Pakistan’s import sector is facing severe turmoil following the abrupt alteration of Green Channel parameters by the Customs Department. The move, implemented without prior notice, has left thousands of containers stranded at ports, leading to substantial financial losses for importers and severe supply chain disruptions. Essential goods, including medicines, pulses, steel, and medical devices, are at risk of becoming scarce in local markets as clearance delays persist.
This sudden change highlights the critical need for better planning and communication in Customs operations, as the current situation threatens to undermine economic growth and consumer welfare.
The Role of the Green Channel in Trade Facilitation
The Green Channel is an essential feature of Pakistan’s Risk Management System (RMS). Designed to fast-track the clearance of low-risk consignments, it ensures that vital goods move swiftly through Customs checkpoints, reducing bottlenecks at ports.
Previously, over 47% of consignments were cleared through the Green Channel, enabling quick access to essential commodities like pharmaceuticals, food supplies, and raw materials for industries. However, the recent reduction of this clearance rate to below 26% has significantly slowed down the import process, creating a backlog of containers awaiting examination and assessment.
Financial Strain on Importers
The delays caused by the altered Green Channel parameters have left importers in a financial bind. Containers now face four-day delays in grounding (offloading for inspection), followed by an additional two to three days for examination and assessment. During this period, importers must bear rising costs due to demurrage and detention charges levied by shipping companies and terminal operators.
Demurrage fees are incurred when containers remain at the port beyond the allowed free time, while detention charges apply for the extended use of containers. These costs, which accumulate every five days, can reach into the millions for larger shipments.
“These changes have created a system where importers are penalized, while shipping companies and terminal operators profit immensely,” said Khurram Ejaz, Chairman of the Customs Advisory Council at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).
Supply Chain Disruptions and Economic Impact
The clearance delays are not merely an inconvenience; they pose a serious threat to Pakistan’s economy. Essential goods like medicines, pulses, and medical devices are now at risk of supply shortages. Without timely clearance, the availability of these products in local markets could dwindle, leading to price hikes that would directly affect consumers.
Steel imports, critical for the construction and manufacturing sectors, are also impacted. The delays could slow down ongoing infrastructure and industrial projects, further denting economic progress.
The cascading effects of these delays are alarming. A slower supply chain not only affects businesses but also disrupts employment, project timelines, and consumer satisfaction.
Increased Pressure on Customs Officials
The abrupt policy shift has also burdened Customs assessment officers, who are now overwhelmed by the increased number of containers requiring manual examination. These officers were already stretched thin due to litigation duties, as noted by Khurram Ejaz, and the lack of a dedicated litigation department further exacerbates the issue.
Without sufficient manpower to handle the increased workload, delays are likely to worsen, creating a vicious cycle of inefficiency and frustration for all parties involved.
Private Operators Profit While Importers Suffer
One glaring consequence of this situation is the financial windfall enjoyed by shipping companies and terminal operators. As containers pile up at ports, these private entities collect demurrage and container rents. Millions of rupees are being earned daily, raising concerns about whether the current system is inadvertently designed to favor these companies at the expense of importers.
A Call for Policy Revisions
Stakeholders are now calling for urgent action to address the crisis. To restore efficiency and mitigate the financial burden on importers, the following measures have been proposed:
- Revisiting Green Channel Criteria: Customs authorities must reassess the recent changes to RMS criteria to restore Green Channel clearance rates to previous levels.
- Increase Manpower: More Customs officers should be appointed to handle the surge in assessment and examination workloads.
- Advance Notifications: Importers should be informed well in advance of any policy changes, allowing them to prepare for potential delays or costs.
- Streamlined Litigation Handling: Establishing a separate litigation department within Customs could reduce the burden on assessment officers, enabling them to focus on timely clearances.
- Cap Demurrage and Detention Charges: A regulatory framework should be introduced to cap the fees imposed by shipping companies and terminal operators during extraordinary situations like this.
A Delicate Balance
The Customs Department must strike a delicate balance between enforcement and facilitation. While ensuring compliance with laws is critical, overly aggressive enforcement measures can stifle trade and damage the economy. The current backlog demonstrates the pitfalls of poorly implemented policy changes.
Conclusion
The current crisis serves as a stark reminder of the interconnectedness of trade policies and economic health. Importers, as key players in ensuring the steady flow of goods into the country, are now at a breaking point due to sudden and uncoordinated changes in Customs operations.
To prevent further disruption and restore confidence in Pakistan’s trade ecosystem, swift and decisive action is required. Only through collaboration between Customs authorities, importers, and private operators can the system regain its efficiency and fairness, ensuring the steady supply of essential goods and supporting the broader economy.
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