950824

Ball bearing imports

Duty cuts offset

by over-valuation

by PSI companies

HARIS ZAMIR

KARACHI: The reduction of duty on ball bearings from 50 to 10 percent has started encouraging legitimate imports and it is expected that around Rs.1 billion will be collected in the shape of customs duty and other levies during the current fiscal year from bearing imports.

According to a representative of the Bearing Trade Group (BTG), after the reduction in customs duty on ball bearings since June 14, 1995, legal imports have virtually elbowed out the inflow of smuggled goods under the garb of the Afghan transit trade which had captured 85 percent of the bearing trade.

The reduction in the levies has yielded fruitful results because in the last 65 days over 32 letters of credit have been opened. Some consignments have already arrived and the importers of ball bearings have paid levies on them to the tune of Rs.75 million.

The BTG representative admitted that despite the massive reduction in duty the prices of bearings have not come down and imports are not picking up as expected. The main reason for this, he said, were the pre-shipment inspections by Cotecna and SGS whose reports are overvalued. He regretted that these companies were not accepting even certified reports from Japan, China and Korea.

He complained that these companies some time reassess the goods by over 100 percent. Recently a specific grade of ball bearing (No.6024) arrived from China. The price of the ball bearing was 27 cents but PSI inflated the unit rate to 67 cents. On the same vessel, another grade (No.6205) was booked (origin China) and the inspection company assess the value at 41 cents instead of 31 cents. The higher assessments made by the company have totally offset the duty reduction. On several occasions, overvaluation by the PSI companies have been instrumental in raising prices by more than 15 percent in spite of the duty reduction which should have made bearings cheaper.

Sales of ball bearings have also come down by 20 to 30 percent. Even the sales of industrial ball bearing are quite slack because of the continuing crisis in the city", he claimed.

He lamented that factories and industries, due to the law and order situation in Karachi are moving on at a snail's pace resulting in low usage of bearing. Several units which used to work on three-shift basis have had to confine production to only one shift. Business is gradually moving over to the Punjab and there is a slump in the Karachi markets where sales have been cut drastically.

He said the local importers have failed to capture the industrial ball bearing demand because the duty on cylindrical, needle ball, and automotive bearings are still on the higher side. The total incidental of 50 percent on these leave enough cushion for the Afghan traders to operate with impunity in the market.

The Bearing Trade Group has asked the government to reduce the duty on these items from 40 percent to 10 percent. Total demand in the country is around 6.6 million and major user of the bearings is the fan industry.

"It is expected that during the current fiscal year, local importers may snatch back from the smugglers 40 percent market share as against the 85 percent currently held by the Afghan traders.