FBR Secret Report On Smuggling PDF

STRICTLY CONFIDENTIAL
Ascertain the Market Demand of Goods Prone to SmugglingEstablishing the Volume of

Smuggling
Last Updated: May 14, 2015
Prepared by: MCC Preventive, Karachi
Table of Contents
Topic
Page No.
1. Executive Summary.... 1
2. Introduction. 3
3. Literature Review.... 7
4. Research Methodology..... 11
4.1 The Afghan Connection-A Pilot Study.. 11
4.1.1 Imports of Tyres in Pakistan vs. Afghanistan.. 12
4.1.2 Imports of Televisions in Pakistan vs. Afghanistan. 13
4.1.3 Imports of Tea in Pakistan vs. Afghanistan..... 14
4.2 Quantification of Smuggling... 15
4.3 Equation Used to Describe the Quantum of Smuggling..... 16
4.4 Determining the Commodities Most Prone to Smuggling.. 17
4.5 Research Design for the Commodities Under Question..... 18
4.5.1 Determining the Market Demand............................................................ 19
4.5.2 Determining Volume of Domestic Production.... 19
4.5.3 Determining Quantum of Imports for Pakistan and Afghanistan.... 20
4.5.4 Determining the Quantum of Exports for Pakistan.. 20
4.5.5 Analysis of ATTA as Major Source Used by the Smuggling Regime.... 20
4.5.6 Calculating Revenue Lost by FBR.. 21
4.5.7 Effects of Tariff Rationalization on Imports...............................................21
5. Results......23
5.1Quantification of Smuggling in Tyres. 23
5.2 Quantification of Smuggling in Tea... 25
5.3 Quantification of Smuggling in Auto Parts.... 27
5.4 Quantification of Smuggling in Mobile Phones. 30
5.5 Quantification of Smuggling in Fabric... 32
5.6 Quantification of Smuggling in Cigarettes..... 34
5.7 Quantification of Smuggling in Plastic Granules... 36
5.8 Quantification of Smuggling of Televisions... 38
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5.9 Quantification of Smuggling in Steel Sheets.. 40

5.10 Quantification of Smuggling in Vehicles..........42
5.11 Quantification of Smuggling of POL (Diesel).. 44
5.12 Analysis of Pakistan vs. Afghanistan Imports on Commodities of Interest. 46
5.12.1 Quarterly Analysis of Import of Tyres Pakistan vs. Afghanistan . 47
5.12.2 Quarterly Analysis of Import of Televisions Pakistan vs. Afghanistan .... 49
5.12.3 Quarterly Analysis of Import of Fabric Pakistan vs. Afghanistan .... 51
5.13 Effects of Tariff Rationalization and Average Value Assessed on the Volume of
Legitimate Imports in Pakistan. 53
5.13.1 Tariff and Average Value Assessed on Tyres and the Volume of Import..54
5.13.2 Tariff and Average Value Assessed on Televisions and the Volume of
Import.... 55
5.13.3 Tariff and Average Value Assessed on Mobile Phones and the Volume of
Import.... 57
5.13.4 Tariff and Average Value Assessed on Cigarettes and the Volume of
Import.... 58
5.13.5 Use of Tariff Rationalization as a Policy Approach to Curb Smuggling.. 59
6. Implications of Smuggling ... 61
6.1 Total Revenue Lost on Commodities Under Investigation by FBR .. 61
6.2 Implication on Local Industries . 62
6.2.1 Tyre Industry ........... 63
6.2.2 Tea Blending Industry . 64
6.2.3 Auto Parts Industry.. 64
6.2.4 Mobile Phone Industry.................................................................................64
6.2.5 Textile Industry.............................................................................................65
6.2.6 Cigarettes Industry........................................................................................65
6.2.7 Plastic Granules Industry (Recycling Plastic)..............................................66
6.2.8 Television Industry......................................................................................66
6.2.9 Steel Sheets Industry....................................................................................66
6.2.10 Vehicle Industry.........................................................................................67
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6.2.11 POL (Diesel) Industry................................................................................67

7. Policy Recommendations . 68
7.1 Tariff Rationalization . 69
7.2 Bilateral Negotiations .... 69
7.3 Enforcement ... 70
7.3.1 Distribution of Responsibility . 71
8. Conclusion ... 72
9. References .... 74
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List of Figures
Figure /Table
Page No.
1. Fig. 1: Number of Containers Imported Under ATTA From 2012-2014..... 11

2. Fig. 2: Number of Tyres Imported by Pakistan and Afghanistan 13
3. Fig. 3: Number of Televisions Imported by Pakistan and Afghanistan 14
4. Fig. 4: Tea Imported by Pakistan and Afghanistan... 15
5. Fig. 5: Equation Used for Determining Market Demand. 16
6. Fig. 6: Modified Equation to Determine Magnitude of Smuggling. 17
7. Table 1: Commodities Finalized for Anti-Smuggling Project.. 18
8. Fig. 7: Quantification of Factors Involved in Meeting Market Demand for Tyres.. 23
9. Fig. 8: Percent Contribution Involved in Satisfying Market Demand for Tyres.. 25
10. Fig. 9: Quantification of Factors Involved in Meeting Market Demand for Tea..... 26
11. Fig. 10: Percent Contribution of Factors Involved in Satisfying Market
Demand for Tea... 27
12. Fig. 11: Quantification of Factors Involved in Meeting Market Demand for
Auto Parts. 28
13. Fig. 12: Percent Contribution of Factors Involved in Satisfying Market Demand for
Auto Parts.. 30
Mobile Phones.. 31
Mobile Phones.. 32
Fabric.... 33
Fabric.... 34
Cigarettes.. 35
Cigarettes.. 36
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Plastic Granules.... 37
Plastic Granules.... 38
Televisions.... 39
Televisions.... 40
Steel Sheets... 41
Steel Sheets... 42
Vehicles. 43
Vehicles. 44
POL (Diesel)..... 45
POL (Diesel)..... 46
30. Fig. 29: Tyres Import Comparison Between Afghanistan and Pakistan by Quarter ... 47
31. Fig. 30: Average Assessed Value on Imports of Tyres ... 48
32. Fig. 31: Television Import Comparison Between Afghanistan and Pakistan . 50
33. Fig. 32: Average Assessed Value on Imports of Televisions .. 51
34. Fig. 33: Fabric Import Comparison Between Afghanistan and Pakistan by Quarter .. 52
35. Fig. 34: Average Assessed Value on Imports of Fabric .. 53
36. Fig. 35: Tyre Duty Rates vs. Import Quantities.... 55
37. Fig. 36: Television Duty Rates vs. Import Quantities.. 56
38. Fig. 37: Mobile Phone Duty Rates vs. Import Quantities. 57
39. Fig. 38: Cigarette Duty Rate vs. Import Quantities.. 59
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40. Table 2: Total Revenue Lost on Commodities Under Investigation ... 62
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About the Authors

Mr. S.M. Tariq Huda joined Pakistan Customs and Excise Service in 1989 and has served in
various positions in Pakistan Customs in the fields of enforcement, trade facilitation, passenger
and cargo profiling. He also served at the Federal Board of Revenue in policymaking and in the
formulation of the national budget. He was the Director General Asia and Europe at the Trade
Development Authority of Pakistan for a year during which many international events were
organized. He represented Pakistan in the World Customs Organization in 2002 and the World
Trade Organization in 2007. Presently, he has been posted as the Collector of Customs
Preventive in Karachi since August of 2013. In additional to this charge, he is also on the Board
of Trustees at the Karachi Port Trust since 2014. Mr. Huda was the principle investigator for the
project. That is he outlined the objectives of the study, and formulated the equation used to
determine the magnitude of smuggling for the commodities investigated in the study. When the
results of the study were finalized, Mr. Huda was also the principle contributor for the policy
recommendations detailed in the paper.
Misbah Hasan is the Director Special Projects for MCC Preventive, Karachi. She has undertaken a number of projects during her work with the department for the past year. This includes
analytical work on money laundering, IED precursor chemicals, developing and training
Customs officials on IED precursor end use verification, developing a lab renovation plan for the
Customs Lab under MCC Appraisement East, IPR violations, tracking of bonded movement of
goods under transshipment and magnitude of smuggling in Pakistan. She is also responsible for
developing standardized forms, which are to be used for the creation of data bases for drug and
non-drug seizures for the MCC Preventive Karachi. In the present study, she was one of the
primary researchers, who gathered and analyzed data, conducted market surveys and interviews
with market experts, performed calculations to determine the magnitude of smuggling, the
revenue lost under the different headers and tariff to the national exchequer and the lost to the
local industry. Misbah was also in-charge of coordinating activities of the interns inducted from
Lahore University of Management Sciences (LUMS). She also co-authored the full-length
research paper, which was produced at the end of the project. Misbah holds a Bachelors of
Science in Biochemistry and Biophysics with a minor in Math and Chemistry from University of
Houston and a Masters of Arts in Neurobiology from Harvard Graduate School of Arts and
Sciences.
Sonia Hasan works in the capacity of a National Research Consultant for UNODC. She has
been working for the MCC Preventive, Karachi for over a year. Her work entails a number of
research projects for the department, which includes work on IED precursor chemicals, drug
precursor chemicals, and IPR violations. She has developed SOPs for FD Units and EUV teams
for IED Precursor Chemicals End Use Verification, for which she delivered trainings in the
Lahore, Islamabad and Peshawar Collectorates. For the current project, Sonia devised the
research methodology using the equation formulated by Tariq Huda. She conducted market
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surveys and interviews with market experts. She also helped in the tabulation of import and
export data to calculate the magnitude of smuggling for the commodities under investigation.
Sonia co-authored the full-length research paper, which was produced at the end of the research
project, which outlined the magnitude of smuggling for the thirteen commodities under
investigation. Sonia holds a Bachelors of Science in Biochemistry and Biophysics with a minor
in Math and Chemistry from University of Houston and a Masters of Arts in Neurobiology from
Harvard Graduate School of Arts and Sciences.
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Harvard Research Panel

Market Demand and Domestic Production Team
Naueen Ahmad holds a MBA in General Management and International Business from Harvard
Business School, class of 1992. Currently, she is the Vice President of Marketing and Human
Capital Management in Supernet Limited.
Raheel Janjua holds a MBA in General Management and International Business from Harvard
Business School. He graduated in 2014. Currently he is working for the Boston Consulting
Group in Ontario, Canada as a Management Consultant.
Data Analysis Team
Misbah Hasan holds a Masters of Arts in Neurobiology from Harvard Graduate School of Arts
and Science, class of 2013. She currently works in the capacity of Director Special Projects for
MCC Preventive, Karachi.
Sonia Hasan holds a Masters of Arts in Neurobiology from Harvard Graduate School of Arts
and Science, class of 2013. She currently works as a National Research Consultant for UNODC
in MCC Preventive, Karachi.
Policy Recommendation Team
Imran Sarwar holds a Masters in Public Policy from Harvard Kennedy School, class of 2013.
He is a social entrepreneur and serves as the Co-Founder and Managing Director of RABTT.
Karrar Jaffar Hussain holds a Master in Public Administration and International Development
from Harvard Kennedy School, class of 2013. He is currently a PhD Candidate of Economics at
the University of Southern California.
Asim Jhangir holds a Masters in Public Administration and International Development from
Harvard Kennedy School, class of 2012. He was a former lecturer and research fellow at
Institute of Business Administration (IBA), Karachi, and is currently working at the Islamic
Development Bank.
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Other Contributors
Yasir Khan holds a Masters in Public Administration from Columbia University, and was on the
panel of researchers that gave policy recommendations. He currently works as the Country
Economist at the International Growth Center.
Customs Experts
Shafqat Ali Khan Niazi, Additional Collector, MCC Muhammed Bin Qasim Port
Mukarram Jah Ansari, Collector (Preventive), MCC Lahore
Mujtaba Memon, Collector, MCC Hyderabad
Muhammad Ibrahim Vighio, Director Transit Trade
Anti-Smuggling Projects Research Interns

The research interns took part in determining the market demand by attending meetings with
market experts, conducting market surveys where applicable, and analyzing research material
made available to them for their respective commodities. We would like to thank these young
interns for their contribution to this very important study.
Institute of Business Administration (IBA) Research Interns
Name
Isra Shaikh
Hiba Shahzad
Hammad Ezad
Anum Amin Hajiani
Annum Aftab
Ariba Rehan Siddiqui
Ali Mohsin Naqvi
Ali Rizvi
Danish-Us-Salam
Hammad Ather Mehmood
Shahroz Lasi
Masroor Ul Hussain Mumtaz
Hasaan Anwar Mohiuddin
Dawar Khan
Education
BS Economics & Mathematics, IBA Karachi (Class of 2016)
MSc Economics, IBA Karachi (Class of 2014)
MSc Economics, IBA Karachi (Class of 2014)
Lahore University of Management Sciences (LUMS) Research Interns

Name
Ahmad Almakky
Shabib Ansari
Sania Rashid
Muhammad Faraz
Bushra Aslam
Syed Abbas Shah
Fakhruddin Ali Valika
Kiran Masood
Shireen Gul
Raja Safiullah
Shanza Faiq
Anam Bashir
Education
BS Political Science (Class of 2017)
BS Economics (Class of 2017)
BS Economics & Political Science (Class of 2015)
BA-LLB (Class of 2018)
BA-LLB (Class 2017)
BS Accounting & Finance (Class of 2017)
BS Economics, LUMS Lahore (Class of 2015)
BS Economics & Political Science (Class of 2017)
BS Management Sciences (Class of 2016)
BSc Economics (Class of 2015)
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ANTI-SMUGGLING REPORT
1. Executive Summary
For the first time in the history of the country, quantification in terms of volume, value
and tariff lost to the national exchequer has been assessed for thirteen commodities most prone to
smuggling in Pakistan. This was possible due to the research approach developed by Collector
Preventive, Karachi (see Figure 6). We first conducted a pilot study to justify the requirement to
undertake such a research initiative that took five months to complete. Findings of the pilot
study that took into account ATT cargo, gave us the motive we required to continue with the
study. Next, we selected the commodities we wanted to focus on by analyzing the countrywide
seizure data kept by Customs Enforcement and Coordination.
Thirteen commodities were initially selected and after thorough research, it was noted
that of those thirteen, eleven had a significant part of the market share, which was catered
through smuggling. The findings give the quantum of smuggling taking place in the country for
each of the commodities we investigated. To see if ATT cargo served as a source of smuggling
for the items in this study, trends in Pakistans and Afghanistans imports with regards to volume
versus market size and average value assessed were analyzed to see if patterns emerged, as
observed in the pilot study, and for a set of commodities this did seem to be the case.
In addition, the tariff lost by the FBR was also calculated and compared to the taxes
collected. Next, the value of the smuggled goods was compared to the GDP. Both of these
comparisons showed that smuggling plays a significant role in loss of revenue to the national
exchequer annually. Since tariff rationalization seemed to be a popular policy recommendation
with the manufacturers and importers of these commodities, we analyzed the history of tariff
rationalization and its effects on the imports of these commodities to see if in fact it was a viable
policy option.
1
Implications on the relevant industries were then evaluated to see how much investment
was required to meet the demand currently catered by smuggling, and in turn how many jobs will
be created if these industries are setup. At the conclusion of the study, we recommended a shift
in Government policy to battle the problem of smuggling in the country from financially driven
strategies to ones that focus on better enforcement.
2. Introduction
Many countries that serve as transit countries to their land locked neighbors with porous
borders dividing them often face the problem of informal cross border trade (ICBT), and
Pakistan is no exception. ICBT refers to undocumented business transactions that take place
across porous borders. These include goods moving through unofficial (smuggling) and official
trade routes (through mis-declaration of cargo). A porous Pak-Afghan border, combined with
Irans need to export by whichever means necessary due to the sanctions placed on it, makes
Pakistan an especially vulnerable marketplace for smuggled goods. Combined with political
instability and tribal control in the border region has made the country a hotspot for smuggled
goods, unlike any other in the region. However, considering the border as the primary source of
smuggled goods would be a devastating mistake. The smuggling problem in Pakistan is
multimodal with goods coming in from multiple sources including the high sea and in
containerized cargo with officials fully aware and involved in their transport. Therefore, while
many investigations have been undertaken to try to protect the society against this menace,
gauging the true magnitude of the challenge is not an easy task. This lack of factual trade
information has blindsided the Governments capabilities when it comes to policymaking and
investment decisions in the public and private sectors. Smuggled goods make the national trade
statistics useless because they are grossly under estimated. This results in the Government
adopting inaccurate macroeconomic policies and strategies.
Smuggling of commodities is viewed entirely from the angle of revenue loss in Pakistan.
This uni-focal approach makes sense considering Pakistans dependence on Customs duties as a
principal source of public revenue. However, opacity to view smuggling from other angles has
disabled Pakistan to answer many critical problems afflicting it. For example, rampant
3
unemployment, low pace of industrialization, flight of human resource and capital are just a few
of the many problems caused by the smuggling phenomenon. Smuggling, by definition, is the
bringing in of goods/commodities into the domestic market without incurring Customs duties
and other related taxes. This on the surface carries a revenue loss to the exchequer but there are
hidden and deep consequences. In the marketplace, the smuggled goods provide unfair
competition to commodities, which carry the heavy burden of import duties and even compete
with domestically produced goods that have incurred production costs and are responsible for
paying sales tax, added to their price. Not only this, these goods unashamedly block out the
domestically produced goods for which the import tariff had been placed for protection, and
shove out the duty paid imported goods which have borne the brunt of import tariffs. A country
could have suffered less if this would have been just a market phenomenon and ended at that, but
since the marketplace has deep socio-economic consequences, such goods entering the market
uncontrollably pose a challenge that a country like Pakistan is not equipped to handle. Honest
law-abiding importers lose their businesses due to compliance with the law. Their choices are to
look for some other sources of income or join the smugglers bandwagon. Not only does this
increase the black economy but also the societys propensity towards crime increases
significantly. This has a cascading effect where unless the government intervenes strongly
through enforcement and other policy measures, smuggled items will surreptitiously and
continuously erode the legitimate market share. Equally if not more, are the deleterious effects
smuggling has on the domestic industry, which especially in the case of Pakistan is unable to
compete with the better quality and low value of smuggled goods. This has direct consequence
on unemployment due to closure of the local industry, loss of local taxes for the state and local
governments and channelization of capital in areas which do not pay any dividend to the
4
economy (for example Real Estate). Therefore, it is urgently required that the Government first
quantify the magnitude of smuggling at least for those items most notoriously known to be
smuggled. Thus, quantification of smuggling for these items is the main objective of this study.
To orient the focus of the research to the commodities which should be the highest
priority, seizure data for the past five years kept by Pakistan Customs Enforcement and
Coordination wing was used to finalize the list of commodities for the study. This was done to
focus on the commodities that are being smuggled most frequently, and therefore causing the
greatest loss to the national exchequer. Additionally, these commodities also have the most
deleterious effect on the domestic industry. This study used Customs seizure data in particular
since the commodities seized are most likely to be smuggled through containerized cargo at
some stage of the smuggling process. A major motivation behind this research project was to
develop an action plan that was Customs specific and help to enhance Customs anti-smuggling
efforts in Pakistan.
Quantification of smuggling for the selected commodities was done by implementing a
simple equation, (see Figure 6) in which the market demand was first determined. Next, imports
and domestic production were tabulated and identified as the legal band of supply that meets the
market demand. Where applicable, exports were taken into account to get a true picture of the
gap between the market demand and supply, which is available in the market through the legal
channels. After the application of this equation, we found that a significant portion of the market
demand was met through smuggling for the goods under investigation. Therefore, for the first
time, quantification of the challenge faced by the Government was determined for items most
prone to smuggling in Pakistan.
This study has been initiated to bring out the hardships Pakistan carries due to
smuggling in a vastly bigger way to enable the policymakers to view the consequences through
different angles and to make all stakeholders aware of the gravity of this phenomenon so that
more emphasis is given to the matter by all. For the Government, this study will enable it to
comprehend the magnitude of the challenge so that appropriate and necessary measures can be
taken to help the country fight this menace.
3. Literature Review
Goods traded informally are not restricted to small volumes, but also move through
containerized cargo (Lesser & Moise-Leeman, 2008; Wanjiku et al., 2011). Trade information
of such movement is very important to ensure that proper decisions are made when it comes to
investment by the private sector, public sector, donors of goods (such as USAID) and policymakers. Moreover, inadequate knowledge of the informal trade magnitude leads to under
estimated figures in national trade statistics and complicates the formulation of appropriate
macroeconomic policies and strategies (Wanjiku et al., 2011). Missing informal trade data leads
to unreliable external trade statistics that has adverse effects on implementation and monitoring
of domestic, regional and international trade policies (Macamo, 1999; Wanjiku et al., 2011).
Therefore, like other economies, Pakistan is in urgent need to quantify the true volume of
smuggled goods.
The factors, which encourage ICBT in economically deprived countries, are uniform
throughout the nations with this issue. Businesses are tempted to escape trade related regulations
and duties when price disparities arise between the formally and informally traded goods in the
importing country due to high levels of import duties (and taxes) on selected commodities.
Additionally, officially traded goods are often subjected to complex, non-transparent or
divergent regulatory requirements, that is, Customs formalities, technical regulations and
sanitary standards that contribute to increase in trade transactional costs and encourage traders to
escape formal procedures all together. ICBT also arises where there are barriers in trade caused
by import quotas or export bans (like in the case of Iran) or foreign exchange controls. Finally,
weak law enforcement not only encourages informal trade, but letting some traders get away
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with it acts as an important trigger for it, since generating arbitrary applications of trade laws
and regulations and requirements for facilitation payments or bribes (Lesser & Moise-Leeman,
2008).
ICBT has evolved over time and constitutes one of the main ways of overcoming barriers
to formal regional trade. Tracking this evolution and its impact on the local and regional
economy has become increasingly important. A common technique used is to monitor
movement of goods at the border. However, this is not a very dependable technique since
researchers usually survey over a course of a few weeks when an accurate picture can only be
assembled if an entire year of monitoring is conducted and documented at the borders (Macamo,
1999; Nzuma, 2011). A major assumption that has to be made with border monitoring is the
notion that all goods bypassing Customs channels can be easily observed. Sophisticated secret
deals involving importers, exporters, Customs and other public officials make it extremely
difficult for even a trained observer to get a realistic estimate of the trade transacted at the border
informally. Relying purely on observation of the movement of goods is also difficult in the case
goods are brought into the country on unconventional means of transport such as motor vehicles
or loaded animals. In such cases, establishing the nature of the goods can be next to impossible
(Ackello-Ogutu, 1996). This same assumption will have to be applied if border monitoring was
employed as the primary source of data collection in the present study.
This problem combined with an increasingly dangerous situation rising between the PakAfghan border, Pak-Iran border and the high seas, we choose the technique Macamo used in his
research paper looking into ICBT in Mozambique and the neighboring countries. In his paper,
Macamo speaks of interviewing parties, which are directly involved in ICBT. These interviews
8
were conducted for collection of data from traders, agents, transporters, consumers and public
officials (1999). To cross-reference the information these individuals provided us, we added
trade associations and government entities, which monitor the market for the commodities of
interest in Pakistan. Facing the same problem as other researchers in properly monitoring the
ICBT movement over a course of a substantial time period, Lesser and Moise-Leeman used
Customs data to get an estimate of the missing import quantities (2008). The same use of import
data collected by Customs was used by Ackello-Ogutu. Who additionally used data from
exporting countries and compared it to the import data of countries under question to find the
missing import quantities (1996). Since our research has grouped the variable of mis-declaration
under the umbrella of smuggling, we are only concerned with the declared quantities of
imports to account for the legal supply to meet the demand for the sake of clarity in the current
study. The choice to simplify these variables early in the research was made since these two
things occur with the cognizance of the Customs officials and are extremely difficult to
document for the purpose of research (Ackello-Ogutu, 1996). While casual analysis will be
mentioned in the current study, which will bring to lime light the discrepancies among exporting
countries and the import data reported in Pakistan, the problem of mis-declaration is beyond the
scope of this study and will be addressed in a separate study if required. However, to fully
understand the magnitude of smuggling in Pakistan, we have added the variable of declared
exports which past studies have neglected according to our research. Once again, if any misdeclarations are happening at the export levels, this too will be factored into the smuggling
quantum since in the larger scheme of things, these goods are being smuggled out of the country.
According to our research, such a systematic approach for quantification of smuggling
has never taken place regionally. In the current study, not only will the market share held by the
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smuggled goods be quantified, the loss to the national exchequer in terms of tariff lost on imports
will also be determined for each commodity. Additionally, by the end of the project, we aim to
fully understand the value of the smuggling regime to the countrys GDP, and the proportion of
smuggled goods to the tax collected by the Government. This will enable us to understand how
Pakistan compares to others similar to Pakistan in terms of socio-economic dynamics and
geographic proximity.
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4. Research Methodology
4.1 The Afghan ConnectionA Pilot Study
It is a well-established notion throughout Customs and other law enforcement agencies
that goods, which are smuggled into Pakistan, are often supplied by the Afghan Transit Trade
(ATT) containers. Therefore, we decided to do a pilot study to look at the possibility of ATT
containers being involved. We first looked at the import trends under ATT. For this we met
with the Director of the Directorate of Transit Trade and obtained the number of containers that
were destined for Afghanistan during June to October of 2012-13 and June to October 2013-14
(Fig. 1).
Fig. 1. Number of Containers Imported Under ATTA from 2012-2014. The number of
containers that transitted through Pakistan under the ATTA banner from 2012 to 2014
(Directorate Transit Trade, 2014).
This data made us realize that there was a marked increase in numbers in just two years of transit
data. The exponential increase in fabric, cooking oil, and a significant increase in tyres could not
11
be justified by economic growth or an increase in market demand for these commodities in war
stricken Afghanistan. The continuously higher levels of black tea coming into the country could
not be justified for a country where the demand for green tea is significantly higher.
We then selected a few other commodities that were considered prone to smuggling and
compared import data from January of 2012 to October of 2014. Specifically, we compared the
import data for tyres, televisions and black tea between Pakistan and Afghanistan to see if any
interesting patterns emerged.
4.1.1 Imports of Tyres in Pakistan vs. Afghanistan
According to the United Nations, Pakistan has about 57 vehicles for every 1,000 people.
If the population is estimated to be about 210 million people, the number of vehicles in Pakistan
would equal about 11.97 million. When we compare this to the number of vehicles in
Afghanistan, we see that according to the same study, Afghanistan has 28 vehicles per 1,000.
This is roughly half of the number of vehicles in the same ratio, which are present in Pakistan.
Afghanistans population is significantly less, only 30 million people, therefore, the estimated
number of vehicles in Afghanistan is about 840,000 (UNdata, 2014).
According to these statistics, Pakistans tyre demand should be about fourteen times
larger than Afghanistan. However, the imports are only about two to three times larger (Fig. 2).
12
Fig. 2. Number of Tyres Imported by Pakistan and Afghanistan. The number of tyres imported
into Pakistan and Afghanistan from January, 2012 to October, 2014 (PRAL, 2014).
While other factors such as domestic production were not factored into the pilot study, the import
analysis for tyres intrigued us to look further.
4.1.2 Import of Televisions in Pakistan Vs. Afghanistan
According to previous research, there are 13.96 million television sets in Pakistan
(Pakistan Economic Survey, 2013). An estimate of the number of televisions in Afghanistan is
difficult to determine however, we agreed that it ought to be significantly lower compared to
Pakistan, since only 100,000 television sets were present in Afghanistan in 2003 compared to
Pakistans 13.1 million television sets (Media Comparison by Country, 2003). Interestingly, the
import of high-end name brand television sets to Afghanistan is significantly larger compared to
Pakistan (Fig. 3).
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Fig. 3. Number of Televisions Imported by Pakistan and Afghanistan. The number of televisions
imported into Pakistan and Afghanistan from January, 2012 to October, 2014 (PRAL, 2014).
4.1.3 Import of Tea in Pakistan Vs. Afghanistan
According to research, Pakistan is the fifth largest consumer of black tea in the World,
while the only sector of society that drinks black tea in Afghanistan are the Afghan refugees who
have moved back to Afghanistan from Pakistan. This group represents about 10% of the total
population. We found an interesting pattern in the import pattern of tea particularly for 2013
(Fig. 4).
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Fig. 4. Tea Imported by Pakistan and Afghanistan. The amount of tea imported (in MT) into
Pakistan and Afghanistan from January, 2012 to October, 2014 (PRAL, 2014).
According to import data, 153,741 MT were imported into Pakistan while 94,410 MT of
tea was imported into Afghanistan during the year 2013. According to the Pakistan Tea
Association, the consumption of tea per annum is about 240,000 MT. The import numbers for
the two countries put together is 248,151 MT for 2013. If we use a 3% margin of error in
calculating the annual consumption, we concluded that it would equal to 248,000 MT, which is
roughly the combined import numbers of the two countries.
The pilot study convinced us that smuggling is taking place in the country, and that a
more in depth research methodology will need to be adopted to determine its magnitude. The
initial research and data analysis also provided enough evidence to look keenly into ATT, and
how it can be used to supply the unmet demand of the market.
4.2 Quantification of Smuggling
The project idea was first conceived by Tariq Huda, Collector Preventive, Karachi
(Pakistan Customs). While the challenge of smuggling has been in the limelight for some time,
15
and previous work has rendered some results, these results are sporadic and do not do enough to
break apart the infrastructure put in place by the smuggling regime. Therefore, the Collector
proposed to first fully understand the challenge law enforcement agencies such as Customs are
up against, so that proper resources and an action plan can be put in place to combat the menace.
More importantly, once the quantum of the problem is understood, through analytical research,
effective policy measures can be recommended to ensure that the anti-smuggling operations,
which will result from the study, are long lasting.
4.3 Equation Used to Describe the Quantum of Smuggling
A simple four variable equation was devised by the Collector Preventive, which helped
determine the magnitude of smuggling. First, the total market demand for each commodity was
described by the general equation below (Fig. 5):
Fig. 5. Equation for Determining Market Demand. The total market demand for a given
commodity has four variables that play a role in supplying the total market demand, namely
imports, domestic production, exports; and the amount which is smuggled into the country
through smuggling.
To determine the total market demand, four variables were taken into consideration. The total
imports and exports which can be determined through internal Customs data (PRAL) for the
given commodity using HS codes for that commodity, domestic production number which can be
determined using production data provided by manufacturers themselves, or the commodities
16
associations, such as All Pakistan Textile Mill Association (APTMA) or the Ministry of Textile
for fabric and smuggling which was the only variable which could not be determined. Therefore,
the equation had to be modified to solve for smuggling instead.
The modified equation (Fig. 6) required that we first determine the market demand for
the commodities under investigation. After which, the additive figure of domestic production
and imports obtained from primary and secondary sources will be deducted from the demand
determined along with the exports of the commodities to render the magnitude of smuggling for
each commodity.
Fig. 6. Modified Equation to Determine Magnitude of Smuggling. The original market demand
equation was modified to include exports and solve for the quantum of smuggling.
4.4 Determining the Commodities Most Prone to Smuggling
We obtained Customs seizures from the Enforcement and Coordination wing of Pakistan
Customs from2010 to 2014. The data set provided to us included seizures from all Collectorates,
Directorates and enforcement agencies of Customs all over Pakistan. We focused on Customs
seizures since the enforcement plan and our policy recommendations will be Customs centric.
These seizures were tabulated according to frequency of seizures, value of seizures, and
mode of smuggling. We then picked the commodities, which are most frequently caught and are
17
the greatest in value. The revenue lost to the Federal Government, and the pattern of imports in
relation to the ATT also played a role in finalizing the list of commodities of interest. Out of 32
commodities that were analyzed, eleven commodities were originally short listed, but after
meetings with the DG Intelligence, Preventive Collectorate Lahore and other Customs officials
two more commodities were added to the list totaling thirteen commodities that were to be
focused on for the project (Table 1).
Commodities Finalized for Anti-Smuggling Project
Tyres (in units)
Tea (in MT)
Auto parts (in Rupees billion)
Mobile phones (in units)
Fabrics ( in MT)
Cigarettes (in units)
Plastic Granules (in MT)
Television (in units)
Steel Sheets (in MT)
POL (Diesel) (in MT)
Vehicles (Cars and Jeeps) (in units)
Table 1. Commodities Finalized for Anti-Smuggling Project. The commodities finalized after
analysis of the seizure data and the units, which will be used to determine the quantum of
smuggling for a given commodity. This does not include the two commodities later excluded due
to insignificant results.
4.5 Research Design for the Commodities Under Question
As mentioned in the general equation above, we had to determine four variables to
determine the quantum of smuggling. First, the market demand, second the total imports of the
commodity as per PRAL data using HS codes for the commodity, third the domestic production
for the commodity and finally the export data for the commodity as per PRAL data using the
same HS codes which were used for generating the import data. The following sections outline
how each one of these variables was determined by us.
18
4.5.1 Determining the Market Demand

The market demand data can be difficult to determine in countries such as Pakistan where
a large sector of the economy is completely undocumented and works through informal setups.
Therefore, the true market demand is very difficult to determine for the period provided to finish
the study. Thus, we decided to depend on market experts from each commodity. To ensure that
the best estimate of the market demand was obtained, a number of resources were used which
included primary and secondary resources and market surveys for the selected commodities.
To determine the market demand for each commodity, different types of stakeholders
were interviewed. This included local manufacturers, multinationals, trade associations,
commercial importers, and Government entities that kept track of market demand. Additionally,
secondary research papers assembled by international organizations, when available, were also
used to cross-reference the numbers provided by the stakeholders. Multinationals and local
manufacturers were given priority in determining the market demand since they had access to
market surveys that had been done for their given commodity. The complete list of resources
used to determine the market demand is outlined in Annex A.
4.5.2 Determining Volume of Domestic Production

The sources, which were used to determine the market demand for the commodities
under investigation, also helped in determining the domestic production. We interviewed major
manufacturers, trade associations and Government entities to obtain domestic production
numbers. Additionally, commodities for which domestic production depended on imports, such
as tea, mobile phones and televisions, data from Pakistan Revenue Automation PVT. LTD.
19
(PRAL) was also extracted for the appropriate HS codes. The HS codes used to extract domestic
production data will be discussed in the section where quantum of imports are determined. The
details of sources according to the commodity are shown in Annex B.
4.5.3 Determining Quantum of Imports for Pakistan and Afghanistan

Import data obtained from PRAL was tabulated from January 1, 2010 to December 31,
2014 for all of the commodities under investigation for both Pakistan and Afghanistan. Special
attention was paid to the HS codes, which were selected, so that import data for the specific
commodity types for which market demand and domestic production was quantified is tabulated.
The Description field of each import entry was closely analyzed to ensure that the description
matched the HS code to avoid errors, which are common in PRAL data. We choose to look at
imports over the past five years to notice any fluctuations or interesting patterns in the data. The
HS codes used to calculate imports for each commodity are given in Annex C.
4.5.4 Determining the Quantum of Exports for Pakistan

The final variable which required quantification according to the research equation, were
the export numbers for the commodities we were investigating. Data was extracted from PRAL
for the same timeframe as the one used for import data. The same HS codes (Annex C) were
also used to ensure consistency.
4.5.5
Analysis of ATTA as Major Source Used by the Smuggling Regime
The pilot study done at the beginning of this research project showed strong evidence that
imports in Afghanistan for the selected commodities were too large in number and were not
20
justified by the market demand. Therefore, two types of analysis on imports of the two countries
were conducted. The quantum of imports and the average value assessed applied to collect tariff
on the imported goods. This analysis was done on a quarterly basis to better visualize the
changes in quantum of imports with changes in valuation of the goods being imported in the two
countries.
4.5.6 Calculating Revenue Lost by FBR

Once the magnitude of smuggling was quantified, we worked to determine how much
revenue would have been generated by FBR in terms of Customs duties (CD), sales tax (ST) and
withholding tax (WHT) if the quantity smuggled into the market to meet the demand was legally
imported. The imports for each commodity were analyzed by determining the proportion of the
total imports under each HS code. Using the import proportions for each commodity as the
model, we assumed that the quantity smuggled, if legally imported, would be imported at the
same proportion as what the current imports showed.
We then calculated the average value assessed of these commodities on each HS code in
US Dollars. Using the duty structure as outlined in Pakistan Customs Tariff 2013-2014, we
calculated the CD, ST and WHT. The duty structure applied is detailed in Annexure D-N.
4.5.7 Effects of Tariff Rationalization on Imports

A popular policy recommendation from the manufacturers and importers was to
rationalize the tariff charged on imports to lower the incentive for smuggling. Tariff
rationalization is a common practice that has been undertaken by FBR in the past. To see the
effects of tariff rationalization, we analyzed the volume of imports when tariffs were lowered to
21
see if tariff rationalization resulted in an increase in imports. This was done to help us
understand the effects of tariff rationalization on imports and to test if such a rationalization is a
viable policy option.
22
5. Results
The quantification of smuggling discussed in this section was tabulated using the
equation discussed in the Research Methodology section (Fig. 6). For each commodity
discussed in this section, market demand was first determined from which domestic production,
imports and exports were subtracted. The domestic production and imports were deemed the
legitimate band of supply that meets the demand, while the remaining quantum of the demand,
factoring in exports for each commodity that was met is deemed to be supplied by smuggling.
5.1 Quantification of Smuggling in Tyres
The graph below (Fig. 7) shows the quantum of the four variables used to determine the
magnitude smuggling of tyres.
Fig. 7. Quantification of factors involved in meeting market demand for tyres. Quantification in
numbers of the different variables contributing to the market demand for tyres (General Tyres,
2014; Bridgestone, 2014; PRAL, 2015).
23
The market demand of tyres was determined by taking into account the number of cars,
which are on the road. On average, the life expectancy of a car is 10 years. According to the
annual sales records for passenger cars, pick-up, jeeps/SUV and truck buses, that number equals
to 1,612,878 vehicles, which are currently on the road (PAMA, 2014; Indus Toyota, 2014). We
assigned four tyres to each vehicle, which means that there are an estimated 46,451,512 tyres on
Pakistans roads. The life expectancy of tyres on average is five years (General Tyres, 2014).
Calculating the market demand from these figures, Pakistans average requirement for tyres
annually is estimated at 9,290,302.4 with a margin of error of 3%.
This demand was partially satisfied through domestic production of 1,717,000 units
(General Tyres, 2014) and imports of 2,098,855 units (PRAL, 2015). Of the locally produced
tyres, 43,171 units were exported out of the country (PRAL, 2015). Between the domestic
production and imports of tyres, there was a gap of 5,517,618 units of unmet demand for that
year, however, these additional tyres that were not domestically produced or importer were still
sold in the market. Therefore, it can be noted that approximately 59% of the demand for tyres
was satisfied through illegal channels and may have been met through smuggling (Fig.8).
24
Fig. 8. Percent contribution of factors involved in satisfying market demand for tyres. Figure
shows the percentage that each factor is contributing to fulfill the market demand for tyres in
2013 (General Tyres, 2014; Bridgestone, 2014; PRAL, 2015).
5.2 Quantification of Smuggling in Tea
The graph below (Fig. 9) shows the value of the four variables of the smuggling equation
and the quantum of smuggling as it relates to tea. Per capita consumption of tea is estimated to
be 1.2 kg annually (Pakistan Tea Association, 2014; Pakistan Business Council, 2014; Unilever,
2014; Tapal, 2014). We take the population of Pakistan to equal 210 million. This estimated the
tea consumption in Pakistan to equal 252,000,000 kg annually or 252,000 MT. This number was
also in line with the sales figures of 240,000 to 260,000 MT (Euromonitor International, 2013;
BMI Industry Report, 2013).
Since there is no domestic production of tea in Pakistan, this market demand was
partially satisfied by imports of 133,257 MT (PRAL, 2015). Of the tea that was imported 1,805
25
MT was exported out of Pakistan after blending and packaging. Between the imports and then
exports there was a gap of 120,548 MT of tea in the market demand which was met, but is not
accounted for in the documented economy.
Fig. 9. Quantification of factors involved in meeting market demand for tea. Quantification in
numbers of the different variables contributing to the market demand for tea (Unilever, 2014;
Tapal Tea, 2014; Pakistan Tea Association, 2014; PRAL, 2015).
Therefore, we estimate that around 47% of the demand for tea was satisfied through illegal
channels (Fig. 10).
26
Fig. 10. Percent contribution of factors involved in satisfying market demand for tea. Figure
shows the percentage that each factor is contributing to fulfill the market demand for tea in 2013
(Unilever, 2014; Tapal Tea, 2014; Pakistan Tea Association, 2014; PRAL, 2015).
5.3 Quantification of Smuggling in Auto Parts
The auto parts market is unique compared to the other markets evaluated in this study.
Figure 11 shows the quantum of smuggling of auto parts in billions of rupees, after other
components feeding the market are accounted for.
27
Fig. 11. Quantification of factors involved in meeting market demand for auto parts.
Quantification in numbers of the different variables contributing to the market demand for auto
parts (BMI Industry Report, 2013; Indus Toyota, 2014; Atlas Honda, 2014; PAMA, 2014;
PAAPAM, 2014; Pakistan EDB, 2014; PBC, 2014; PRAL, 2015).
Determining market demand for auto parts was convoluted due to the plethora of auto
parts, which are available in the market. For example, over 12 thousand auto parts are available
just for Toyota Corollas. Therefore, we depended heavily on resources interviewed (Annex A)
for determining the market demand. Extensive work had been done to determine the magnitude
of smuggling of auto parts by the industry experts. The industry as a whole likes to consider the
market demand in terms of monetary value rather than individual parts. It is estimated that the
market demand for auto parts in Pakistan equals to Rs. 56 billion (PAMA, 2014; PAPAM, 2014;
Indus Toyota, 2014; Atlas Honda, 2014; Market Expert, 2014).
28
This market demand was partially met through domestic production estimated to be
around Rs. 10 billion and imports worth Rs. 9 billion which includes imports by original
equipment manufacturers (OEMs) and commercial importers. An interesting point of these
imports is that of the Rs. 9 billion, Rs. 7.461 billion are legal imports by OEMs and Rs. 0.651
billion are imports by commercial importers. However, this Rs. 0.651 billion accounts for
approximately 30% of the actual imports. Additional imports of around Rs. 0.93 billion fall
under mis-declaration and under-invoicing. Along with this, market experts have estimated that
the market is slightly catered by counterfeit parts valued at around Rs. 5 billion. Therefore, even
between the domestic production, imports and counterfeit parts, the market still required Rs. 32
billion worth of auto parts. Upon further investigation, it can be concluded that this demand of
Rs. 32 billion worth (amounting to approximately 57% of the market) in auto parts was satisfied
through various means of smuggling (Fig. 12).
29
Fig. 12. Percent contribution of factors involved in satisfying market demand for auto parts.
Figure shows the percentage that each factor is contributing to fulfill the market demand for auto
parts in 2013 (PAMA, 2014; Indus Toyota, 2014; PRAL, 2015).
5.4 Quantification of Smuggling in Mobile Phones
Figure 13 shows the quantification of smuggling as it relates to mobile phones. The
market demand for mobile phones was 60,000,000 units for the year 2013 (Fig. 13) (BMI
Industrial Report, 2013; Q-Mobile, 2014; Pakistan Electronics Manufacturers Association,
2014). While there is no domestic production of mobiles in Pakistan, this demand was partially
satisfied through imports of 24,929,244 units (PRAL, 2015). However, of these imported units,
906,144 units were exported out of Pakistan (PRAL, 2015), leading to a gap of 35,977,900 units.
30
Fig. 13. Quantification of factors involved in meeting market demand for mobile phones.
Quantification in numbers of the different variables contributing to the market demand for
mobile phones (BMI Industry Report, 2013; QMobile, 2014; Pakistans Electronics
Manufacturers Association, 2014; PBC, 2014; PRAL, 2015).
Therefore, it is proposed that 59% of the demand for mobile phones was satisfied through
illegal channels and may have been met through smuggling (Fig. 14).
31
Fig. 14. Percent contribution of factors involved in satisfying market demand for mobile phones.
Figure shows the percentage that each factor is contributing to fulfill the market demand for
mobile phones in 2013 (PRAL, 2015).
5.5 Quantification of Smuggling in Fabric
The quantification of smuggling in metric tons of fabric is shown in Figure 15, after the
application of the research equation. The per capita consumption of fabric is approximately 8 kg
annually (Ministry of Textiles, 2014). We take the population of Pakistan to equal 210 million.
This estimated the fabric consumption in Pakistan to equal 1,680,000,000 KG or 1,680,000 MT.
This market demand was partially met through domestic production of 1,944,000 MT (All
Pakistan Textile Mills Association, 2014; PBC, 2014) and imports of 428,000 MT of fabric
(PRAL, 2015). However, of the locally produced fabric approximately 972,000 MT were
exported out of the country because of international demand for our textile products (PRAL,
32
2015). This export created a gap of 280,000 MT of fabric in the domestic market demand which
was satisfied through other means.
Fig. 15. Quantification of factors involved in meeting market demand for fabric. Quantification
in numbers of the different variables contributing to the market demand for fabric (PBC, 2014;
Ministry of Textiles, 2015; All Pakistan Textile Mills Association, 2014; Ministry of Textiles,
2015; PRAL, 2015).
This 280,000 MT accounts for approximately 17% of the total demand for 2013 (Fig. 16).
33
Fig. 16. Percent contribution of factors involved in satisfying market demand for fabric. Figure
shows the percentage that ech factor is contributing to fulfill the market demand for fabric in
2013 (Gul Ahmed, 2014; Ministry of Textiles, 2015; PRAL, 2015).
5.6 Quantification of Smuggling in Cigarettes
The graph below (Fig. 17) looks at the variables of market size, domestic production,
imports and exports as it related to the cigarettes industry in Pakistan. Tobacco use in Pakistan is
common and one of the highest in the South East Asian Region. There are 22 million smokers in
the country with about 55% of the households with at least one person who smokes tobacco
(Agricultural Policy Institute & Pakistan Journal of Agricultural Economics, 2010). This
generated a market demand for 82,568,000,000 cigarette sticks in 2013 (Oxford Economics,
2014). Tobacco grown in Pakistan has an average yield of 2,097 kg/hectors which yielded 97.98
million kg of tobacco in 2012-13 (Pakistan Tobacco Board, 2013). All of which must be bought
by the tobacco manufacturers. Due to our strong tobacco industry, a large portion of the market
demand is met by domestic production which accounts for 79,804,792 thousands of cigarettes of
which 63,707,000 thousands account for declared production and 16,097,792 is undeclared in
34
order to avoid excise tax. Along with the domestic production, a very small portion of imports
(approximately 349,000 units) are brought in to cater to the market demand. With our large
production of tobacco products, a small portion of our domestically created cigarettes are
exported out of Pakistan, accounting for only 77,927 thousand cigarettes (PRAL, 2015).
Fig. 17. Quantification of factors involved in meeting market demand for cigarettes.
cigarettes (Oxford Economics, 2013; Phillip Morris, 2014; PRAL, 2015).
However, there was still a gap of 2,840,787 thousands of cigarettes which went
unaccounted but were sold in the market. This figure represents 3% of the market demand which
is met by smuggling (Fig. 18).
35
Fig. 18. Percent contribution of factors involved in satisfying market demand for cigarettes.
cigarettes in 2013 (Oxford Economics, 2013; PRAL, 2015).
5.7 Quantification of Smuggling in Plastic Granules
Plastic granules serve as raw material for plastic products that are produced in the
country. According to market experts, the consumption of plastic per capita is 5.2 kg annually.
Therefore, the market demand for plastic granules in Pakistan is 1,100,000 MT (G&T, 2014;
Market Expert, 2014). Figure 19, shows the quantum of the smuggling and the variables related
to it. A little less than a third (300,000 MT) of demand was met through domestic production
(G&T, 2014), while majority of the quantity needed was met through imports of 718,266 MT
(PRAL, 2015).
36
Fig. 19. Quantification of factors involved in meeting market demand for plastic granules.
Quantification in numbers of the different variables contributing to the market demand for plastic
granules (G&T, 2014; Market Expert, 2014; PRAL, 2015).
Combining domestic production with the imports and taking exports (38,345 MT) out of
the picture, there was a gap of 120,079 MT in the market demand that was filled. Therefore,
approximately 11% of the plastics market is being catered for through illegal channels (Fig. 20).
37
Fig. 20. Percent contribution of factors involved in satisfying market demand for plastic
granules. Figure show the percentage that each factor is contributing to fulfill the market demand
for plastic granules in 2013 (G&T, 2014; PRAL, 2015).
5.8 Quantification of Smuggling of Televisions
There are 13.96 million TV sets in Pakistan (Pakistan Economic Survey, 2013). As the
years progress, new television sets are added and old television sets are replaced. This accounts
for a total of 10% of the TV sets, which are being replaced, on an annual basis (Pakistans
Electronics Manufacturing Association, 2014). The figures as they relate to the television
industry are outlined in the graph below (Fig. 21). In 2013, the market demand for televisions in
Pakistan was approximately 1.3 million televisions (BMI Industry Report, 2013; PBC, 2014;
Pakistans Electronics Manufacturers Association, 2014). This demand was partially satisfied
through domestic production and imports of 475,000 units and 78,461 units, respectively (LG,
2014). With a marginal export of only 9 units (PRAL, 2015), a gap of 746,548 units between the
demand and supply was met through illegal channels amounting to 57% of the market (Fig. 22).
38
Fig. 21. Quantification of factors involved in meeting market demand for televisions.
televisions (BMI Industry Report, 2013; PBC, 2014; Pakistans Electronics Manufacturers
Association, 2014; Orient, 2014; LG, 2014; PRAL, 2015).
39
Fig. 22. Percent contribution of factors involved in satisfying market demand for televisions.
televisions in 2013 (BMI Industry Report, 2013; PBC, 2014; Pakistans Electronics
Manufacturers Association, 2014; Orient, 2014; LG, 2014; PRAL, 2015).
5.9 Quantification of Smuggling in Steel Sheets

Steel sheets are the raw material used to make various high-density steel products. Three
types of steel sheets are used in Pakistan, hot rolled coil (HRC), cold rolled coil (CRC) and
galvanized steel. There are three industries that produce steel sheets in Pakistan, namely,
Pakistan Steel Mills, International Steels and Aisha Steels. The market (industrial) demand for
HRC is 1 million MT. The total market (industrial) demand for CRC is 550, 000 MT.
International Steels is the only one that produces galvanized steels. The production for 2014 of
galvanized steels was 160,000 MT. Therefore, the total market (industrial) demand for these
three types of sheets is 1,710,000 MT in Pakistan (Aisha Steels, 2014; ILL, 2014).
40
This demand was mostly satisfied through imports of 1,507,689.03 MT (PRAL, 2015),
and very little domestic production of 47,500 MT (mostly by Pakistan Steel Mills) (Aisha Steels,
2014). The quantity exported (19,097.19 MT) (PRAL, 2014) resulted in a gap of approximately
173,908 MT existed (Fig. 23) in the demand which was approximately 10% (Fig. 24).
Fig. 23. Quantification of factors involved in meeting market demand for steel sheets.
Quantification in numbers of the different variables contributing to the market demand for steel
sheets (Aisha Steels, 2014; International Steels LTD., 2014; International Industries LTD., 2014;
PRAL, 2015).
41
Fig. 24. Percent contribution of factors involved in satisfying market demand for steel sheets.
Figure shows the percentage that each factor is contributing to fulfill the market demand for steel
sheets in 2013 (PRAL, 2015).
5.10 Quantification of Smuggling in Vehicles
According to UNData, it is estimated that Pakistan has about 57 vehicles on the road per
1,000 people. With a population of 210 million, people that equals to 11,970,000 vehicles
(UNData, 2014). The average life expectancy of a car in Pakistan is said to be 10 years (PAMA,
2014; Indus Toyota, 2014). While vast majority of cars are replaced by other used cars, about
8%, <2% are replaced by new cars. Therefore the market demand for new cars and jeeps is
204,291 annually (Fig. 25) (BMI Industry Report, 2013; PAMA, 2014; Pakistans Excise and
Taxation Department, 2014; Atlas Honda, 2014; Indus Toyota, 2014). This demand was
partially fulfilled through local production and imports of 136,000 vehicles and 43,000 vehicles,
42
respectively (Atlas Honda, 2014; Indus Toyota, 2014; PRAL, 2015). In the same year, only 50
vehicles were exported out of Pakistan and a gap of 25,341 vehicles existed in the market
demand. This estimates that approximately 12% of the market was satisfied through smuggling
(Fig. 26).
Fig. 25. Quantification of factors involved in meeting market demand for vehicles.
vehicles (BMI Industry Report, 2013; PAMA, 2014; Pakistans Excise and Taxation Department,
2014; Atlas Honda, 2014; Indus Toyota, 2014).
43
Fig. 26. Percent contribution of factors involved in satisfying market demand for vehicles. Figure
shows the percentage that each factor is contributing to fulfill the market demand for vehicles in
2013 (PAMA, 2014; Pakistans Excise and Taxation Department, 2014; Atlas Honda, 2014;
Indus Toyota, 2014).
5.11 Quantification of Smuggling of POL (Diesel)

The graph below (Fig. 27) shows the value of the four variables of the smuggling
equation and the quantum of smuggling as it relates to POL (Diesel). The market demand for
POL (Diesel) was approximately 6,897,695 MT for the year 2013 (Oil Company Advisory
Council, 2014). The domestic production of POL (Diesel) after the import of raw product is
4,258,295 MT along with imports of finished product of 344,993.25 MT (PRAL, 2015) to meet
the market demand. Along with the domestic production and import, a very small quantity
(namely 890 MT) was exported out of Pakistan (PRAL, 2015). Between the domestic
production, imports and exports there was a gap of 2,295,297 MT of POL (Diesel) in order to
44
fulfill the market demand, however, as it can be seen with other commodities, this demand was
met.
Fig. 27. Quantification of factors involved in meeting market demand for POL (Diesel).
Quantification in numbers of the different variables contributing to the market demand for POL
(Diesel) (Oil Company Advisory Council, 2014; PRAL, 2015).
Therefore, it is proposed that around 33% of the demand for POL (Diesel) was satisfied through
illegal channels and may have been met through smuggling (Fig. 28).
45
Fig. 28. Percent contribution of factors involved in satisfying market demand for POL (Diesel).
Figure shows the percentage that each factor is contributing to fulfill the market demand for POL
(Diesel) in 2013 (Oil Company Advisory Council, 2014; PRAL, 2015).
We were able to determine that at least a small portion of the market demand was being
met by the smuggling regime for every commodity we investigated. The markets that were most
effected by smuggling were tyres, mobile phones, auto parts and televisions of the eleven
commodities we investigated. The markets which were least effected were cigarettes, plastic
granules, steel sheets and vehicles.
5.12 Analysis of Pakistan vs. Afghanistan Imports on Commodities of Interest

As observed in the pilot study done in the initial stages of this project, interesting patterns
were observed when the import patterns of Pakistan were compared to that of Afghanistan for
the commodities most prone to smuggling. Once the quantum of smuggling was estimated in
46
numbers, two types of analysis were conducted on the imports of the commodities of interest.
First, an analysis of the quantity imported on a quarterly basis, and then secondly evaluating the
average value of assessment on imports. The following sections summarize the findings for
those commodities that showed a significant pattern.
5.12.1 Quarterly Analysis of Import of Tyres Pakistan vs. Afghanistan

Figure 29 shows the import patterns of Pakistan (green), and Afghanistan (red) from
January 2010 to December 2014 on a quarterly basis in terms of quantities imported.
Fig. 29. Tyres Import Comparison Between Afghanistan and Pakistan by Quarter. The imports
of Pakistan are shown in green and imports of Afghanistan are shown in red (PRAL, 2014).
At several points in the data it can be observed that Pakistans imports are inversely proportional
to Afghanistans imports (i.e. when Pakistans imports increase, Afghanistans imports decrease
and vice versa). Such observations were made from July 2010 to January 2011, where
Pakistans imports in tyres increased while Afghanistans imports decreased. Similarly, from
April 2011 to September 2011, Pakistan saw a decrease in tyre imports while Afghanistan saw an
increase. April 2013 to December 2013, again an increase in Pakistani imports was paired with a
47
decrease in Afghan imports of tyres. The graph shifted in the opposite direction from December
2013 to June 2014, where a decrease in tyre imports in Pakistan was met by an increase in tyre
imports in Afghanistan by the same magnitude. Interestingly, after June 2014, Afghanistans
tyre imports increased significantly to almost meet the Pakistani imports. In December 2014,
Pakistani imports were almost at the same level as the Afghan imports of tyres, even though
Afghanistans tyre market is estimated to be twelve times smaller than that of Pakistan.
To see if changes in valuation may have been the factor influencing the pattern of
imports, we looked at the average value assessed on a quarterly basis on the same data set.
Figure 29 shows the average value assessed of the imports in which CD, ST and WHT are
applied.
Fig. 30. Average Assessed Value on Imports of Tyres. The average value assessed per unit of
tyre in Pakistan is shown in green, and Afghanistan is shown in red (PRAL, 2014).
The average value assessed on tyres is significantly higher overall in Afghanistan compared to
Pakistan. However, if we look at the same periods where the import numbers in Pakistan versus
Afghanistan were inversely proportional, an interesting pattern arises. From July 2010 to March
48
2011, when Pakistani import of tyres increased and Afghanistans decreased, we saw that the
average value upon which taxes are applied decreased in Pakistan from $61 to $41 on the HS
codes. Looking at the period of April 2011 to September 2011, the average value assessed for
tyres moved from $39 to $53 in Pakistan. As mentioned previously, this was paired with a
decrease in imports in Pakistan and an increase in imports in Afghanistan. In April 2013 to
December 2013, Pakistani imports had increased, while Afghan imports decreased. This was in
line with a decrease in average value assessed in Pakistan from $51 to $45 per unit. Looking at
December 2013 to June 2014, average value assessed in Pakistan increased from $45 to $56, in
response, the imports in Pakistan plummeted sharply during this period while the imports in
Afghanistan increased. From June 2014 to December 2014, the average value assessed in
Pakistan tappers off to around the same value in Afghanistan. Interestingly, the imports in
Afghanistan increased to about the same level as Pakistan, which is not explained by its market
demand.
It is important to note that the average value assessed is not making a significant impact
on import numbers of tyres in Afghanistan, unlike Pakistan where a slight increase or decrease in
the average value assessed is reflected immediately in the import numbers.
5.12.2 Quarterly Analysis of Import of Televisions Pakistan vs. Afghanistan

The market demand for televisions in Afghanistan is significantly lower than Pakistan, so
much so that Afghanistan only had 100,000 units in 2003 (the latest data available) while
Pakistan had 13.1 million operating units countrywide (Media Comparison by Country, 2003).
However, as seen in Figure 31, Afghanistan is importing in exponentially greater quantities
compared to Pakistan from July, 2010 to March, 2011. The imports became more comparable in
49
the period between April, 2011 to December, 2011, followed by a sharp incline in Afghanistans
imports from April, 2012. These imports continued to rise until the end of the analysis window in
December, 2014.
Fig. 31. Television Import Comparison Between Afghanistan and Pakistan. The imports of
Pakistan are shown in green and imports of Afghanistan are shown in red (PRAL, 2014).
When looking at the average value assessed per unit of television, Figure 32, the average
value per unit was about a third in Afghanistan compared to Pakistan from July 2010 to March
2011. These values become more comparable in the same time frame that the imports became
more comparable from April, 2011 to December, 2011, and remained within $100 per unit mark
for the remainder of the analysis period.
50
Fig. 32. Average Assessed Value on Imports of Televisions. The imports of Pakistan are shown
in green and imports of Afghanistan are shown in red (PRAL, 2014).
5.12.3 Quarterly Analysis of Import of Fabric Pakistan vs. Afghanistan

Afghanistan consistently imports exponentially greater quantities of fabric compared to
Pakistan. This can be partially explained by the fact that Pakistan has a strong textile industry.
However, while gathering information on market demand, domestic production and exports of
the textile industry we found, that a large quantum of the fabric produced in Pakistan is exported
out of the country (see Fig. 16), and therefore, is not used to meet the local market demand. The
fabric imported in Pakistan is cheaper raw products used for domestic production. While
Afghanistan imports large quantities of finished products, this includes large amounts of
synthetically produced polyester which is not domestically produced or imported in large
quantities in Pakistan, but is readily available. Additionally, silk, which is not commonly used in
Afghanistan is also very commonly imported in Afghanistan. The shear quantum of import is
not justified by the market demand generated by only 30 million people whose purchasing power
51
is about half of Pakistan. Figure 33 shows the quantum of fabric imports between the two
countries.
Fig. 33. Fabric Import Comparison Between Afghanistan and Pakistan by Quarter. Pakistan
import patterns are shown in green while Afghanistans import patterns are in red (PRAL, 2014).
The average value assessed of the fabric imported in Pakistan versus Afghanistan was
also analyzed, and is shown in Figure 34. We observed, that the imports in Afghanistan were
mostly that of polyester and silk, while Pakistan was mostly of raw material mixed in with fabric
other than polyester and silk. More recently, the average value assessed has come to that of
Pakistan, which is also a point of concern, since the import numbers in Afghanistan sky rocketed
in the same time period. This may point to the fact, that even the raw materials might have
started to be smuggled.
52
Fig. 34. Average Assessed Value on Imports of Fabric. Pakistan import patterns are shown in
green while Afghanistans import patterns are in red (PRAL, 2014).
5.13 Effects of Tariff Rationalization and Average Value Assessed on the Volume of Legitimate
Imports in Pakistan
Tariff rationalization is a popular policy proposal which was mentioned over and over
again when interviews with market leaders and importers were conducted. We know that this
policy has been implemented by FBR on items which are most prone to smuggling in the past.
Therefore, we obtained data in terms of Customs duties charged and the volume of imports from
the budget department of FBR. The following section discusses the effects of tariff
rationalization on imports of the commodities. For the sake of avoiding repetition, only four
examples of significant trends observed is discussed in the paper.
53
5.13.1 Tariff and the Average Value Assessed on Tyres and the Volume of Import
When we look at the tariff applied to tyres which are imported (Figure 35), we see that
even when the tariff remained the same and the average value assessed (Figure 30) was on an
upward trend overall since 2011, the import of tyres still increased from 2010 to 2014. The
average value assessed was low compared to other years included in this data set during the
fiscal year of 2010-11 of only $45.25. However, the fiscal year of 2010-11 showed the lowest
imports. The average value assessed increased to $49.75 in 2011-12, and the tariff applied
stayed the same, however, the volume of imports more than doubled. In 2012-13, the average
value assessed was at an all time low at $45, but the imports only increased by a third. Finally,
the average value assessed has increased to $48.75 during 2013-14, however, there was still a
marginal increase in the imports, even though there was no change in the percentage of tariff
applied on the import of tyres. The import data of tyres shows that if tariff is kept constant, the
import of tyres is independent of average value assessed. This conclusion can be made, since the
imports were low during times when the average value assessed was lower. Also, a lower
average value assessed did not cause as big a jump in the increase of import volumes (imports of
2011-12 doubled, with an increase in valuation of $4, while a decrease in valuation of $3.75 only
caused an increase of 33% in 2012-13 compared to the previous year). Therefore, we saw that
the volume of imports was independent of both variables presented in the first case, where the
tariff applied remained constant, and the value assessed both increased and decreased.
54
Fig. 35. Tyre Duty Rate vs. Import Quantities. The percent of tariff applied and the volume of
imports during the fiscal years of 2010 to 2014 (FBR Budgetary Department, 2015).
5.13.2 Tariff and the Average Value Assessed on Televisions and the Volume of
Import
Televisions have been considered a commodity which is smuggled in large volumes.

Therefore, tariff was lowered by almost 4% from 2011-2012 when the imports were at their
highest point (Figure 36) and the average value assessed on the imports were also at their lowest
of $389 ( Figure 32).
55
Fig. 36. Television Duty Rate vs. Import Quantities. The percent of tariff applied and the
volume of imports during the fiscal years of 2010 to 2014 (FBR Budgetary Department, 2015).
Even with this decline in tariffs applied and the average value assessed stabilized at $445 in
2013-14, the imports did not increase, even though the demand for LEDs and LCDs increased
significantly in the country while domestic production did not take place in Pakistan. However,
a marked increase was seen in ATTA imports of televisions which are now bringing in high end
LEDs and LCDs with about the same average assessed value as those imported in Pakistan (see
Figures 31 for volume of ATTA imports and Figure 32 for the average value assessed) but in
more quantities compared to Pakistan. This evidence shows that the lowering of tariff does not
have a significant effect on the quantum of legitimate imports even if the average value assessed
is almost constant.
56
5.13.3 Tariff and the Average Value Assessed on Mobile Phones and the Volume of
Import
According to market experts, mobile phones is a market which is most affected by

smuggling (Figure 14). Surprisingly, the imports of mobile phones has decreased (Figure 37),
even though due to the Free Trade Agreement (FTA) with China, the tariff applied on mobile
phones is 0%, and a flat rate of $2.50 is charged per handset to clear the goods.
Fig. 37. Mobile Phone Duty Rate vs. Import Quantities. The percent of tariff applied and the
volume of imports during the fiscal years of 2010 to 2014 (FBR Budgetary Department, 2015).
57
Therefore, in the case of mobile phones, neither the tariff nor the average value assessed applied,
however, the import of handsets has significantly declined and continues to do so. Thus, it can
be concluded, that even lowering the tariff to 0% and not accounting for the average value
assessed does not make an impact on the volume of imports and smuggling continues to be
rampant if the conditions are favorable.
5.13.4 Tariff and the Average Value Assessed on Cigarettes and the Volume of
Import
Cigarettes was the only exception to the pattern we observed when it comes to the effects
of tariff applied and the average value assessed.
58
Fig. 38. Cigarettes Duty Rate vs. Import Quantities. The percent of tariff applied and the volume
of imports during the fiscal years of 2010 to 2014 (FBR Budgetary Department, 2015).
Figure 38 shows a significant increase in the volume of imports after the tariff was lowered by
5%. This is because the motive behind the smuggling of cigarettes is different, cigarettes are
more prone to tax evasion, since tobacco is grown in the country and cigarettes are domestically
produced into their finished form. Therefore, reduction in the payment of taxes is a major
motivator to increase imports.
5.13.5 Use of Tariff Rationalization as a Policy Approach to Curb Smuggling

The general pattern when tariff applied and import volumes are analyzed shows that
rationalization of tariff or placing the tariff at 0% does not motivate an increase in legitimate
59
imports. If cases where lowering the tariff applied may cause an increase in legitimate imports,
this increase is not significant enough to deem it an effective approach from a policy making
point of view. It is also observed that increasing tariff doesnt always result in a decrease in
imports (to see the import trends for the remainder of the commodities in this study which were
not discussed in this section see Annex Y).
60
6. Implications of Smuggling
We found that a significant portion of the market demand was being catered by the
smuggling regime for eleven out of the thirteen commodities we investigated. The current
section will take into account the total revenue lost to the national exchequer if these
commodities were legally imported, and the level of investment required if the gap in the market
demand was filled by growth in the local industry.
6.1 Total Revenue Lost on Commodities Under Investigation by FBR

To estimate the total amount of revenue lost in terms of duties and taxes collected if the
entire smuggled supply was legally imported, we took the average value assessed sorted by HS
Codes, and applied the CD, ST and WHT as outlined in the Pakistan Customs Tariff 2013-2014.
The complete list of the percent tariff applied by HS code is detailed in Annexure D to N. The
total revenue lost by FBR in 2014 by commodity is outlined in Table 2.
61
Total Revenue Lost on Commodities Under Investigation
Commodity
Total Value
CD
ST
WHT
Total Lost by
Commodity
Tyres
$280,728,738.15
$56,712,420.83
$47,723,885.49
$14,036,436.91
$118,472,743.23
Television
$17,438,474.98
$5,231,542.49
$2,964,540.75
$871,923.75
$9,068,006.99
Tea
$242,198,238.00
$24,219,823.80
$41,173,700.46
$12,109,911.90
$77,503,436.16
Cigarettes
$51,673,897.34
$15,502,169.20
$8,784,562.55
$2,583,694.87
$26,870,426.62
Mobile Phones
$4,394,218,566.00
$89,942,250.00
$747,017,156.22
$219,710,928.30
$1,056,670,334.52
Plastic Granules
$822,914.80
$41,145.74
$139,895.52
$41,145.74
$222,187.00
Steel Sheets
$351,785,740.00
$35,178,574.00
$59,803,575.80
$17,589,287.00
$112,571,436.80
POL (HSD)
$2,731,403,430.00
$273,140,343.00
$464,338,583.10
$136,570,171.50
$874,049,097.60
Vehicles
Autoparts
(INDUSTRY
ESTIMATE)
$626,535,952.20
$36,970,238.31
$106,511,111.87
$31,326,797.61
$174,808,147.79
Fabric
$6,111,965.69
$1,247,949.81
$1,039,034.17
$305,598.28
$2,592,582.26
Grand Total Lost
$9,022,917,917.16
$538,186,457.18
$1,479,496,045.93
$435,145,895.86
$2,638,808,398.97
$320,000,000.00
$185,980,000.00
Table 2: Total Revenue Lost on Commodities Under Investigation (January to December 2014).
The portions used to calculate the volume of imports required were first divided by commodity
and then HS Codes within the commodities are detailed in Annexure O to X.
Pakistans GDP is $232.3 billion (World Bank, 2014). The smuggling to GDP ratio for
just the eleven commodities investigated in this study accounts for 3.88% of the countrys total
GDP, and is 9.46% of the total tax collected by FBR. Therefore, the challenge posed by
smuggling to the growth in GDP and collection of revenue is staggering.
6.2 Implication on Local Industries

Currently, the local industry has been facing detrimental consequences due to the
smuggling challenge they face. For industries, where the smuggling regime controls 10-60% of
the market, investors have either minimized production or have been forced to shut down
operations completely. However, if the law enforcement agencies, particularly Customs
authorities take a proactive role to safeguard the local economy, the local industry will not only
come back in full form very quickly, but new industries will also be setup which will create jobs
62
and propel the economy in a positive direction. The current section discusses the amount of
investment required for each industry that has been focused on in the study and the positive
economic effects strengthening old industry or setting up new ones will have on the country.
6.2.1 Tyre Industry

A number of industries are not working at their full capacity due to the control of the
smuggling regime on their local market. For instance, currently, General Tyres is the largest
manufacturer of tyres for passenger cars. General Tyres is producing only 1.7 million tyres per
annum even though its production capacity is 2.2 to 2.3 million tyres. Therefore, they are
operating at only 74-77% of their total capacity with a workforce of 1,800 to 2,000 people. If
better controls are exercised, industries like General Tyres would be able to operate at their full
capacity which will add 460 to 500 jobs to the local industry. No additional revenue would be
required since the infrastructure is already in place.
However, bringing just one industry to its full capacity will not meet the market demand
completely. Thus, new industries will need to be set up. There is a lot of scope for the new
industries to set up in the country which will not only meet the current demand, but will also give
tyres produced in Pakistan a competitive edge in the world market, since the production costs are
so low due to cheaper labor. A state of the art tyre producing factory with a production capacity
of 1.5 million tyres calls for an investment of only $65 million and will add 1,500 jobs to the
local economy.
63
6.2.2 Tea Blending Industry
According to tea giants such as Unilever, close to elimination of smuggling would result
in the opportunity of an additional 100,000 MT for branded tea and other players. This would
require three Unilever size tea blending factories to serve the additional demand. Resulting in
approximately $77 million in investment for infrastructure creating 712 jobs for factory
operations and other ancillary services (Unilever, 2015).
6.2.3 Auto Parts Industry

The auto parts industry is more complex than other commodities we looked into. The
investment is large, and it is not likely that industries will start in Pakistan in the near future.
The individuals involved in the industry will likely continue to import auto parts, until the
economy of the country stabilizes to support such a large investment.
6.2.4 Mobile Phone Industry

Q-Mobile currently has a factory in the HUB area of Baluchistan which has been shut
down due to their inability to compete with the smuggled phones which flood the market. With
the FTA in place, Pakistani mobile phone providers import their phones and accessories from
China. However, if a state of the art facility that was to produce smart phones with Android
capabilities in Pakistan was set up, the total cost of the infrastructure would be about $16 million.
The facility would produce 2 million units a month and would employ over 2,000 people. Since
the infrastructure for making more basic technology is already in place, no new investment
would be required, but that too will add jobs which will pump life into the crippled economy of
the country.
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6.2.5 Textile Industry

Textile is one of Pakistans largest exports. 972,000 MT of fabric was exported out of
Pakistan in various forms in 2014. So if the smuggling of fabric is successfully curbed, the
textile industry is more than adequately prepared to meet the demand. However, if new spinning
mills were to be set up, a state of the art facility would call for a $15 million investment, and
would have the production capacity of 100 million meters per annum. More importantly than
that, each such spinning mill would employee 2,000 individuals. Since, Pakistan is already
known for its textiles the world over, a secure market free from the threat of smuggled goods,
would help grow the export of fabric as well.
6.2.6 Cigarettes Industry

The problem with the smuggling of cigarettes is completely different. The smuggling of
cigarettes does not necessarily happen in the form of the finished product, but rather the
smuggling of tobacco in the raw form to factories which are located in the Azad Kashmir area.
Therefore, the cigarette manufacturing giants such as Philip Morris have the infrastructure
already in place to manufacture for the 3% of the market which is currently catered through
smuggled cigarettes. They would only have to add the workforce required to meet the new
demand. Currently employing 2,500 people, the company would have to add 75 new jobs to the
local economy.
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6.2.7 Plastic Granules Industry (Recyling Plastics)
Currently, there are no documented plants in Pakistan that recycle plastics to make plastic
granules. The average cost of recycling plastics and turning them into granules is $40-$60 a ton.
The total investment to set up infrastructure for this purpose is $1.5 million. Since multiple steps
are required in the process, the plant would employ close to 100 people and have a production
capacity of 2 tones per day.
6.2.8 Television Industry

Leaders of televisions such as Samsung have moved their production facilities from
Pakistan to neighboring UAE due to counterfeiting and smuggling problems they faced.
However, if a television producing facility was to reopen in Pakistan, it would be an investment
of about $200-$300 million with a production capacity of 1.5 million televisions, employing
500-1,000 people. Only one such factory would suffice to meet the market demand currently
catered by smuggled products and therefore, increase Pakistans potential of becoming a regional
hub for television production and export due to its cheap labor and industry friendly policies
adopted by the Government.
6.2.9 Steel Sheets Industry

Currently, Pakistan Steel Mills is only operating at 5 to 10% of its total production
capacity. This is mainly due to operational and management issues which are not likely to be
due to smuggling. However, if the market demand catered by smuggling is made available to the
local industry, a cutting edge facility would require an investment of $100 million. The
66
production capacity would be 100 million tons per annum. A facility such as this one would
provide employment for 1,000 directly and about 2,500 indirectly.
6.2.10 Vehicle Industry

All of the new vehicles currently sold in Pakistan are imported either in completely
knocked down kits or finished products, except for Suzuki which is locally produced. However,
a $160 million investment will result in a state of the art facility with a production capacity of
about 30,000 vehicles which would completely do away with the portion of the market currently
controlled by smuggled goods. Not only that, a single vehicle assembly facility would add 3,200
jobs to the local economy.
6.2.11 POL (Diesel) Industry

Currently, all of the POL supply used to meet the market demand is being imported into
the country mostly as a finished product and in small quantities as raw material. However, with
a cheap labor source, setting up an oil refinery especially for the industry giants who already
have a strong presence in the country like Shell will be a great incentive. Such a refinery will
cost $500 million to setup. Its production capacity will be 2.25 million tons per annum and will
add 2,000 to 3,000 new jobs to the economy.
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7. Policy Recommendations
Pakistans smuggling to GDP ratio for only the eleven commodities we investigated is
around 3.88%, which is not only significantly higher than the countries of the region which
operate on more or less the same conditions but is also high when compared to countries having
a similar GDP. For instance, Indias smuggling to GDP ratio (at least for goods, which have
been studied) is only 0.43% while Bangladeshs is also only 0.04%. Not only this, countries
with similar GDP as us, such as Greece and Ireland have smuggling to GDP ratio of only 0.78%
and 0.47%, respectively. Looking back at Pakistan, this not only means a huge loss in terms of
tax collection but also reflects a sizeable chunk of the market fed by smuggled goods. It also
suggests, therefore, that Pakistan has limited domestic market controls. Consequently, Pakistan
has not been able to achieve investments for industry to the desirable level, explaining its lack of
industrial growth in recent years. It is important to keep in mind that if other commodities that
are not smuggled in that great a quantity are also taken into account, the figures that will emerge
will be greater than what is observed in the current study. The figures also show a potential and
a path for Pakistans policy makers to tread for taking necessary policy measures by way of
which this huge amount of smuggling is checked and space is created for local industry to
develop. The stakeholders, therefore, in the policy making should not be limited to the revenue
collecting agencies but must also include the Ministry of Industries, Ministry of Manpower, etc.
Following are the policy recommendations, which may be employed to counter and check the
significant volumes of smuggled goods entering the country.
68
7.1 Tariff Rationalization
Tariff rationalization has been implemented on multiple occasions in the past as a policy for
bringing the price of imported goods below the price of smuggled goods (making them
competitive). During the years 1996 to 2003, Pakistans tariffs were steadily reduced bringing
the average down from 42% to around 17.3%, however, these reductions did not desensitize
smuggling in the country (Pursell, Khan & Gulzar, 2011). Over the years, FBR has been
rationalizing this on the pretext that bringing the tariffs down, for example tea (2003-2004 was
25% and then brought down to 5% four years back) would work to curb smuggling but
smuggling levels continued to be the same. Reasons for this phenomenon are not related to a
high tariff structure, since the study found no direct correlation between a commoditys tariff
structure and its import quantities, but more related to taxes and profit making. For example,
some individuals/companies may avoid importing to avoid having documented transactions,
which would result in higher income taxes. Not only would these organizations avoid taxes but
would also create a larger profit margin for themselves since smuggled goods come at very
competitive rates. Furthermore, from the viewpoint of the industry lowering tariffs for this
reason is not a good option because tariffs are to protect the local industry and a reduction in
these tariffs would decrease this protection while benefitting the legally imported goods. Thus, it
is not a recommended way of fixing the problem.
7.2 Bilateral Negotiations

During the course of this study, we found that a large quantity of the smuggling was due to
the ATTA cargo. Considering the quantum of the smuggling and its negative fallout for the
economy and the country as a whole, Pakistan has to assign high priority to this issue in
69
negotiations with Afghanistan and bring the matter up as one of the key demands with
Afghanistan. During negotiations, discussing on the possibility of collecting duty taxes here in
Pakistan for Afghanistan may help to curb some of the issue. Pak-Afghan Customs can thereafter
work constructively on combating this menace, which is equally hurtful to the Afghans. This
option has the potential to mitigate the injury caused due to massive influx of smuggled goods.
7.3 Enforcement
While tariff rationalization has not been able to bear much fruit as a credible possibility
and is detrimental to the local industry, and the fact that diplomacy may help Pak-Afghan
cooperation to some extent, enforcement remains to be the biggest policy option Pakistan
Customs needs to pursue. While Customs administration may also be willing to take up the
challenge, the issue demands a political will from the highest quarters of the country that must
show a clear commitment to combat smuggling of such magnitude. Hitherto, the common
practice has been to delegate anti-smuggling powers to various law enforcement agencies to
cover the ground left over by the absence of Customs enforcement units. Over the years,
Customs administration is not equipped to rise to any challenge whatsoever and with the great
rate of attrition in the human resources, deterioration is on the incline. Customs enforcement is
devoid of any marine assets and has to count on the Maritime Security Agency or the Coast
Guards for any interdiction whatsoever in the coastal waters. Similarly, the border areas are
almost entirely manned by the Frontier Constabulary with no checks on the misuse of the
Customs powers delegated to them.
70
7.3.1 Distribution of Responsibility
The responsibility of combating smuggling is distributed amongst different agencies,
thereby diluting it. Therefore, no agency takes this work as their primary function and the role is
assigned to a lower level of priority and does not get the attention it deserves. Every agency tries
to get away when confronted with the failure to control the influx of illegitimate goods across
borders citing the reason that the job is not its primary function. Customs on the other hand, gets
an excuse to blame other agencies whom the powers have been delegated to, and are recipients
of generous Government funding for border control functions. Thus, the focus on the issue is
blurred due to adoption of this policy and its result.
Due to this policy, Customs administration has been losing its personnel, the skills and
important networks over the years. This is the result of the apathy of the Government towards
bringing up the Customs organization to a level where it could meet the challenge. The agency,
having a national mandate, to be so ill equipped to control its borders is a self-contradiction,
which the Government has to confront if the situation has to be corrected.
Therefore, it is recommended that the Government adopt a single agency focus, to
enforce Customs laws. Customs should be equipped with modern ways to ensure that
enforcement is at its desirable level to support the Government to exercise greater market
control. Reforms should be done within enforcement as they were once made for cargo
clearance. In general, Customs as a national organization should be given its place and status not
only for the sake of the agency but also for allowing it to fulfill its national mandate. This will
not only provide benefits for the country and economy but will also play a vital role in the
viability of the state. The fruits of such reforms will allow for rapid industrialization, a decrease
in unemployment and a decrease in crime rate.
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8. Conclusion
The smuggling phenomenon in Pakistan is staggering with the smuggling regime getting
stronger, and the enforcement measures taken against it getting more dismal on a daily basis.
When compared to other countries with similar GDPs, the smuggling to GDP ratio of Pakistan is
exponentially higher. In addition, our smuggling problem is also not comparable to other
countries, which are geographically close by. This lack of similarity in the magnitude of
smuggling in countries that are similar economically or geographically points to the fact that
Pakistans smuggling problem is unique. However, this is not due to the economic conditions of
the country or the fact that it serves as a transit nation to its neighbors, it is simply because
effective policy measures to face the challenge are not in place.
This lack of effective policy is further crippling the countrys economy and breaking the
backbone of the industries, which are responsible for generating revenue, and creating jobs for
the countrys growing population. Majority of the foreign investment has left the country, and
more is leaving everyday with no promise of ever coming back. This is because they are simply
not able to compete with the profit margins, which smuggled goods generate for those who are
involved. Therefore, the Government needs to redraw its game plan for the anti-smuggling
measures it has in place. This can only be done by empowering the appropriate agencies with
the correct jurisdiction and enforcement tools required to battle the problem head on. Doing so,
will help create the much needed room required for new industries to come and existing
industries to grow. If correct measures are put in place, not only will more revenue be generated
in terms of taxes collected through legitimate imports, but growth in the GDP will also be
observed in a very short time.
72
While the current study is the first of its kind to place a numerical value on the magnitude
of the problem for the items most prone to smuggling, it should be kept in mind that the study
took into account only thirteen commodities. Therefore, more research initiatives need to take
place using a similar methodology to fully understand the quantum of this menace.
73
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Pursell, G., Khan, A., & Gulzar, S. (2011). Pakistan's Trade Policies. London: International
Growth Centre.
Rana, J. (2015, February 15). Pakistans thriving black economy hits $9.5 billion. Retrieved
February 15, 2015, from Khaleej Times Business:
http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/opinionanalysis/2013/September
/opinionanalysis_September13.xml&section=opinionanalysis
Revathy, L.N. (2013, October 16). Small tea growers plan model factory. Retrieved March 2,
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The Economic Times (2015). Spice Mobile to start manufacturing unit; will invest Rs. 100
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http://articles.economictimes.indiatimes.com/2009-11-29/news/27646811_1_mobilehandsets-spice-mobiles-manufacturing
The Express Tribune (2015). $1 billion Investment: Chinese firm to setup refinery in
Baluchistan. Retrieved March 3, 2015, from The Express Tribune:
http://tribune.com.pk/story/790236/1b-investment-chinese-firm-to-set-up-refinery-inbalochistan/
Wanjiku, J., Gelan, A., Gbegbelegbe, S., Joseph, K., Stella, M., Jonesmus, W., et al. (2011).
Challenges and prospects of tracking informal cross border trade in Eastern and Southern
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Yunus Textile Mills (2010). Yunus Textile for Life. Retrieved March 2, 2015, from the Yunus
Textile Mills: http://www.yunustextile.com/factory-tour.html
75
Annex A
Sources Used to Determine Market Demand by Commodity
Commodity
Sources
Bridge Stone
General Tyres
Pakistan's Automotive Manufacturer's Association
Tyres
Pakistan's Association of Automotive Parts &
Accessories Manufacturers
Pakistan Business Council
Indus Toyota
Unilever PVT. LTD.
Tapal Tea PVT. LTD.
Pakistan Tea Association
Tea
Euromonitor International, 2013 (Hot Drinks)
BMI Industry Report, 2013 (Food and Drink)
Commerical Trader
Indus Toyota
Atlas Honda
Autoparts
Pakistan's Engineering and Development Board
BMI Industry Report, 2013 (Autoparts)
Qmobile
Pakistan's Electronics Manufacturer's Association
Mobile Phone
PTA Annual Report, 2014
BMI Industry Report, 2013 (Mobile Phones)
Hustler
Lakhani Silk Mills
Gul Ahmed
Fabrics
All Pakistan Textile Mills Association
Bonanza
Ministry of Textiles
Phillip Morris
Pakistan Tobacco Company
Cigarettes
Pakistan Tobacco Board
Oxford Economics, 2014
Cigarettes
Sources Used to Determine Market Demand by Commodity
Commodity
Sources
Euromonitor International, 2013 (Cigarrettes)
Commerical Trader
Plastic Granules
G&T
Orient
LG
Televisions
BMI Industry Report, 2013 (Television)
Aisha Steels
International Steels LTD.
Steel Sheets
International Industries LTD.
Amreli Steels
POL (Diesal)
Oil Company Advisory Council
Atlas Honda
Indus Toyota
Vehicles (Cars and Jeeps) Pakistan's Excise and Taxation Department
Pakistan's Aumotive Manufacturer's Association
BMI Industry Report, 2013 (Auto)
Orient
LG
Air Conditioners
Pakistan Electronics Manufacturer's Association
BMI Industry Report, 2013 (Consumer Electronics)
Annex A
Annex B
Sources Used to Determine Domestic Production by Commodity
Commodity
Sources
General Tyres
Tyres
Indus Toyota
Unilever PVT. LTD.
Tapal Tea PVT. LTD.
Tea
Pakistan Tea Association
Euromonitor International, 2013 (Hot Drinks)
Pakistan Revenue Automation (PVT.) LTD.
Indus Toyota
Atlas Honda
Autoparts
Pakistan's Engineering and Development Board
Qmobile
Mobile Phone
Hustler
Lakhani Silk Mills
Gul Ahmed
Fabrics
All Pakistan Textile Mills Association
Ministry of Textiles
Phillip Morris
Cigarettes
Pakistan Tobacco Company
Commerical Trader
Plastic Granules
G&T
Orient
LG
Televisions
BMI Industry Report, 2013 (Television)
Aisha Steels
International Steels LTD.
Steel Sheets
International Industries LTD.
Amreli Steels
POL (Diesal)
Oil Company Advisory Council
Atlas Honda
Indus Toyota
Vehicles (Cars and Jeeps) Pakistan's Excise and Taxation Department
Pakistan's Aumotive Manufacturer's Association
BMI Industry Report, 2013 (Auto)
Orient
LG
Air Conditioners
Pakistan Electronics Manufacturer's Association
BMI Industry Report, 2013 (Consumer Electronics)
Annex C
HS Codes Used to Determine Volume of Imports and Export by Commodity
Commodity
HS Code
4011.1000, 4011.2010, 4011.6100, 4011.6200
Tyres
0902.3000, 0902.4020, 0902.4010, 0902.4090
Tea
7007, 8708, 8413
Autoparts
8517.121
Mobile Phone
5201, 5205, 5206, 5207, 5306, 5307, 5308, 5402,
5403, 5406, 5509, 5511, 5605, 5606, 5208, 5209,
5511, 5605, 5606, 5208, 5209, 5210, 5211, 5212,
6001, 6002, 6003, 6004, 6005, 6006, 6301, 6302,
6303, 6304, 6306, 6115, 6116, 6117, 6212, 6213,
Fabrics
6214, 6215, 6216, 6217, 6101, 6102, 6103, 6104,
6105, 6106, 6107, 6108, 6109, 6110, 6111, 6112,
6113, 6114, 6201, 6202, 6203, 6204, 6205, 6206,
6207, 6208, 6209, 6210, 6211, 5407, 5408, 5512,
5513, 5514, 5515, 5516, 5701, 5702, 5703, 5704,
5705, 6308, 5801, 5802, 5804, 5805, 5806, 5808,
5809, 5810, 5811
2402.2000
Cigarettes
Plastic Granules
3901, 3902, 3903, 3904
8528.7110, 8528.7190, 8528.7211, 8528.7212,
Televisions
8528.7220, 8528.7290, 8528.7300
7208, 7209, 7210
Steel Sheets
POL (Diesal)
2710.1931
Vehicles (Cars and Jeeps) 8702, 8703, 8704
Air Conditioners
8415.1010, 8415.1030, 8415.1020
Annex D
Tyre Tariffs by HS Code and Year
HS Code Year
UoM CD % ST % FED % WHT%
2010-2011 u
25
17
5
2011-2012 u
25
16
5
4011.1000
2012-2013 u
25
16
5
2013-2014 u
25
17
5
HS Code
Year
2010-2011
2011-2012
4011.2010
2012-2013
2013-2014

u
20
17
5
u
20
16
5
u
20
16
5
u
20
17
5
HS Code
Year
2010-2011
2011-2012
4011.6100
2012-2013
2013-2014

u
20
17
5
u
20
16
5
u
20
16
5
u
20
17
5
HS Code

u
10
17
5
u
10
16
5
u
10
16
5
u
10
17
5
Year
2010-2011
2011-2012
4011.6200
2012-2013
2013-2014
Annex E
Tea Tariffs by HS Code and Year
HS Code Year
2010-2011 kg
10
17
5
2011-2012 kg
10
16
5
0902.3000
2012-2013
2013-2014
HS Code
Year
2010-2011
2011-2012
0902.4020
2012-2013
2013-2014

kg
10
17
5
kg
10
16
5
kg
10
16
5
kg
10
17
5
HS Code
Year
2010-2011
2011-2012
0902.4010
2012-2013
2013-2014

kg
10
17
5
kg
10
16
5
kg
10
16
5
kg
10
17
5
HS Code

kg
10
17
5
kg
10
16
5
kg
10
16
5
kg
10
17
5
Year
2010-2011
2011-2012
0902.4090
2012-2013
2013-2014
Annex F
Auto Parts Tariff by HS Code and Year
HS Code Year
UoM
CD %
ST %
FED % WHT%
2010-2011 kg
25-35 (with additional17CD, Ref. 693-2006 App.I)
5
2011-2012 kg
5
7007
2012-2013 kg/m2
5
2013-2014 kg/m2
5
HS Code Year
2010-2011
2011-2012
8708
2012-2013
2013-2014
UoM
kg
kg
kg
kg
CD %
ST %
FED % WHT%
35 (with Addl CD Ref.
17639-2006 App.II) 5
16639-2006 App.II) 5
16639-2006 App.II) 5
17639-2006 App.II) 5
HS Code Year
2010-2011
2011-2012
8413
2012-2013
2013-2014
UoM
u
kg/u
u
u
CD %
ST %
FED % WHT%
5-35 (with Addl CD Ref.
17 693-2006 App.II) 5
16 693-2006 App.II) 5
16 693-2006 App.II) 5
17 693-2006 App.II) 5
Annex G
HS Code
Year
2010-2011
2011-2012
8517.1210
2012-2013
2013-2014
Mobile Phone Tariff by Year

UoM
CD %
ST %
u
Rs. 250/set
u
Rs. 250/set
u
Rs. 250/set
u
Rs. 250/set
FED %
17
16
16
17
WHT%
5
5
5
5
HS Code
5201
5205
5206
5207
5306
5307
5308
5402
5403
5406
5509
5511
5605
5606
5208
5209
5210
5211
5212
6001
6002
6003
6004
6005
6006
6301
6302
6303
6304
6306
6115
6116
6117
6212
6213
6214
6215
6216
6217
6101
6102
6103
6104
6105
6106
6107
6108
6109
6110
6111
6112
6113
6114
6201
6202
6203
6204
6205
6206
6207
6208
6209
6210
6211
5407
5408
5512
5513
5514
5515
5516
5701
5702
5703
5704
5705
6308
5801
5802
5804
5805
5806
5808
5809
5810
5811
Fabric Tariff by HS Code (2010-2011)

UoM
CD %
ST %
FED % WHT%
kg
0
17
5
kg
5
17
5
kg
5
17
5
kg
10
17
5
kg
5
17
5
kg
10
17
5
kg
10
17
5
kg
10 (except for 5402.4410)
17
5
kg
5-10
17
5
kg
10
17
5
kg
10
17
5
kg
10
17
5
kg
10
17
5
kg
10
17
5
kg
25
17
5
kg
25
17
5
kg
15
17
5
kg
15
17
5
kg
25
17
5
kg
25
17
5
kg
20-25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
u/kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
u/kg
25
17
5
kg
25
17
5
kg
25
17
5
u
25
17
5
kg
25
17
5
kg
25
17
5
kg
5
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
kg
25
17
5
u
25
17
5
kg
25
17
5
kg
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u/kg
25
17
5
u/kg
25
17
5
kg
25
17
5
u/kg
25
17
5
u/kg
25
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
m2
25
17
5
m2
25
17
5
m2
17 693-2006 App. I) 5
m2
10-25
17
5
m2
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25 (0 for 5806.4000)17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
HS Code
5201
5205
5206
5207
5306
5307
5308
5402
5403
5406
5509
5511
5605
5606
5208
5209
5210
5211
5212
6001
6002
6003
6004
6005
6006
6301
6302
6303
6304
6306
6115
6116
6117
6212
6213
6214
6215
6216
6217
6101
6102
6103
6104
6105
6106
6107
6108
6109
6110
6111
6112
6113
6114
6201
6202
6203
6204
6205
6206
6207
6208
6209
6210
6211
5407
5408
5512
5513
5514
5515
5516
5701
5702
5703
5704
5705
6308
5801
5802
5804
5805
5806
5808
5809
5810
5811

UoM
CD %
ST %
FED % WHT%
kg
0
16
5
kg
5
16
5
kg
5
16
5
kg
10
16
5
kg
5
16
5
kg
10
16
5
kg
10
16
5
kg
10 (except for 5402.4410)
16
5
kg
5-10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
25
16
5
kg
15
16
5
kg
15
16
5
kg
25
16
5
kg
25
16
5
kg
20-25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
u/kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
u/kg
25
16
5
kg
25
16
5
kg
25
16
5
u
25
16
5
kg
25
16
5
kg
25
16
5
kg
5
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
kg
25
16
5
u
25
16
5
kg
25
16
5
kg
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u/kg
25
16
5
u/kg
25
16
5
kg
25
16
5
u/kg
25
16
5
u/kg
25
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
m2
25
16
5
m2
5-25
16
5
m2
5-25 (with Addl CD
16 Ref. 693-2006 App.5I)
m2
10-25
16
5
m2
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25 (0 for 5806.4000)
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
HS Code
5201
5205
5206
5207
5306
5307
5308
5402
5403
5406
5509
5511
5605
5606
5208
5209
5210
5211
5212
6001
6002
6003
6004
6005
6006
6301
6302
6303
6304
6306
6115
6116
6117
6212
6213
6214
6215
6216
6217
6101
6102
6103
6104
6105
6106
6107
6108
6109
6110
6111
6112
6113
6114
6201
6202
6203
6204
6205
6206
6207
6208
6209
6210
6211
5407
5408
5512
5513
5514
5515
5516
5701
5702
5703
5704
5705
6308
5801
5802
5804
5805
5806
5808
5809
5810
5811

UoM
CD %
ST %
FED % WHT%
kg
0
16
5
kg
10
16
5
kg
5
16
5
kg
10
16
5
kg
5
16
5
kg
10
16
5
kg
10
16
5
kg
10 (except for 5402.4410
16
and 5402.5100)
5
kg
5-10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
10
16
5
kg
25
16
5
kg
25
16
5
kg
15
16
5
kg
15
16
5
kg
25
16
5
kg
20-25
16
5
kg
20-25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
u/kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
u/kg
25
16
5
kg
25
16
5
kg
25
16
5
u
25
16
5
kg
25
16
5
kg
25
16
5
kg
5
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
kg
25
16
5
u
25
16
5
kg
25
16
5
kg
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u
25
16
5
u/kg
25
16
5
u/kg
25
16
5
kg
25
16
5
u/kg
25
16
5
u/kg
25
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
kg
15
16
5
m2
25
16
5
m2
25
16
5
m2
5-25 (with Addl CD
16 Ref. 693-2006 App.5I)
m2
10-25
16
5
m2
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25 (0 for 5806.4000)
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
kg
25
16
5
HS Code
5201
5205
5206
5207
5306
5307
5308
5402
5403
5406
5509
5511
5605
5606
5208
5209
5210
5211
5212
6001
6002
6003
6004
6005
6006
6301
6302
6303
6304
6306
6115
6116
6117
6212
6213
6214
6215
6216
6217
6101
6102
6103
6104
6105
6106
6107
6108
6109
6110
6111
6112
6113
6114
6201
6202
6203
6204
6205
6206
6207
6208
6209
6210
6211
5407
5408
5512
5513
5514
5515
5516
5701
5702
5703
5704
5705
6308
5801
5802
5804
5805
5806
5808
5809
5810
5811
Annex H
UoM
CD %
ST %
FED % WHT%
kg
0
17
5
kg
5
17
5
kg
5
17
5
kg
10
17
5
kg
5
17
5
kg
10
17
5
kg
10
17
5
kg
10 (except for 5402.4410)
17
5
kg
5-10
17
5
kg
10
17
5
kg
10
17
5
kg
10
17
5
kg
10
17
5
kg
10
17
5
kg
25
17
5
kg
25
17
5
kg
15
17
5
kg
15
17
5
kg
25
17
5
kg
20-25
17
5
kg
20-25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
u/kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
u/kg
25
17
5
kg
25
17
5
kg
25
17
5
u
25
17
5
kg
25
17
5
kg
25
17
5
kg
5
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
kg
25
17
5
u
25
17
5
kg
25
17
5
kg
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u
25
17
5
u/kg
25
17
5
u/kg
25
17
5
kg
25
17
5
u/kg
25
17
5
u/kg
25
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
kg
15
17
5
m2
25
17
5
m2
5-25
17
5
m2
5-25 (with Addl CD
17 Ref. 693-2006 App.5I)
m2
10-25
17
5
m2
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25 (0 for 5806.4000)
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
kg
25
17
5
Annex I
Cigarette Tariff by Year
HS Code Year
UoM CD %
ST % FED %
WHT%
2010-2011 kg
35+RD 15
17
5
2011-2012 kg
35
16
5
2012-2013 kg
30+ RD 15
16
5
2402.2000
65% of retail price; 500% ad val (if
goods are without indication of retail
2013-2014 kg
30+ RD 15
17 prices)
5
Annex J
Plastic Granule Tariff by HS Code and Year
HS Code Year
2010-2011 kg
5
22
5
2011-2012 kg
5
22
5
3901
2012-2013 kg
5
16
5
2013-2014 kg
5
17
5
HS Code Year
2010-2011
2011-2012
3902
2012-2013
2013-2014
UoM CD %
kg
kg
kg
kg
HS Code Year
2010-2011
2011-2012
3903
2012-2013
2013-2014
UoM
kg
kg
kg
kg
CD %
5-15
5-15
5-15
5-15
HS Code Year
2010-2011
2011-2012
3904
2012-2013
2013-2014
UoM
kg
kg
kg
kg
CD % ST % FED % WHT%
10
22
5
10-20
22
5
10-20
16
5
10-20
17
5
5
5
5
5
ST % FED % WHT%
22
5
22
5
16
5
17
5
ST % FED % WHT%
22
5
22
5
16
5
17
5
Annex K
TV Tariff by HS Code and Year
HS Code Year
UoM
CD %
ST %
FED %
2010-2011 u
30+RD 20
17
2011-2012 u
20
16
8528.7110
2012-2013 u
30
16
2013-2014 u
30
17
HS Code
Year
2010-2011
2011-2012
8528.7190
2012-2013
2013-2014
HS Code
Year
2010-2011
2011-2012
8528.7211
2012-2013
2013-2014
HS Code
Year
2010-2011
2011-2012
8528.7212
2012-2013
2013-2014
HS Code
Year
2010-2011
2011-2012
8528.7220
2012-2013
2013-2014
HS Code
Year
2010-2011
2011-2012
8528.7290
2012-2013
2013-2014
HS Code
Year
2010-2011
2011-2012
8528.7300
2012-2013
2013-2014
UoM
u
u
u
u
CD %
ST %
35+RD 15
35
30
30
UoM
u
u
u
u
CD %
35+RD15
UoM
u
u
u
u
CD %
35+RD15
UoM
u
u
u
u
CD %
35+RD15
UoM
u
u
u
u
CD %
ST %
30+ RD 20
35
30
30
UoM
u
u
u
u
CD %
ST %
35+RD 15
35
30
30
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
17
16
16
17
ST %
17
16
16
17
35
30
30
ST %
17
16
16
17
35
30
30
ST %
20
30
30
17
16
16
17
17
16
16
17
17
16
16
17
WHT%
5
5
5
5
Annex L
HS Code
7208
HS Code
7209
HS Code
7210
Steel Sheet Tariff by HS Code and Year

Year
UoM
CD %
ST %
FED %
2010-2011 kg
10-20
19.5
2011-2012 kg
10-20
19.5
2012-2013 kg
10-20
16
2013-2014 kg
10-20
17
WHT%
5
5
5
5
Year
2010-2011
2011-2012
2012-2013
2013-2014
UoM
kg
kg
kg
kg
CD %
10-20
10-20
10-20
10-20
ST %
FED %
19.5
19.5
16
17
WHT%
5
5
5
5
Year
2010-2011
2011-2012
2012-2013
2013-2014
UoM
kg
kg
kg
kg
CD %
5-20
5-20
5-20
5-20
ST %
FED %
19.5
19.5
16
17
WHT%
5
5
5
5
Annex M
HS Code
Year
2010-2011
2011-2012
2710.1931
2012-2013
2013-2014
POL Tariff by Year

UoM
CD %
ST %
kg
10
kg
10
kg
10
kg
10
FED %
17
16
16
17
WHT%
5
5
5
5
Annex N
HS Code
8702
HS Code
8703
HS Code
8704
Year
2010-2011
2011-2012
2012-2013
2013-2014
Vehicle Tariff by Year

UoM
CD %
ST %
u
0-20
u
0-20
u
0-20
u
0-20
17
16
16
17
Year
2010-2011
2011-2012
2012-2013
2013-2014
UoM
u
u
u
u
CD %
ST %
20-100 + RD 50
20-100
30-100+RD 50
20-100
17
16
16
17
Year
2010-2011
2011-2012
2012-2013
2013-2014
UoM
u
u
u
u
CD %
30-60
30-60
30-60
30-60
17
16
16
17
ST %
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
FED %
WHT%
5
5
5
5
H.S. Code Quantity Imported (units) % of Total Imported

4011.1000
858,380
40.90%
4011.2010
1,032,433
49.19%
4011.6100
171,249
8.16%
4011.6200
28
1.75%
H.S. Code Quantity (unit)

4011.1000
4011.2010
4011.6100
4011.6200
Total
2,256,706
2,714,116
450,238
96,558
Annex O
Revenue Loss by Tyres
Imported
Average Value Assessed
Total Value
CD
ST
WHT
Total Revenue Generated
$36.95 $31,717,141.00 $7,929,285.25
$5,391,913.97 $1,585,857.05
$14,907,056.27
$39.53 $40,812,076.49 $8,162,415.30
$6,938,053.00 $2,040,603.82
$17,141,072.13
$120.00 $20,549,880.00 $4,109,976.00
$3,493,479.60 $1,027,494.00
$8,630,949.60
$373.10
$10,446.80
$1,044.68
$1,775.96
$522.34
$3,342.98
Total
$93,089,544.29 $20,202,721.23 $15,825,222.53 $4,654,477.21
$40,682,420.97
Smuggled
Total Value
CD
$83,385,283.95
$20,846,320.99
$107,289,024.89
$21,457,804.98
$54,028,519.37
$10,805,703.87
$36,025,909.94
$3,602,590.99
$280,728,738.15
$56,712,420.83
ST
WHT
Total Loss
$14,175,498.27 $4,169,264.20 $39,191,083.46
$18,239,134.23 $5,364,451.24 $45,061,390.45
$9,184,848.29 $2,701,425.97 $22,691,978.14
$6,124,404.69 $1,801,295.50 $11,528,291.18
$47,723,885.49 $14,036,436.91 $118,472,743.23
H.S. Code Quantity Imported

% of Total
(units)
Imported
8528.7110
70,073
89.31%
8528.7190
78
0.10%
8528.7211
8
0.01%
8528.7212
4,653
5.93%
8528.7220
1
0.001%
8528.7290
3,648
4.65%
8528.7300
0
0.00%
Annex P
Revenue Loss by Televisions
Imported
Total Value
CD
ST
WHT
$2.77
$194,102.21 $58,230.66
$32,997.38 $9,705.11
$100,933.15
$416.00
$32,448.00
$9,734.40
$5,516.16 $1,622.40
$16,872.96
$448.00
$3,584.00
$1,075.20
$609.28
$179.20
$1,863.68
$92.00
$428,076.00 $42,807.60
$72,772.92 $21,403.80
$136,984.32
$69.70
$69.70
$20.91
11.849
3.485
$36.24
$321.91 $1,174,327.68 $352,298.30 199635.7056 58716.384
$610,650.39
$0.00
$0.00
$0.00
0
0
$0.00
Total
$1,832,607.59 $111,847.86
$311,543.29 $91,630.38
$867,340.75
Smuggled
H.S. Code Quantity (unit)

Total Value
CD
8528.7110 666,742
$1,846,875.34
8528.7190
746
$310,336.00
8528.7211
74
$33,152.00
8528.7212
44,270
$4,072,840.00
8528.7220
7
$487.90
8528.7290
34,714
$11,174,783.74
8528.7300
0
$0.00
Total
$17,438,474.98
ST
WHT
$554,062.60
$313,968.81 $92,343.77
$93,100.80
$52,757.12 $15,516.80
$9,945.60
$5,635.84
$1,657.60
$1,221,852.00
$692,382.80 $203,642.00
$146.37
$82.94
$24.40
$3,352,435.12 $1,899,713.24 $558,739.19
$0.00
$0.00
$0.00
$5,231,542.49 $2,964,540.75 $871,923.75
Total Loss
$960,375.18
$161,374.72
$17,239.04
$2,117,876.80
$253.71
$5,810,887.54
$0.00
$9,068,006.99
H.S. Code Quantity Imported

% of Total
(MT)
Imported Average Value Assessed
902.3000
13
0.01%
$10,280.00
902.4010
333
0.25%
$5,270.00
902.4020
4
0.003%
$6,280.00
902.4090 132,896
99.74%
$2,000.00
Total
Annex Q
Revenue Loss by Tea
Imported
Total Value
CD
ST
WHT
$136,929.60
$13,692.96
$23,278.03
$6,846.48
$43,817.47
$1,755,647.80
$175,564.78
$298,460.13
$87,782.39
$561,807.30
$25,120.00
$2,512.00
$4,270.40
$1,256.00
$8,038.40
$265,792,000.00 $26,579,200.00 $45,184,640.00 $13,289,600.00
$85,053,440.00
$267,709,697.40 $26,770,969.74 $45,510,648.56 $13,385,484.87
$85,667,103.17
Smuggled
H.S. Code Quantity (MT)
Total Value
CD
902.3000
12
$123,360.00
902.4010
301
$1,586,270.00
902.4020
4
$22,608.00
902.4090 120,233
$240,466,000.00
Total
$242,198,238.00
ST
$12,336.00
$158,627.00
$2,260.80
$24,046,600.00
$24,219,823.80
WHT
Total Loss
$20,971.20
$6,168.00
$39,475.20
$269,665.90
$79,313.50
$507,606.40
$3,843.36
$1,130.40
$7,234.56
$40,879,220.00 $12,023,300.00 $76,949,120.00
$41,173,700.46 $12,109,911.90 $77,503,436.16
Annex R
Revenue Loss by Cigarettes
Imported
H.S. Code Quantity (KG) Average Value Assessed
Total Value
CD
ST
WHT
2402.2000
342,648
$18.19
6,232,767 $1,869,830.14 $1,059,570.41
$311,638.36
$3,241,038.90
Smuggled
H.S. Code Quantity (KG) Total Value
CD
ST
WHT
Total Loss
2402.2000
2,840,786
$51,673,897.34
$15,502,169.20 $8,784,562.55 $2,583,694.87
$26,870,426.62
Annex S
Revenue Loss by Mobile Phones
Imported
H.S. CodeQuantity (Units) Average Value Assessed
Total Value
CD
ST
WHT
24,929,240
$122.14
3,044,857,374
$62,323,100.00 $517,625,753.51
$152,242,868.68
$732,191,722.19
8517.1210
Smuggled
H.S. CodeQuantity (Units) Total Value
CD
ST
WHT
Total Loss
35,976,900
$4,394,218,566.00
$89,942,250.00
$747,017,156.22
$219,710,928.30
$1,056,670,334.52
8517.1210
Annex T
H.S. CodeQuantity Imported

% of Total
(MT)
Imported
3901 326,811
45.50%
3902 336,651
46.87%
3903
19,465
2.71%
3904
35,338
4.92%
Revenue Loss by Plastic Granules

Imported
Total Value
CD
$10.84 $3,542,631.24 $177,131.56
$3.36 $1,131,147.36 $56,557.37
$6.82
$132,751.30
$6,637.57
$3.28
$115,908.64
$5,795.43
Total
$4,922,438.54 $246,121.93
ST
WHT
$602,247.31 $177,131.56
$956,510.43
$192,295.05 $56,557.37
$305,409.79
$22,567.72
$6,637.57
$35,842.85
$19,704.47
$5,795.43
$31,295.33
$836,814.55 $246,121.93
$1,329,058.41
Smuggled
H.S. CodeQuantity (MT)
Total Value
CD
3901
54,635
$592,243.40
3902
56,281
$189,104.16
3903
3,254
$22,192.28
3904
5,907
$19,374.96
Total
$822,914.80
ST
$29,612.17
$9,455.21
$1,109.61
$968.75
$41,145.74
$100,681.38
$32,147.71
$3,772.69
$3,293.74
$139,895.52
WHT
Total Loss
$29,612.17 $159,905.72
$9,455.21 $51,058.12
$1,109.61
$5,991.92
$968.75
$5,231.24
$41,145.74 $222,187.00
H.S. CodeQuantity Imported

% of Total
(MT)
Imported
7208 893,154
62.04%
7209 160,239
11.13%
7210 386,269
26.83%
Annex U
Revenue Loss by Steel Sheets
Imported
Total Value
CD
ST
WHT
$1,660.00 $1,482,635,640.00 $148,263,564.00 $252,048,058.80
$74,131,782.00
$474,443,404.80
$3,070.00
$491,933,730.00
$49,193,373.00
$83,628,734.10
$24,596,686.50
$157,418,793.60
$2,430.00
$938,633,670.00
$93,863,367.00 $159,567,723.90
$46,931,683.50
$300,362,774.40
Total
$2,913,203,040.00 $291,320,304.00 $495,244,516.80 $145,660,152.00
$932,224,972.80
Smuggled

Total Value
CD
7208 107,822
$178,984,520.00
7209
19,355
$59,419,850.00
7210
46,659
$113,381,370.00
Total
$351,785,740.00
ST
$17,898,452.00
$5,941,985.00
$11,338,137.00
$35,178,574.00
$30,427,368.40
$10,101,374.50
$19,274,832.90
$59,803,575.80
WHT
Total Loss
$8,949,226.00
$57,275,046.40
$2,970,992.50
$19,014,352.00
$5,669,068.50
$36,282,038.40
$17,589,287.00 $112,571,436.80
Annex V
Revenue Loss by POL (HSD)
Imported
H.S. Code Quantity Imported (MT) % of Total Imported Average Value Assessed
Total Value
CD
ST
WHT
2710.1931
344,993
100.00%
$1,190.00 $410,541,967.50
$41,054,196.75
$69,792,134.48 $20,527,098.38
$131,373,429.60
Total
$410,541,967.50
$41,054,196.75
$69,792,134.48 $20,527,098.38
$131,373,429.60
Smuggled
H.S. Code Quantity (MT)
Total Value
CD
2710.1931
2,295,297
$2,731,403,430.00
Total
$2,731,403,430.00
$273,140,343.00
$273,140,343.00
ST
WHT
Total Loss
$464,338,583.10 $136,570,171.50 $874,049,097.60
$464,338,583.10 $136,570,171.50 $874,049,097.60
Annex W
Revenue Loss by Vehicles
Imported
H.S. CodeQuantity (Units)
Total Value
CD
ST
WHT
8703
43,000
$24,724.20
1,063,140,600
$62,733,271.00 $180,733,902.00
$53,157,030.00
$296,624,203.00
Smuggled
H.S. CodeQuantity (Units)
Total Value
CD
ST
WHT
Total Loss
25,341
$626,535,952.20
$36,970,238.31
$106,511,111.87
$31,326,797.61
$174,808,147.79
8702
Annex X
H.S. Code
5201
5205
5206
5207
5208
5209
5210
5211
5212
5306
5307
5308
5402
5403
5406
5407
5408
5509
5511
5512
5513
5514
5515
5516
5605
5606
Quantity
52
7
1
2,357
1,129,399
612
81,061
1,780
25,111
36
0
0
0
16,478
11,584
390,237
1,100
8,180
29,450
0
11,828
21,913
296,361
2,722,250
17,146
0

Total Value
$11.80
$613.60
$58.10
$435.17
$3.00
$3.00
$14.10
$33,226.65
$3.10
$3,501,136.90
$7.70
$4,715.48
$3.45
$279,660.45
$4.20
$7,476.00
$4.90
$123,043.90
$7.83
$281.88
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$5.15
$84,864.02
$2.32
$26,875.34
$4.75
$1,853,624.80
$2.00
$2,200.00
$4.04
$33,047.20
$8.40
$247,382.52
$0.00
$0.00
$4.40
$52,043.20
$4.00
$87,652.00
$4.38
$1,298,060.92
$4.52 $12,304,568.19
$6.19
$106,133.74
$0.00
$0.00
Revenue Loss by Fabric

Imported
% of Total
CD
ST
WHT
0.001677%
$0.00
$104.31
$30.68
$134.99
0.001189%
$21.76
$73.98
$21.76
$117.50
0.000008%
$0.15
$0.51
$0.15
$0.81
0.090787%
$3,322.67
$5,648.53
$1,661.33
$10,632.53
9.566315%
$875,284.23
$595,193.27
$175,056.85
$1,645,534.34
0.012884%
$1,178.87
$801.63
$235.77
$2,216.28
0.764129%
$41,949.07
$47,542.28
$13,983.02
$103,474.37
0.020427%
$1,121.40
$1,270.92
$373.80
$2,766.12
0.336198%
$30,760.98
$20,917.46
$6,152.20
$57,830.63
0.000770%
$14.09
$47.92
$14.09
$76.11
0.000000%
$0.00
$0.00
$0.00
$0.00
0.000000%
$0.00
$0.00
$0.00
$0.00
0.000000%
$0.00
$0.00
$0.00
$0.00
0.231878%
$6,364.80
$14,426.88
$4,243.20
$25,034.89
0.073433%
$2,687.53
$4,568.81
$1,343.77
$8,600.11
5.064743%
$278,043.72
$315,116.22
$92,681.24
$685,841.18
0.006011%
$330.00
$374.00
$110.00
$814.00
0.090296%
$3,304.72
$5,618.02
$1,652.36
$10,575.10
0.675934%
$24,738.25
$42,055.03
$12,369.13
$79,162.41
0.000000%
$0.00
$0.00
$0.00
$0.00
0.142200%
$7,806.48
$8,847.34
$2,602.16
$19,255.98
0.239496%
$13,147.80
$14,900.84
$4,382.60
$32,431.24
3.546750%
$194,709.14
$220,670.36
$64,903.05
$480,282.54
33.620328% $1,845,685.23 $2,091,776.59
$615,228.41
$4,552,690.23
0.289994%
$10,613.37
$18,042.74
$5,306.69
$33,962.80
0.000000%
$0.00
$0.00
$0.00
$0.00
5701 (SQM)
796
$10.70
$8,516.13
0.023269%
$2,129.03
$1,447.74
$425.81
5702 (SQM)
1,420
$3.88
$5,509.60
0.015054%
$826.44
$936.63
$275.48
$2,038.55
5703 (SQM)
84,586
$0.67
$56,672.54
0.154849%
$8,500.88
$9,634.33
$2,833.63
$20,968.84
5704 (SQM)
$3.00
$9.00
0.000025%
$1.58
$1.53
$0.45
$3.56
5705 (SQM)
5801
5802
5804
5805
5806
5808
5809
5810
5811
6001
6002
6003
6004
6005
6006
1,437
278,662
44
64,226
0
63,302
0
0
4,248
0
3,074,851
0
0
918
317,872
208,700
$1.27
$4.88
$12.37
$1.75
$0.00
$3.81
$0.00
$0.00
$4.61
$0.00
$2.72
$0.00
$0.00
$2.45
$4.61
$3.35
$1,824.99
$1,359,872.27
$544.28
$112,395.50
$0.00
$241,180.62
$0.00
$0.00
$19,583.28
$0.00
$8,363,594.72
$0.00
$0.00
$2,249.10
$1,465,389.92
$699,144.50
0.004987%
$456.25
$310.25
3.715640%
$339,968.07
$231,178.29
0.001487%
$136.07
$92.53
0.307103%
$28,098.88
$19,107.24
0.000000%
$0.00
$0.00
0.658989%
$60,295.16
$41,000.71
0.000000%
$0.00
$0.00
0.000000%
$0.00
$0.00
0.053508%
$4,895.82
$3,329.16
0.000000%
$0.00
$0.00
22.852228% $2,090,898.68 $1,421,811.10
0.000000%
$0.00
$0.00
0.000000%
$0.00
$0.00
0.006145%
$562.28
$382.35
4.003951%
$366,347.48
$249,116.29
1.910304%
$174,786.12
$118,854.56
$91.25
$67,993.61
$27.21
$5,619.78
$0.00
$12,059.03
$0.00
$0.00
$979.16
$0.00
$418,179.74
$0.00
$0.00
$112.46
$73,269.50
$34,957.22
$857.75
$639,139.97
$255.81
$52,825.89
$0.00
$113,354.89
$0.00
$0.00
$9,204.14
$0.00
$3,930,889.52
$0.00
$0.00
$1,057.08
$688,733.26
$328,597.91
6101 (Unit)
1,048
$50.32
$52,730.83
0.144079%
$13,182.71
$8,964.24
$2,636.54
$24,783.49
6102 (Unit)
204
$9.20
$1,876.80
0.005128%
$469.20
$319.06
$93.84
$882.10
6103 (Unit)
100
$9.00
$900.00
0.002459%
$225.00
$153.00
$45.00
$423.00
6104 (Unit)
100
$20.00
$2,009.80
0.005491%
$502.45
$341.67
$100.49
$944.61
6105 (Unit)
13,960
$13.20
$184,267.78
0.503483%
$46,066.94
$31,325.52
$9,213.39
$86,605.85
6106 (Unit)
77
$5.30
$408.10
0.001115%
$102.03
$69.38
$20.41
$191.81
6107 (Unit)
260
$3.00
$780.00
0.002131%
$195.00
$132.60
$39.00
$366.60
6108 (Unit)
6,712
$2.31
$15,505.48
0.042366%
$3,876.37
$2,635.93
$775.27
$7,287.58
6109 (Unit)
3,543
$17.20
$60,939.60
0.166508%
$15,234.90
$10,359.73
$3,046.98
$28,641.61
6110 (Unit)
6111
1,757
18,422
$13.52
$2.68
$23,757.88
$49,370.96
0.064915%
0.134899%
$5,939.47
$12,342.74
$4,038.84
$8,393.06
$1,187.89
$2,468.55
$11,166.21
$23,204.35
6112 (Unit)
6113
6114
6115
6116
6117
6201
6202
1
11,445
69,431
95,488
0
13,818
10,709
2,293
$20.00
$43.90
$1.90
$9.30
$0.00
$1.91
$2.48
$7.30
$20.00
$502,435.50
$131,918.90
$888,038.40
$0.00
$26,392.38
$26,558.32
$16,738.90
0.000055%
1.372827%
0.360448%
2.426427%
0.000000%
0.072113%
0.072566%
0.045736%
$5.00
$125,608.88
$32,979.73
$222,009.60
$0.00
$6,598.10
$6,639.58
$4,184.73
$3.40
$85,414.04
$22,426.21
$150,966.53
$0.00
$4,486.70
$4,514.91
$2,845.61
$1.00
$25,121.78
$6,595.95
$44,401.92
$0.00
$1,319.62
$1,327.92
$836.95
$9.40
$236,144.69
$62,001.88
$417,378.05
$0.00
$12,404.42
$12,482.41
$7,867.28
6203 (Unit)
34,793
$10.50
$365,326.50
0.998198%
$91,331.63
$62,105.51
$18,266.33
$171,703.46
6204 (Unit)
2,332
$10.26
$23,926.32
0.065375%
$5,981.58
$4,067.47
$1,196.32
$11,245.37
6205 (Unit)
4,928
$10.52
$51,842.24
0.141651%
$12,960.56
$8,813.18
$2,592.11
$24,365.85
6206 (Unit)
6207
29
9,008
$5.00
$6.39
$145.80
$57,558.50
0.000398%
0.157270%
$36.45
$14,389.63
$24.79
$9,784.95
$7.29
$2,877.93
$68.53
$27,052.50
6208 (Unit)
6209
6210 (Unit)
6211 (Unit)
6212
6213
6214
6215
6216
6217
6301
6302
6303
6304
6306
6308
19,726
7,499
6
406
171,794
10,908
26,485
8,976
2,549
7,743
107,252
148,742
13,161
80,862
43,382
25
$3.23
$6.72
$31.00
$53.68
$2.91
$2.88
$6.38
$2.91
$1.82
$2.00
$2.49
$2.18
$3.17
$1.58
$2.03
$4.40
$63,713.85
$50,394.29
$186.00
$21,794.08
$499,920.54
$31,415.04
$168,975.32
$26,118.76
$4,639.80
$15,486.00
$267,057.98
$324,257.56
$41,720.37
$127,762.43
$88,064.55
$110.00
$36,598,596.97
0.174088%
0.137695%
0.000508%
0.059549%
1.365955%
0.085837%
0.461699%
0.071365%
0.012678%
0.042313%
0.729695%
0.885984%
0.113994%
0.349091%
0.240623%
0.000301%
$15,928.46
$10,831.35
$3,185.69
$12,598.57
$8,567.03
$2,519.71
$46.50
$31.62
$9.30
$5,448.52
$3,704.99
$1,089.70
$124,980.14
$84,986.49
$24,996.03
$7,853.76
$5,340.56
$1,570.75
$42,243.83
$28,725.80
$8,448.77
$6,529.69
$4,440.19
$1,305.94
$1,159.95
$788.77
$231.99
$3,871.50
$2,632.62
$774.30
$66,764.49
$45,399.86
$13,352.90
$81,064.39
$55,123.79
$16,212.88
$10,430.09
$7,092.46
$2,086.02
$31,940.61
$21,719.61
$6,388.12
$22,016.14
$14,970.97
$4,403.23
$27.50
$18.70
$5.50
$7,472,753.37 $6,221,761.49 $1,829,929.85
$29,945.51
$23,685.32
$87.42
$10,243.22
$234,962.65
$14,765.07
$79,418.40
$12,275.82
$2,180.71
$7,278.42
$125,517.25
$152,401.05
$19,608.57
$60,048.34
$41,390.34
$51.70
$15,524,444.70
Total
Total Value
CD
ST
$36,598,596.97 $7,472,753.37
Revenue Loss by Fabric

Imported
WHT
$6,221,761.49
$1,829,929.85
$15,524,444.70
Smuggled
Total Value
CD
ST
$6,111,965.69 $1,247,949.81
$1,039,034.17
WHT
Total Loss
$305,598.28
$2,592,582.27
$4,002.58
Smuggled
Total Value
CD
ST
WHT
Total Loss
$102.47
$0.00
$17.42
$5.12
$22.54
$72.67
$3.63
$12.35
$3.63
$19.62
$0.50
$0.03
$0.09
$0.03
$0.14
$5,548.85
$554.89
$943.30
$277.44
$1,775.63
$584,689.86
$146,172.47
$99,397.28 $29,234.49
$274,804.24
$787.49
$196.87
$133.87
$39.37
$370.12
$46,703.30
$7,005.49
$7,939.56
$2,335.16
$17,280.22
$1,248.49
$187.27
$212.24
$62.42
$461.94
$20,548.33
$5,137.08
$3,493.22
$1,027.42
$9,657.72
$47.07
$2.35
$8.00
$2.35
$12.71
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$14,172.29
$1,062.92
$2,409.29
$708.61
$4,180.83
$4,488.18
$448.82
$762.99
$224.41
$1,436.22
$309,555.34
$46,433.30
$52,624.41 $15,477.77
$114,535.48
$367.40
$55.11
$62.46
$18.37
$135.94
$5,518.88
$551.89
$938.21
$275.94
$1,766.04
$41,312.88
$4,131.29
$7,023.19
$2,065.64
$13,220.12
$0.00
$0.00
$0.00
$0.00
$0.00
$8,691.21
$1,303.68
$1,477.51
$434.56
$3,215.75
$14,637.88
$2,195.68
$2,488.44
$731.89
$5,416.02
$216,776.17
$32,516.43
$36,851.95 $10,838.81
$80,207.18
$2,054,862.89
$308,229.43
$349,326.69 $102,743.14
$760,299.27
$17,724.33
$1,772.43
$3,013.14
$886.22
$5,671.79
$0.00
$0.00
$0.00
$0.00
$0.00

5201
5
$11,800.00
5205
3
$58,100.00
5206
0
$3,000.00
5207
254
$14,100.00
5208
26,786
$3,100.00
5209
36
$7,700.00
5210
2,140
$3,450.00
5211
57
$4,200.00
5212
941
$4,900.00
5306
2
$7,830.00
5307
0
$0.00
5308
0
$0.00
5402
0
$0.00
5403
649
$5,150.00
5406
206
$2,320.00
5407
14,181
$4,750.00
5408
17
$2,000.00
5509
253
$4,040.00
5511
1,893
$8,400.00
5512
0
$0.00
5513
398
$4,400.00
5514
671
$4,000.00
5515
9,931
$4,380.00
5516
94,137
$4,520.00
5605
812
$6,190.00
5606
0
$0.00
5701
(SQM)
65
$10,700.00
$1,422.19
$355.55
$241.77
$71.11
$668.43
5702
(SQM)
42
$3,880.00
$920.10
$138.02
$156.42
$46.01
$340.44
5703
(SQM)
434
$670.00
$9,464.31
$1,419.65
$1,608.93
$473.22
$3,501.80
5704
(SQM)
0
$3,000.00
$1.50
$0.26
$0.26
$0.08
$0.59
5705
(SQM)
14
$1,270.00
$304.77
$76.19
$51.81
$15.24
$143.24
5801
10,404
$4,880.00
$227,098.67
$56,774.67
$38,606.77 $11,354.93
$106,736.37
5802
4
$12,370.00
$90.89
$22.72
$15.45
$4.54
$42.72
5804
860
$1,750.00
$18,770.05
$4,692.51
$3,190.91
$938.50
$8,821.92
5805
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
5806
1,845
$3,810.00
$40,277.16
$10,069.29
$6,847.12
$2,013.86
$18,930.27
5808
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
5809
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
5810
150
$4,610.00
$3,270.41
$817.60
$555.97
$163.52
$1,537.09
5811
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
6001
63,986
$2,720.00 $1,396,720.32
$349,180.08
$237,442.45 $69,836.02
$656,458.55
6002
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
6003
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
6004
17
$2,450.00
$375.60
$93.90
$63.85
$18.78
$176.53
6005
11,211
$4,610.00
$244,720.12
$61,180.03
$41,602.42 $12,236.01
$115,018.45
6006
5,349
$3,350.00
$116,757.13
$29,189.28
$19,848.71
$5,837.86
$54,875.85
6101
(Unit)
403
$50,320.00
$8,806.05
$2,201.51
$1,497.03
$440.30
$4,138.84
6102
(Unit)
14
$9,200.00
$313.43
$78.36
$53.28
$15.67
$147.31
6103
(Unit)
7
$9,000.00
$150.30
$37.58
$25.55
$7.52
$70.64
6104
(Unit)
15
$20,000.00
$335.64
$83.91
$57.06
$16.78
$157.75
6105
(Unit)
1,410
$13,200.00
$30,772.72
$7,693.18
$5,231.36
$1,538.64
$14,463.18
6106
(Unit)
3
$5,300.00
$68.15
$17.04
$11.59
$3.41
$32.03
6107
(Unit)
6
$3,000.00
$130.26
$32.57
$22.14
$6.51
$61.22
6108
(Unit)
119
$2,310.00
$2,589.42
$647.35
$440.20
$129.47
$1,217.03
6109
(Unit)
466
$17,200.00
$10,176.91
$2,544.23
$1,730.08
$508.85
$4,783.15
6110
(Unit)
182
$13,520.00
$3,967.57
$991.89
$674.49
$198.38
$1,864.76
6111
378
$2,680.00
$8,244.95
$2,061.24
$1,401.64
$412.25
$3,875.13
6112
(Unit)
0
$20,000.00
$3.34
$0.84
$0.57
$0.17
$1.57
6113
3,844
$43,900.00
$83,906.73
$20,976.68
$14,264.14
$4,195.34
$39,436.16
6114
1,009
$1,900.00
$22,030.46
$5,507.61
$3,745.18
$1,101.52
$10,354.31
6115
6,794
$9,300.00
$148,302.41
$37,075.60
$25,211.41
$7,415.12
$69,702.13
6116
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
6117
202
$1,910.00
$4,407.53
$1,101.88
$749.28
$220.38
$2,071.54
6201
203
$2,480.00
$4,435.24
$1,108.81
$753.99
$221.76
$2,084.56
6202
128
$7,300.00
$2,795.40
$698.85
$475.22
$139.77
$1,313.84
6203
(Unit)
2,795
$10,500.00
$61,009.53
$15,252.38
$10,371.62
$3,050.48
$28,674.48
6204
(Unit)
183
$10,260.00
$3,995.70
$998.92
$679.27
$199.78
$1,877.98
6205
(Unit)
397
$10,520.00
$8,657.65
$2,164.41
$1,471.80
$432.88
$4,069.10
6206
(Unit)
1
$5,000.00
$24.35
$6.09
$4.14
$1.22
$11.44
6207
440
$6,390.00
$9,612.27
$2,403.07
$1,634.09
$480.61
$4,517.77
6208
(Unit)
487
$3,230.00
$10,640.21
$2,660.05
$1,808.84
$532.01
$5,000.90
6209
386
$6,720.00
$8,415.85
$2,103.96
$1,430.69
$420.79
$3,955.45
6210
1
$31,000.00
$31.06
$7.77
$5.28
$1.55
$14.60
6211
167
$53,680.00
$3,639.61
$909.90
$618.73
$181.98
$1,710.62
6212
3,825
$2,910.00
$83,486.73
$20,871.68
$14,192.74
$4,174.34
$39,238.76
6213
240
$2,880.00
$5,246.31
$1,311.58
$891.87
$262.32
$2,465.77
6214
1,293
$6,380.00
$28,218.88
$7,054.72
$4,797.21
$1,410.94
$13,262.87
6215
200
$2,910.00
$4,361.83
$1,090.46
$741.51
$218.09
$2,050.06
6216
35
$1,820.00
$774.85
$193.71
$131.72
$38.74
$364.18
6217
118
$2,000.00
$2,586.16
$646.54
$439.65
$129.31
$1,215.50
6301
2,043
$2,490.00
$44,598.68
$11,149.67
$7,581.78
$2,229.93
$20,961.38
6302
2,481
$2,180.00
$54,151.01
$13,537.75
$9,205.67
$2,707.55
$25,450.98
6303
319
$3,170.00
$6,967.30
$1,741.83
$1,184.44
$348.37
$3,274.63
6304
977
$1,580.00
$21,336.33
$5,334.08
$3,627.18
$1,066.82
$10,028.07
6306
674
$2,030.00
$14,706.78
$3,676.69
$2,500.15
$735.34
$6,912.19
6308
1
$4,400.00
$18.37
$4.59
$3.12
$0.92
$8.63
$6,111,965.69 $1,247,949.81 $1,039,034.17 $305,598.28 $2,592,582.27
Annex Y
Quantity Imported (in MT)
Tea Duty Rate vs. Import Quantities

160000
140000
120000
100000
80000
60000
40000
20000
0
144561
140947
0.1
99681
0.12
0.1
0.08
0.06
53090
0.04
Import Quantity
Duty Rate
0.02
0
2010-11
2011-12
2012-13
2013-14
Financial Year
Plastic Granules Duty Rate vs. Import Quantities

800000
696390
0.0961
750630
600000
426983
400000
223328
0.094
200000
0
2010-11
2011-12
2012-13
Financial Year
2013-14
0.0965
0.096
0.0955
0.095
0.0945
0.094
0.0935
0.093
0.0925
Import Quantity
Duty Rate
Steel Sheet Duty Rate vs Import Quantites

1800000
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
0.1485
163,9543
1,418,528
1,230,054
785,701
2010-11
2011-12
2012-13
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
Import Quantity
Duty Rate
2013-14
Financial Year
POL (Diesel) Duty Rate vs Import Quantites

1400000
1200000
1000000
0.12
1,193,619
0.1
910,063
0.1
0.08
800000
600000
428,898
494,210
0.06
0.04
400000
0.02
200000
0
0
2010-11
2011-12
2012-13
Financial Year
2013-14
Import Quantity
Duty Rate
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
18,660
Fabric Duty Rate vs Import Quantites

0.2055
0.2052
14,751
0.205
13,329
0.2045
8,761
0.204
0.2035
0.2035
Import Quantity
Duty Rate
0.203
0.2025
2010-11
2011-12
2012-13
2013-14
Financial Year
Quantity Imported (in

Numbers)
Vehicle Duty Rate vs Import Quantites

6,150,841
6400000
6200000
6000000
5800000
5600000
5400000
5200000
5000000
0.6454
0.644
0.643
0.642
0.641
0.64
0.639
5,657,873
5,542,421
5,411,162
0.6417
2010-11
2011-12
2012-13
Financial Year
0.646
0.645
2013-14
Import Quantity
Duty Rate

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STRICTLY CONFIDENTIAL

Ascertain the Market Demand of Goods Prone to SmugglingEstablishing the Volume of

Last Updated: May 14, 2015

Prepared by: MCC Preventive, Karachi

5.9 Quantification of Smuggling in Steel Sheets.. 40

6.2.11 POL (Diesel) Industry................................................................................67

1. Fig. 1: Number of Containers Imported Under ATTA From 2012-2014..... 11

40. Table 2: Total Revenue Lost on Commodities Under Investigation ... 62

About the Authors

Harvard Research Panel

Anti-Smuggling Projects Research Interns

Lahore University of Management Sciences (LUMS) Research Interns

4.5.1 Determining the Market Demand

4.5.2 Determining Volume of Domestic Production

4.5.3 Determining Quantum of Imports for Pakistan and Afghanistan

4.5.4 Determining the Quantum of Exports for Pakistan

Analysis of ATTA as Major Source Used by the Smuggling Regime

4.5.6 Calculating Revenue Lost by FBR

4.5.7 Effects of Tariff Rationalization on Imports

5.2 Quantification of Smuggling in Tea

5.9 Quantification of Smuggling in Steel Sheets

5.10 Quantification of Smuggling in Vehicles

5.11 Quantification of Smuggling of POL (Diesel)

5.12 Analysis of Pakistan vs. Afghanistan Imports on Commodities of Interest

5.12.1 Quarterly Analysis of Import of Tyres Pakistan vs. Afghanistan

5.12.2 Quarterly Analysis of Import of Televisions Pakistan vs. Afghanistan

5.12.3 Quarterly Analysis of Import of Fabric Pakistan vs. Afghanistan

Televisions have been considered a commodity which is smuggled in large volumes.

According to market experts, mobile phones is a market which is most affected by

5.13.5 Use of Tariff Rationalization as a Policy Approach to Curb Smuggling

6.1 Total Revenue Lost on Commodities Under Investigation by FBR

Grand Total Lost

6.2 Implication on Local Industries

6.2.1 Tyre Industry

6.2.3 Auto Parts Industry

6.2.4 Mobile Phone Industry

6.2.5 Textile Industry

6.2.6 Cigarettes Industry

6.2.8 Television Industry

6.2.9 Steel Sheets Industry

6.2.10 Vehicle Industry

6.2.11 POL (Diesel) Industry

7.2 Bilateral Negotiations

UoM CD % ST % FED % WHT%

UoM CD % ST % FED % WHT%

UoM CD % ST % FED % WHT%

UoM CD % ST % FED % WHT%

UoM CD % ST % FED % WHT%

UoM CD % ST % FED % WHT%

Mobile Phone Tariff by Year

Fabric Tariff by HS Code (2010-2011)

Fabric Tariff by HS Code (2011-2012)

Fabric Tariff by HS Code (2012-2013)

Steel Sheet Tariff by HS Code and Year

POL Tariff by Year

Vehicle Tariff by Year

H.S. Code Quantity Imported (units) % of Total Imported

H.S. Code Quantity (unit)

H.S. Code Quantity Imported

H.S. Code Quantity (unit)

H.S. Code Quantity Imported

H.S. CodeQuantity Imported

Revenue Loss by Plastic Granules