KARACHI, May 9: The federal commerce minister was briefed about the issue of fraudulent exports in a meeting of the Export Advisory Committee held in Islamabad recently to discuss the new trade policy.

Shahid Khaqan Abbasi was informed that certain exporters mis-declared their goods to take undue advantage of the export incentives. They are sending cotton/textile waste in the name of leather garments to claim higher rate of duty drawback, a source privy to the meeting told Dawn.

They said that the mis-declaration was possible because under Customs Administrative Reforms (CARe) no physical examination of goods is carried out by the customs officials.

The data of product-wise exports, therefore, is not correct and needs to be verified. It was observed that the national exchequer loses millions of rupees on making payments of duty drawback on such fraudulent exports.

It was suggested by a business leader in the meeting, which was also attended by the Federal Bureau of Revenue (FBR) chairman, that the commodity-wise export figures collected by PRAL should be compared with those compiled by each trade body.

“The higher export figures may be a source of encouragement but when around one third (33 per cent) of the exports are just on papers the data could only lead to confusion,” a trade leader said.

The business leaders informed Mr Abbasi that these issues had been taken up with the customs officials but to no avail. Pakistan Leather Garments Manufacturers and Exporters Association (Plgmea) chairman Fawad Ijaz Khan told the meeting that in his sector around one-third of exports were fake.

Citing an example, he said that exports of leather garments had shown over 42 per cent increase from July 2007 to March 2008 as compared to the same period last year. In his view the genuine exports at best increased only by 10 per cent and the rest 32 per cent growth in exports of leather garments is not genuine.

Mr Fawad further said that most of the fake exports were routed through the Karachi Port where Care system facilitates the practice as it did not have a mechanism of price check and the bank credit advice is not required for claiming duty drawback. Most of this fake merchandise export is through the UAE, and Saudi Arabia.

The Plgmea chief drew the attention of the minister that the export of leather garments to the UAE had increased by about 10 times during the July-December 2007 period as compared to last year.

He said that according to his association’s estimates of the total leather garment exports of $406 million during July-March 2008, exports worth $120 million were not genuine.