ISLAMABAD: The Commerce Division has come up with a National Tariff Policy seeking reduction on more than 450 tariff lines in the budget 2018-19 to enhance export competitiveness and productivity of the domestic industries.

The division evolved the policy recommendations in collaboration with National Tariff Commission (NTC), which will be made part of Strategic Trade Policy Framework (STPF) 2018-23 to provide strategic direction for the export sector for the next five years.

The policy also sought to take the powers of imposing regulatory duties and customs duties from Federal Board of Revenue (FBR) and vested this power in the federal cabinet. The cabinet will act on the advice of the minister-in-charge of commerce.

The NTC and FBR will be consulted by the Commerce Division before proposing any tariff changes so any change in tariff lines will be made after consultations. This plea was made in accordance with the rules of business the tariff protection policy is the subject of the Commerce Division.

The National Tariff Policy (NTP) is drafted in a fashion to make exports more competitive and facilitate participation of local manufacturers, including small and medium enterprises (SMEs), in global and regional value chains.

As per NTP recommendations, it was proposed to reduce duty on 450 tariff lines, comprising raw materials and machinery for export-oriented industries from 2018-19. The tariff slabs will be re-fixed at 5 per cent, 10pc, 15pc and 20pc, respectively within next two years.

For rationalising tariff slabs, it was suggested that the tariff lines currently at 16pc be brought down to 15pc, those at 11pc be lowered to 10pc, and the tariff lines in Fifth Schedule from 4-9pc be merged into a 5pc general slab. The slab structure will retain the cascading of nominal tariffs with progressive stages of manufacturing.

The NTP also suggested that tariff lines currently at the 3pc slab will be brought into the Fifth Schedule at zero tariff phases. The essential raw materials and machinery for the export-oriented industries will be brought to zero within two years.

All the tariff lines, except the locally produced goods, currently at 3pc slab will be brought down to zero within three years. The locally produced raw materials and intermediate goods, currently at 3pc slab, will have their tariffs eliminated within five years, reducing by 1 percentage point each year starting from FY21. It would provide the domestic industry the time for adjustment to reforms.

Regarding the additional duty of 1pc under SRO 1178(I)/2015, it was suggested to merge it into customs duties and the respective tariff lines. After merger of additional duty, it will be placed into the general tariff slabs. In case the merged tariff of a tariff line falls between two slabs, it will be placed in the lower one. The simplification and liberalisation of tariff would reduce distortions.

The difference in the rates of tariff for commercial importers and the industrial users of raw materials, intermediate and capital goods will be eliminated in three years time to reduce misuse of such differentials and to provide access to such essential materials for SMEs.

The nascent industry will be provided time-bound protection, which will cover the payback period of financing and investment. The protection will be phased out gradually to make the protection regime predictable and facilitate the investment decisions.

An official statement issued by the Commerce Division said the objective of the proposed policy is to simplify and rationalise the existing tariff structure for enhancing the efficiency of current domestic activities, especially in manufacturing sector and simultaneously, to ensure predictability and transparency.

The draft policy has been shared with all chambers and associations to get their feedback. The final draft will be submitted to the Economic Coordination Committee of the Cabinet after stakeholders’ consultations, added the announcement.

Published in Dawn, April 22nd, 2018