Customs Probes Alleged Export Facilitation Scheme Misuse

The Collectorate of Customs (Enforcement), Karachi has uncovered an alleged large-scale misuse of the Export Facilitation Scheme (EFS), leading to an inquiry into the conduct of several customs officials, including an Additional Collector, a Deputy Collector, and appraising and scanning officers serving at the Collectorate of Customs (Appraisement-West), Karachi.

According to an incident report submitted by the Collector of Customs (Enforcement), Karachi to the Federal Board of Revenue (FBR), preliminary findings indicate possible negligence and misconduct by the officials involved in the clearance of multiple consignments imported under the EFS.

The consignments were declared as scrap materials, including compressor scrap, aluminium condenser scrap, iron and steel remeltable scrap, and recoverable copper. However, acting on credible intelligence regarding alleged misdeclaration, attempted tax and duty evasion, and the possible import of restricted goods under the cover of the EFS, Customs Enforcement blocked the consignments at the AICT terminal before their release. Although the consignments had already been cleared by Customs Appraisement-West, they were intercepted at the gate-out stage.

Following the interception, the sealed containers were opened for physical examination. Customs officials found that the cargo primarily consisted of slightly used or nearly new Midea window air conditioners, portable air conditioners, and dehumidifiers manufactured in Thailand, with only a small quantity of compressor scrap, contrary to the declared description.

The Export Facilitation Scheme is intended to encourage exports by allowing eligible manufacturers and exporters to import raw materials and industrial inputs without upfront payment of customs duties and taxes, provided such imports are used for producing export goods. Authorities, however, noted that the scheme remains vulnerable to misuse where importers allegedly misdeclare goods to evade taxes or bypass import restrictions.

The inquiry revealed that the importer initially requested pre-declaration examination of the cargo, a procedure permissible under the Customs Act. After the Goods Declarations (GDs) were filed, all four consignments were assigned to the Customs Computerised System’s Yellow Channel, requiring documentary scrutiny and allowing physical examination where considered necessary. The consignments were also scanned before being transported between ports, with the scan images retained within the customs system.

According to the inquiry, two consignments were cleared solely on document assessment without any request for physical inspection. In the remaining two cases, assessment officers recommended examination of the cargo, but the requests were declined by senior customs officials, who cited the importer’s history of 587 previous Goods Declarations and directed officers to rely on available documentation and scan images unless stronger grounds for inspection were established.

The inquiry further stated that the available scanning images were accessible to the Deputy Collector and assessment officers and allegedly indicated that the cargo did not match the descriptions declared in the Goods Declarations. Despite this, all four consignments completed the assessment process and were cleared for gate-out. A final examination report is expected upon completion of the investigation.

Authorities also noted that these were the importer’s first EFS consignments routed through the AICT terminal via Port Muhammad Bin Qasim (PMBQ). Earlier consignments had reportedly been cleared directly from PMBQ, while a similar shipment had previously been intercepted there, following which subsequent consignments were allegedly diverted to AICT.

Customs further reported that seven additional 40-foot containers belonging to the same importer remain stationed at AICT, with their Goods Declarations still pending approval. Authorities have recommended comprehensive physical examination of these containers before any clearance is granted, as they may constitute relevant evidence in the ongoing investigation.

The preliminary inquiry has also recommended examining the role of the concerned Deputy Collector, citing concerns regarding transparency in official conduct. Additionally, the conduct of the appraising and scanning officers is under review. The role of the Additional Collector is likewise being investigated after initial findings suggested that the rejection of the physical examination requests was allegedly communicated through telephonic instructions issued to the Deputy Collector.