A massive quantity of construction quality steel bars (Hot Rolled Deformed bars) is being imported from a neighbouring country in the garb of Alloy Steel Bars at zero rate of duty causing millions of rupees revenue loss to the national exchequer and domestic steel industry.
Sources told Business Recorder on Wednesday that recently Pakistan Customs has cleared four consignments of Hot Rolled Deformed bars imported from China in the garb of Alloy Steel Bars at zero rate of duty. However, later on the protest and complaints of domestic steel industry, the customs intelligence detained the imported consignments and customs officials have been deputed at four private godowns, where imported goods were shifted after clearance. Now the samples of imported consignments have been sent to A.Q. Khan laboratories in Islamabad for testing, analysis and identification of goods.
“Approximately 8,000 tons of construction quality Hot Rolled Deformed bars have been imported under the cover of Alloy Steel Bars by four hand re-rolling mills based on billets. After this import they (rolling mills) have stopped buying billets from domestic steel melters, as now they have huge stock of raw material”, sources informed.
Alloy Steel Bars are not used in construction work, while all the importers are re-rolling mills engaged in the manufacturing of SARIA (steel bars) for the construction industry.
The import of construction steel bars in the grab of Alloy Steel Bars has also caused hundreds of millions rupee loss to the government on account of sales tax, income tax due to low valuation and mis-declaration by at least $100 per ton. According to domestic steel industry complaints registered with Federal Board of Revenue (FBR) and other customs officials, these consignment’s Goods Declaration (GD) no were HC-48379 dated October 19, 2012; HC-48544 dated October 20, 2012; HC-48916 dated October 22, 2012; HC-50177 dated October 24, 2012 and all GD’s have been declared a valuation of approx $581 C&F Karachi.
Four different consignments of Prime Quality Hot Rolled deformed Alloy Steel Bars, BS4449-1997 460B in lengths of 12 meters and in diameters of l0 to 25 mm have been cleared for home consumption by customs House, Karachi. Detailed study of the BS 4449-1997-460B specification will prove that declared specification is not for Alloy Steel Bars. Alloy Steel bars are generally plain steel bars and are generally cold drawn and are used in automotive and engineering industry. The quantity of imports of Alloy Steel Bars are generally in small quantities.
It may be noted that the subject goods have been declared to be under code 7228.3090. Under this code, it is classified as “other” under the 7228.3010-Case Hardening Steel (conforming to AISI 8620 and equivalent). This heading is for case hardening Alloy Steel. Alloy Steel Bars are never indented or deformed.
“Expert opinion on this issue can be obtained from Pakistan Steel, People’s Steel Mills, A.Q. Khan Laboratories, Indus Motor Car Company, Pak Suzuki and Honda Motor Car Co, Millat Tractors, Al-ghazi Tractors, Loads Ltd, PAMA (Association) and other large vendors in the automotive industry who are all users of Alloy Steel Bars in the country,” according to the complaints.
For the import of these consignments Letters of Credits (LCs) have been opened in the name of some exporter Hangzhou Co-Generation ( HK) Co Ltd in Hong Kong, whereas shipment has been done by a trading company, Tianjin Tiangang International Trade Co, Tianjin, China and goods have been produced by Tianjin Iron & Steel Group Co Ltd, also based in Tianjin, China.
The declared price of Alloy Steel Bars seems to be less than the normal construction quality steel bars available in the international market. Necessary inquiries may be made to obtain C&F quotes for Deformed Construction Grade steel bars from China, Turkey, Ukraine, Russia, Qatar, Saudi Arabia and UAE, it added.
If it’s supposed that these goods are alloy steel bars, than it is also cleared at very low valuation. Price for Alloy Steel Bars declared at around $581 seems to be too low when compared with prices of imports of alloy steel bars in the country. PRAL may be asked to provide data of imports of Alloy Steel Bars in the country in the last one or two years for actual valuation as the past import price for Alloy Steel Bars will not be less than $800 to $1000 per ton.
There is a need to look into the matter of under-invoicing and mis-declaration to evade government revenues on a big scale since Letter of Credits (LC) have been opened in favour of a Hong Kong based company. It is interesting to note that both the shipper and producing mill are located at the same address in Tianjin in china.
It is also to be looked into whether the FTA rules allow imports when the LC is established in Hong Kong and shipments are from mainland China and in this regard Ministry of commerce may be asked for their comments and ruling in the matter. From the comments on the GD, it is seen that remarks have been made by the Customs Staff that from the visible eye, the goods look to be SARIA bars. The report on the case file also has such remarks. Then the question arises, as to why the goods were released simply on an undertaking and not against Bank Guarantees to secure the revenues of the government pending investigation and reports of the Laboratories. The goods should have been detained in the Customs Bond pending valuation investigation and laboratory reports.
The domestic steel industry has urged FBR for an independent inquiry to disclose this corruption. The detailed inquiry will prove that mis-declaration of goods as BS 4449-1997 460B grade does not fall under Alloy Steel and specs do not call for any elements which will make it classified as Alloy Steel Bars. Under Invoicing of goods is evident as bars are being invoiced at $581 PMT C&F against $700 per ton price in International Price, they said.
In addition, goods have been imported and declared under 7228 3010 which is for Alloy Steel and therefore imported consignments must be valued at Alloy Steel Bars prices and as per PRAL record of imports into Pakistan is not less than a price of $800 to $900 per ton. They have demanded that imported goods should be released at 10 percent duty and valuation at $700 per ton minimum and fine of 25 pct.
Although, samples have been sent to A. Q Khan laboratory Islamabad, domestic steel industry also demand that the samples should also be sent to Pakistan Steel and People Steel Mills for their testing, analysis and findings as both are manufacturers of steel and also have state of the art laboratories.
Domestic steel industry said that if a proper inquiry will not conducted, a new avenue of corruption will open that result in millions o rupees loss to national exchequer. It may be mentioned here that normally Hot Rolled Deformed bars (HR) have a 10 percent import duty, 16 percent sales tax and under FTA with China duty reduce to 5 percent.
In this regards the affected large capacity steel manufacturing companies and their Association have also written letters to the Chairman FBR , Member Customs, Director Intelligence, Customs, DG investigation and intelligence; Collector, Karachi Customs, etc. They have also met Customs officials in Karachi and have apprised them of the serious threat to the steel industry of Pakistan by import of construction quality steel bars in the garb of alloy steel bars at highly under invoiced rates and mis-declaration.