EPZA bans business of used, worn clothing

KARACHI: The Export Processing Zone Authority (EPZA) has imposed a ban on new permission/license for used textile clothing units in the zone, as well as restricted sale, purchase and transfer of such goods to existing units.

In a recent meeting, EPZA Board discussed that by allowing worn clothing in the zone, the management had deviated from the main mandate of EPZ.

There are several processing units in the export promotion zone that import used and worn clothing from across the world; these clothes were then sorted, washed, packed and re-exported to African countries primarily.

The meeting was informed that Customs authorities had also expressed reservations on the business cycle of used clothing units. According to the minutes of the meeting held last month, some of these units were indulging in the smuggling of various goods, including electronics and betel nut.

The board decided that to restrict the activity, no fresh permission/license would be given to used/worn clothing; sale, purchase and transfer of used/worn clothing would not be allowed to existing units.

EPZA Board noted the worn/used clothing business had given extraordinary rise to the real estate business in the zone, which had resulted in sky rocketing of prices of plots in the EPZ, keeping away the manufacturing ventures.

The meeting was informed that such activities had been banned in a number of countries because of smuggling and revenue loss.

It may be mentioned here that Pakistan imported worn clothing worth $114 million

during July-February 2018-19, up 7.8 percent compared

with imports of $105.4 million in the corresponding period last year.

According to industry sources, importers also bring in fresh garments by mis-declaring the consignment as used garments. This helps them evade taxes, as against fresh garments, the used ones attract nominal taxes.

“In case the consignment is caught by the department of customs, which is very rare, importers pay a small penalty and get the goods cleared. This has become a regular practice,” a garment producer said.

The EPZA Board said the issue of smuggling and mis-declaration should be brought to the notice of the Federal Board of Revenue (FBR) along with the issue of missing containers for full investigation.