The facility of export refinance on cotton yarn of less than 30 counts, expiring on 30th June 1999, was extended up to December 1999.

Raw cotton export was allowed without any restrictions.

The condition of acquiring Pre-shipment Authorization Certificate from the Export Promotion Bureau (EPB) for export of textile items to non-quota countries was abolished.

To promote export of branded rice in packs of up to 5~kilograms, income tax on the export of rice was curtailed from 1 percent to 0.5 percent.

To exploit and add value to the export of fish and other food items, the income tax for canned and bottled fish (including seafood) and other food items was reduced from the range of 0.75 -1 percent to 0.5 percent. In addition, 90 percent depreciation allowance was allowed in the first year for income tax assessment, to the canned and bottled food exports to promote the development of export of canned food. This would mean a virtual exemption from income tax for about four to five years.

To provide an efficient and speedy handling of perishable cargo one window operation was provided for exports of fresh fruits and vegetable at Karachi and being set up in Multan.

It was decided to allow export of edible oil in bottles or other consumer packs provided there is a value addition of 15 percent for edible use in packs up to 5 liters and 50 percent value addition for non-edible use in packs up to 0.5 liter.

To facilitate exports, regulatory duties on export of crushed bones and steamed bones were reduced from 20 percent to 10 percent and 15 percent to 5 percent, respectively.

To encourage bona fide exports of rough, uncut, cut or polished precious or semiprecious stones, it was decided to reduce income tax on exports of such stones from 1.0 percent to 0.5 percent.

To increase export of engineering, contracting and consultancy services, only 1 percent income tax was levied on foreign exchange earnings of these services. The income of buying and export indenting houses was also considered as export earnings and therefore treated in the same way.

Exporters who are also manufacturers were allowed to import their raw material requirements under certain temporary import schemes without payment of duties. They were further allowed to meet their raw material requirements from Public Bonded Warehouses without payment of duties and taxes.

It was decided that indirect exporters will be provided the same income tax treatment as allowed to direct exporters on purchase through inland L/C or against a Standard Purchase Order paid through a checks.

For obtaining ISO 9000 and 14000 Series of Certifications, a financial assistance was provided to units seeking above certifications, which was made available by the government up to 31st December 2000.

An amount of US$300,000 was provided by the government to the carpet association, to initiate a program to curb child and bonded labor, in collaboration with ILO. It was decided that the same amount would continue to be provided in the years 2000 and 2001 for the completion of this program.

Some of the additional measures introduced during the year inter-alia included:
To maximize the export of potatoes, the Export Promotion Bureau (EPB) extended the facility of freight concession of 25 percent up to 30th September 1999, which was later restored in January 2000.

A regulatory duty was imposed at the rate of 20 percent ad valorem on the exports of raw hides and skins, wet blue tanned hides and skins w.e.f. 1st July 1999.

The new textile quota policy for the year 2000 was announced on 29th December 1999 to facilitate genuine exporters and effectively curb quota trading. The new policy afforded greater access to quotas to genuine exporters especially the newcomers. The allocation of quota on performance continued while the number of textile associations, handling quota categories were reduced.

The Quota Supervisory Council (QSC) of Export Promotion Bureau (EPB) decided to withdraw the imposition of 1.0 percent penalty on textile quota exporters in cases where the date of shipment bill was later than the date of bill of lading w.e.f. 27th March 2000.

The government had allowed exporters to transfer-out 100 percent textile quota acquired through transfer-in, either from market or auctions, before 31st May 2000.

The exporters who transfers quota on or after 31st May 2000, will have to use at least percent of his total quota holdings including the performance quota, quota transfer in and quota acquired through auction.

Textile Quota Management Policy Order 2000 (TQMPO) was amended, extending the last date for textile quota transfers from 31st May to 1st July 2000. Further, the exporters who had acquired quota through transfers (either from the market or auctions) before 11th May 2000 were allowed to transfer 100 percent quota. The TQMPO was further amended to enable the exporters to transfer quota reserved on 'first-come, first served' basis in the same category. Under the new amendment, an exporter who has no export orders can transfer his quota on payment of penalty equal to 25 percent of the quota reserved. Moreover, the government has announced rules for use of flexibilities. The percentage of flexibilities will be calculated and allocated to the exporters on the basis of current year's entitlement plus the net quota (i.e., transfer-in less transfer-out) acquired by them during the currency of the quota year.

A 1.0 percent withholding tax on engineering contracts by Pakistanis abroad and 0.5 percent on export proceeds of rice, canned/bottled food and precious/semi-precious stones was imposed on 17th September 1999.

Duty drawback facility was allowed, by the Economic Co-ordination Committee (ECC), on exports to Afghanistan and Central Asian Republics through land routes provided these exports are affected against advance payment in US dollar or in irrevocable Letter of Credit issued by a recognized bank in US dollars. The facility is admissible as per duty drawbacks schedule subject to a maximum of 7.5 percent.

Imports
To facilitate the promotion of domestic housing and construction industry, import of used/second-hand machinery and equipment required in this sector was allowed without payment of customs duty or sales tax till 30 June 2000. Import of new, used/second-hand bulldozers and angle dozers was also allowed without payment of customs duty and sales tax.

The domain of the facility under SRO 27(I)/98 was extended to rice processing industry, cotton ginning units, plastic fixing crates (used in fish processing) and refrigerated trucks not produced locally required in poultry, dairy farming, fishing and production of perishable commodities such as fruits and vegetables.

Industrial establishments registered, as importers were allowed to import spare parts/machinery up to the value of US$ 7,000 per fiscal year, against foreign currency demand draft, without opening of Letter of Credit, provided such import is made by air or by courier.

Import of Auto Coners for the textile industry was allowed without customs duty. It was also clarified that commercial importers who import sewing machines and other machinery for clothing and textile for onward sale to exporters are entitled to sales tax refund or adjustment.

The import of lubricants was restricted to certain specifications, i.e., automotive engine Oils-(API)SC/CC and Automotive Gear Oils-(API)GL-4 or better while import of lube base oil was made permissible only through lube/oil marketing companies, refineries and registered lube oil blending plants. Moreover, Oil and Gas Companies were allowed to import their specific requirements without the recommendations of Ministry of Petroleum and Natural Resources.

The age limit set for import of used computers was withdrawn and importers were allowed to import used computers through their own resources. In addition to this, spares and accessories, which were not included in the last year's list of duty free importable accessories for computers, were included. Import of two computers including personal computer or Lap Top was also allowed under the personal baggage, which was earlier limited to one PC.

Imported consignment of dry fruits from Afghanistan meant for packing and then re-export allowed to be cleared against indemnity bond and counter guarantee from the chamber concerned.

The restriction of L/C for the import of bulbs and seeds of flowers/fruits was withdrawn, provided the importers arrange their own foreign exchange.

Pharmaceutical units having valid pharmaceutical manufacturing licenses were allowed to import only "pharmaceutical raw materials of pharmaceutical grade".

The age limit for the import of used surgical equipment and electro-medical equipment like CT scanner, dialysis machines and reverse osmosis equipment etc. against own foreign exchange management was increased from 3 years to 5 years.

In addition to 'ADS free certificate', 'Hepatitis B&C free certificate' was also made mandatory for the import of products, prepared with human blood and its fractions.

Limit fixed for import of commercial samples was enhanced from US$ 3,000 to US$ 10,000 per firm per annum.

Duty free import of rough, uncut, cut or polished semiprecious stones for re-export, without involving foreign exchange of the country was allowed to continue.

The import of pitted and rusted rail was disallowed to stop its misuse.

The import of specific kind of chrysotile asbestos, which is necessary for industrial use and also less harmful to health, was allowed.

The import of used photocopier was allowed which was banned earlier.

Special commercial courts were planned for set up in Lahore and Karachi for earlier settlement of commercial disputes.

It was decided to import internationally acceptable food colors and food color lakes to check the imports of poisonous petroleum and textile dyes, which are hazardous for health.

Overseas Pakistanis were allowed to send goods which are freely importable up to US$ 10,000 per annum from their own foreign exchange earnings without opening of Letter of Credit, sales tax registration and import registration.

Following are the additional measures taken by the government in the import regime during the year:

The Economic Co-ordination Committee (ECC) of the Cabinet imposed 15 percent excise duty on the import of cotton to protect the interest of growers on 13th September 1999.

The import of transparencies/negative films used in textile printing and packing was exempted from custom duty and sales tax provided these are temporarily imported for use in textile designs, printing and packing of goods meant for export.

Customs duty on the import of vinyl chloride monomer (VCM) and polyester filament yarn subject to the import by manufacturers was reduced on 29th March 2000 from 10 percent to 5 percent and 35 percent to 25 percent, respectively

CBR notified Customs Valuation (Determination of Value of Imported Goods) Rules 1999 to regulate the valuation of imported goods for levy of custom duty and other taxes, which were effective from 1st January 2000.

To stabilize the prices of urea and provide protection to local industry, 10 percent regulatory duty on import of urea below C&F cost value of US$100 per ton was imposed on 14th March 2000.

The 2.0 percent penal surcharge on clearance of import consignments staying uncleared beyond the stipulated warehousing period of three months was waived on 1st June 2000.