ISLAMABAD:The Federal Board of Revenue (FBR) has published a draft notification, S.R.O. 1359(I)/2025, proposing significant further amendments to the Customs Rules, 2001. This comprehensive draft, issued in exercise of powers under various tax acts including the Customs Act, 1969, Sales Tax Act, 1990, Federal Excise Act, 2005, and Income Tax Ordinance, 2001, aims to streamline import procedures, enhance compliance, and adapt to evolving trade dynamics.
The FBR has opened a narrow window for public consultation, inviting objections or suggestions from all affected persons within five days of the notification’s publication in the official Gazette.
Key Proposed Amendments to Customs Rules:
The S.R.O. 1359(I)/2025 outlines several critical changes across various rules:
1. Rule 871 – Import Procedures and Exemptions:
Raw Cotton, Cotton Yarn, Grey Cloth Exclusion: The phrase “except raw cotton, cotton yarn and grey cloth falling under the respective headings of Pakistan Customs Tariff” will be inserted after “goods” in clause (m). This signifies a change in how these items are treated under specific import rules, likely tightening their duty-free or concessional import status.
Removal of Knitwear/Terry Fabrics Exception: The words “except knitwear, terry fabrics falling under the respective headings of Pakistan Customs Tariff” will be omitted from Rule 871(a)(ii), potentially bringing these items under standard import regulations.
“Incentive Guarantee” Definition (New Clause (n)): A new clause “(n)” is to be inserted, defining “insurance guarantee” as an “incentive guarantee.” This means a guarantee issued by an assurance company (duly notified by the Board) or a bank, in a prescribed format and conditions, will be accepted. This formalizes the use of insurance guarantees, providing more flexibility to importers.
Transitional Provision: Until the format for insurance guarantees is officially notified by the Board, EFS (Export Facilitation Scheme) users will still be required to submit bank guarantees where applicable.
2. Rule 872 – Iron and Steel Scrap, EFS Scope:
Simplified Language for Scrap Import: The phrase “, except persons engaged in import of iron and steel scrap falling under the respective headings of Pakistan Customs Tariff,” will be replaced with simply “and goods” in Rule 872(1)(a).
Copper Content for Scrap (New Clause (g) & (h)): New clauses will be inserted to allow specific copper content for scrap imports:
“(g) import of compressor scrap and motor scrap shall be allowed for copper content only.”
“(h) raw cotton, cotton yarn and grey cloth falling under the respective headings of Pakistan Customs Tariff shall be excluded from the scope of EFS.”
Transitional Provision: Import consignments of raw cotton, cotton yarn, and grey cloth with bills of lading issued within ten days of this notification’s issuance shall be allowed under the previous scheme.
Restriction on Sales to Registered Melters: Customs duties, sales tax, and withholding tax will be applicable at the import stage on the balance steel scrap component, which can only be sold to sales tax registered melters. This aims to control the supply chain of imported scrap.
3. Rule 876 – Use of “Insurance Guarantee” in Existing Clauses:
Multiple amendments to sub-rule (1) of Rule 876 (clauses (a), (b), (c), (d), and (e)) will insert the words “or insurance guarantee” after “guarantee,” broadening the acceptable forms of security in various customs processes.
4. Rule 877 – Acquisition of Raw Materials under EFS:
Increased Flexibility for EFS Users: A new proviso will be inserted stating: “Provided that EFS users shall be allowed to acquire new raw materials to the extent of 10% of total authorization without requiring prior approval from the Regulatory Collector or IOCO.” This aims to streamline raw material acquisition for compliant exporters.
Further Clarification: After “Provided,” the word “further” will be inserted in the second proviso.
5. Rule 879 & 880 – Insurance Guarantee and Scrap Specifics:
Insurance Guarantee: In Rule 879(5), the words “or insurance guarantee” will be inserted after “Guarantee.”
Copper Content (Rule 880): Rule 880(1) will be amended to specify copper content allowed for motor scrap (10% by weight) and compressor scrap (8% by weight), with duties applicable on the balance steel scrap only if sold to registered melters.
6. Rule 882 – Utilization Period Extension:
In Rule 882(2), the word “sixty” (referring to days) will be substituted with “ninety,” extending a specific utilization period.
7. Rule 883 – Extended Utilization Period for Exceptional Cases:
For Rule 883, the expression “9 months extendable in exceptional circumstances by a committee to be constituted by the Board” will be replaced with “nine months. In exceptional cases, a committee comprising of senior officers from FBR, Ministry of Commerce and Ministry of Industries and Production may grant further extension in utilization period up to nine more months for reasons to be recorded“. This provides a more detailed and structured process for longer extensions.
8. Rule 885 – Guarantees for Duty/Tax Payment:
Insurance Guarantees: In sub-rule (2A), the words “or insurance guarantee” will be inserted after “guarantee.”
Bank Guarantee: In sub-rule (5), the word “revolving” will be substituted with “Bank Guarantee or.”
Impact on Stakeholders:
These proposed amendments will have significant implications for:
Importers: Increased flexibility with “insurance guarantees,” but specific conditions for scrap and raw cotton/yarn imports.
Exporters (EFS Users): Streamlined acquisition of new raw materials up to 10% of authorization without prior approval, but raw cotton, cotton yarn, and grey cloth are excluded from EFS.
Textile Industry: Likely to face increased costs for raw cotton, cotton yarn, and grey cloth due to their exclusion from EFS benefits.
Metal Scrap Industry: Clearer rules on copper content and mandates for sales to registered melters.
Tax Compliance: Overall aim is to enhance compliance and curb misuse of import/export schemes.
The FBR’s invitation for objections and suggestions within five days underscores the urgency of these proposed reforms, and affected businesses should promptly review the SRO to provide their input.
