Table of contents list of acronyms

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The TBS is equally applicable to the OEMs and the Licensed Vendors – the latter are required to prove their arrangement with the former. Each is required to have a minimum manufacturing capability, to be inspected by the EDB initially for acceptance of status as OEM or Licensed Vendor and for renewal each year. Since this provides an opportunity for delaying approval for the slightest infringement (paras (i, (ia) and (ib) of the SROs), the possibility of rent-seeking cannot beset aside. The procedure set forth in obtaining the relief is in itself cumbersome and requires details to be provided on each occasion. The EDB is the first step in the process. It is required to forward the applications, but the supplicant has to follow this through physically. Even one unintentionally mislaid document does jam-up the flow. The use of SROs to encourage indigenisation and provide the nascent engineering industry some protection from international competition started in 1988. The industry-specific and later product-specific indigenisation programmes were initially drawn up and managed by awing the MoIP and post by EDB. These were agreed to by firms to establish the mandated, but rising, shares of local content. In return EDB would agree to and input/-output ration permitting import of specified parts and components at zero or much reduced Customs tariffs which then be sent to FBR and routinely notified through modifying SROs amending the
CDs. This meant that EDB had and still has
 discretionary control over which of the materials and components used in the industry could be imported, as otherwise these would have to be produced domestically, in effect creating a non-tariff barrier to imports and amount to aide facto continuation of the old Import License Raj”,
 considerable discretion as to the level and content allowed for import, and
 discretionary control over new entrants to the industry. However, the WTO’s Uruguay Round required removal of all non-tariff barriers to trade and comply with the TRIMS agreement. As a consequence all auto sector programmes were formally removed in July 2006. However, industry pressure and vested interests within bureaucracy and government discovered alternate routes to income using escalated tariff structures combined with the continued use of tariff concessions and partial exemptions for specified lists of raw materials and other intermediate inputs. The day-to-day operations of the IPO and the EPO2009 and the control of imports and exports are governed by the Customs Act. This is done largely through publication of CGOs
8
Including in-house and contracted out vendor units In SRO-speak, concessions means that all the CD in excess of a specified level is exempted. Only if the specified level is zero is the CD zero. So the actual CD could be zero or any other rate that is lower than the statutory duty

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and SROs. Chapter 87 of the Customs Tariff covers the automotive sector which is modified annually through the money bill. Finance Bills are presented each year before the National Assembly and approved by it as the Finance Act of the fiscal year for which it has been designed. This is the instrument which is used to provide protection to the local automotive industry. The levels of the concessionary rates are very low in comparison to the statutory rates and the EDB is required to update the list mandatorily. In principle, none of the CD concessions are available if components or parts are locally manufactured. To facilitate observance of this condition at Customs clearance, EDB “in consultation with stakeholders” has compiled and regularly updates a list of locally manufactured products. If there is a dispute as to local availability, this is decided by EDB after consultation with the renowned local manufacturers of the same or similar products. These modified lists, which deleted the relevant Chapter of the Customs Act, spanning the spectrum of the manufacturing sector, were notified in CGO 11/2007. This is not specific to the automotive sector. The automotive sector lists are transferred electronically to the Customs Department which maintains these both as hard copies and also on the servers of the Pakistan Automated Customs Clearance System (PACCS) or its successors. Two CGOs, specific to the sector, have been issued for assessing the value of used motor vehicles. The first is CGO 14 of 2005 and the second is CGO 02 of 2011 which actually modifies the former. The determined value is based on the manufacturers (or agents) certification of the FOB price to which are added on all costs incurred for importing the vehicle to arrive at the landed cost. This value is then depreciated by a monthly rate for the period from its first registration abroad.
As indicated earlier there are three specific SROs which govern the sector. They are described briefly in Table 3.2 and a more detailed analysis follows.

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