Bonded warehouses see inventory surge amid lockdown

KARACHI: As the terminal operators and shipping companies refused to waive demurrage and detention charges on stranded consignments at ports amid lockdown, traders started moving imported goods to bonded warehouses, it was learnt on Saturday.

An official said there has been a sudden surge of traffic at bonded warehouses as ports refused to waive penalties, while expectation of further improvement in rupee value against greenback compelled importers to in-bond the goods.

“Duty and taxes are imposed on the value of imported goods in dollar, and strong rupee would save additional amount that importers would pay at dollar at higher levels,” the official said.

Dutiable goods can be stored at bonded warehouses without payment of import taxes for a period of six months. Importers only pay taxes on the quantity of goods removed from the warehouses. As such, traders pay taxes in parts avoiding immediate burden of taxation.

Ports are witnessing severe congestion as importers are unable to take delivery due to supply line disruption as the Sindh government couldn’t ease lockdown in absence of efficient mechanism to check health dangers posed by the novel coronavirus. Containers are piling up at the ports.

Sea trade is vital for Pakistan’s economy reliant on imports. Exports and imports contribute 10 to 20 percent to GDP, but are important to keep the economy running. Economic growth already decelerated to 3.3 percent last year from 5.5 percent and expected to fall further to negative 1.5 percent this fiscal year – first time since the country’s partition from India. Traders complained that they were facing troubles in movement on roads.

Khurram Aijaz of Karachi Customs Agents Association said terminal operators and shipping lines are not waiving demurrage and detention charges, which is one reason why consignments are not removed from the ports by importers.

“Trader’s cash lines have dried up as the markets are closed,” Aijaz said. “Most of them cannot even pay the banks to get their documents released, let alone demurrage and detention charges to the tune of millions of dollars.”

Aijaz said terminal operators should provide relief to the traders, so that the cargo is removed making space available for the new shipments. “Importers would get their consignments transferred to bonded warehouses, where space is still available along with an option to pay taxes during the course of time.”

Traders said they have no money and couldn’t pay demurrage and detention. “They would better leave goods perish at the port,” Aijaz said. He complained that there were no measures at the offices of terminal operators and shipping companies to protect against the COVID-19.

Importers asked the authorities to waive one percent customs duty imposed on transfer of cargo to bonded warehouses from the port till June-end.

Chairman Federation of Pakistan Chambers of Commerce and Industry standing committee on customs Shabbir Churra said importers have to pay one percent additional customs duty when goods are moved to bonded warehouses from the ports, while goods in bonded warehouses have to be removed within six months.

“After six months, importers have to pay surcharge, which at time surpasses the value of goods,” Churra said. “Now that the markets and businesses are closed due to the lockdown, traders are unable to take delivery of their consignments.”

Chuhra demanded of the government to waive one percent additional customs duty along with surcharge on overstay of goods till June 30 and surcharge already imposed on importers.