Pakistan's National Tariff Commission for New Customs Tariff Heading and Duty Cut

National Tariff Commission (NTC) has strongly recommended creation of a new Pakistan Customs Tariff (PCT) Heading in existing tariff regime (2011-12) for shredded/scrap tyres to reduce customs duty on the item from existing 20 percent to zero percent for providing an alternative fuel to the cement manufacturers.

Sources told Business Recorder here on Dec. 15, 2011 that the NTC has finalised a comprehensive report on the review of tariff structure of shredded/scrap tyres to be used in the cement manufacturing industry as an alternative fuel.

The findings of the report revealed that the PCT heading of 4004 covers waste, paring and scrap of rubber (other than hard rubber) and powders and granules obtained thereof.

A new PCT Heading for Shredded/ Scrap tyres (4004.0020) has been proposed to be created in the Pakistan Customs Tariff for reduction in customs duty to avoid the revenue loss pertaining to import of all other kinds of scrap robbers.

The findings of the report said that there is a potential for indigenous cement manufacturing industry to use Tyre Derived Fuel (TDF) and to save Rs 1392 per metric tons (PMT) on fuel cost if the Shredded/Scrap tyres are allowed to be imported at zero rate of customs duty.

Resultantly, the cost of fuel as percentage of cost of manufacturing would come down from 63 percent in 2010-11 to 35 percent.

The findings of the NTC report added that there are chances of misuse as import of new tyres under the umbrella of shredded/scrap tyres, which may hurt the indigenous automotive tyres manufacturers, but it could be avoided by strict control on misdeclaration.

Therefore, NTC has suggested that these scrap tyres may be allowed in shredded form (cut into pieces).

The NTC added that the government is charging zero percent duty on all fuels.

Therefore, duty 20 percent on Shredded/Scrap tyres should also be reduced to zero percent for the import by cement industry.

Details of the report revealed that a manufacturer of cement (PCT Code 2523.2900) approached the National Tariff Commission for review of tariff structure of shredded/ scrap tyres to be used in cement manufacturing industry as an alternative fuel.

The cement manufactures stated that currently the custom duty on Shredded/Scrap tyres is 20 percent, due to which use of shredded tyres as an alternative fuel is rendered expensive.

The cement manufacturer has thus requested for complete exemption of custom duty on import of Shredded/Scrap tyres classifiable under HS Code 4004.0090.

The said scrap shall be used as substitute of coal for the manufacturing of cement.

According to sources, the cement manufacturer has based its request on the grounds that the cement manufacture is one of the leading manufactures of Portland cement and has invested Rs 38 billion on its cement manufacturing facilities.

It has created job opportunities for more than 4,000 people in the remote areas of Khyber Pakhtoonkhwa and Sindh.

Sources said that the cement manufacturer is one of the leading exporters of cement and earning US $170 million for the country.

Cement industry is now among top foreign exchange earning industry in Pakistan.

However, present increase in energy prices, primarily due to increase in coal prices from US $85/ MT -in 2008-09 to US $140/MT - in 2010-11 has made the cement exporters un-competitive and thus facing a difficult situation.

Sources said that the NTC has initiated investigation pursuant to the functions entrusted upon the Commission under National Tariff Commission Act, 1990 (the Act) and the National Tariff Commission Rules, 1990 (the Rules).

Functions of the Commission under the Act are to advise the Government on tariff measures or other forms of assistance for providing protection to the indigenous industry or improving competitiveness of the indigenous industry.

In this regard, the Commission conducts inquiries and investigations.

The Commission, thereafter, prepares a report with its views of Environmental Protection Agency (EPA) regarding query of National Tariff Commission as well.

Sources said that the Commission has asked some questions from EPA regarding the environmental impact of TDF from the burning of rubber tyres in rotary cement kilns.