KCCI seeks import ban on recycled plastic from neighbouring countries to protect local industry

Karachi: The Karachi Chamber of Commerce & Industry (KCCI) has called on the government to stop the import of recycled plastic from neighboring countries, saying it causes huge revenue losses and undermines the local recycling industry.

In a letter to Dr. Gohar Ejaz, the caretaker minister for commerce, industries, and production, KCCI president Mohammad Tariq Yousif said that smuggled and misdeclared imports of plastic raw materials, particularly polyethylene, had cost the national exchequer Rs10 billion to Rs12 billion in customs duty, sales tax, withholding tax, and other levies in the past three months.

He warned that this loss could rise to Rs40 billion per year if the government did not take effective measures to curb the illegal trade.

Yousif suggested that the government should conduct a forensic audit of all recent imports of plastics during the last four to six months and ask the importers to explain how they paid their foreign suppliers.

“This will have a very positive impact on remittances, and the vast amounts diverted to grey channels to finance smuggling and misdeclaration of imports from neighboring countries will be redirected to banking channels and will support the value of the rupee in the interbank market,” he said.

“All imports of polyethylene and polypropylene from neighboring countries should be assessed on the basis of weekly reports of S&P Polymer Scan Report, which is in practice by Customs stations at Karachi Port, Port Qasim, and Dry Ports for many years.”

The KCCI chief suggested that all such materials imported from neighboring countries should be treated as prime grade materials even if declared as recycled plastics or any other description.

Referring to the recent visit of the commerce minister to KCCI, Yousif said that although Ejaz had assured the KCCI that effective measures had been taken against smuggling, the ground reality presented a different scenario.

“Smuggling of plastic raw materials, particularly polyethylene (PCT Code 3901), continues unabated in large volumes. As during the last three months, over 50,000 metric tons of polyethylene have been smuggled or imported under the garb of recycled plastic with a very low value declared in the GD,” he said.

“The value of so-called recycled plastic is declared at $450, while the actual value of prime materials is between $1,050 to $1,100, which is imported as recycled plastic.”

Yousif said the quantity of plastic materials imported from neighboring countries is declared below the actual quantity in a container or truck load. For example, one container load is 25 metric tons, but the quantity in the GD is declared as 17 metric tons, resulting in compounding the revenue loss.

“In normal circumstances, the requirement and import of polymers in Pakistan were 1.6 million metric tons. However, as per estimates, this will now decline somewhere in between 0.8 million to 1.0 million metric tons, whereas the rest of Pakistan’s requirement for plastics is being met through smuggled and mis-declared imports from neighboring countries,” he added.

“Furthermore, all the smuggling and undervalued imports are financed through Hawala/grey channel transfers, which means that the foreign remittances which should otherwise be sent through banking channels have now diverted to grey channels,” Yousif said.

“High demand by smugglers and illegitimate importers has created a vast difference of Rs20 to Rs25 per dollar between interbank and hawala rates, which is proved by the $4 billion decline in home remittances.”