Pakistan’s trade agreements allow reduced customs duties and taxes on selected imports, helping promote trade and economic cooperation. These concessions are governed by Section 18C of the Customs Act, 1969, as updated for tax year 2026.
Section 18C explains how preferential duty rates, origin determination, and claims under trade agreements are applied at the time of importation.
What Is Section 18C of the Customs Act, 1969?
Section 18C provides the legal mechanism for applying lower or preferential customs duty rates under:
• Free Trade Agreements (FTAs)
• Preferential Trade Agreements (PTAs)
• Other bilateral or multilateral trade arrangements
It also sets out how origin of goods is verified to qualify for these benefits.
How Preferential Duty Rates Work
1️⃣ Lower Duty Under Trade Agreements
When a trade agreement provides:
• A duty rate lower than the First Schedule
The Federal Government may:
• Issue rules via Gazette notification
• Prescribe how to determine whether goods are:
o Produced, or
o Manufactured
in the partner country or territory
📌 Importers must prove origin to claim reduced duty.
Claiming Preferential Duty at Import Stage
2️⃣ Mandatory Claim Requirement
Even if a preferential rate exists:
• Standard duty applies by default
• Preferential rate is allowed only if:
o The importer claims it at the time of importation
o Required evidence (e.g., certificate of origin) is submitted
📌 No retrospective claims are allowed.
What Is a Preferential or Free Trade Area?
3️⃣ Official Recognition by Government
Under Section 18C:
• A preferential or free trade area means:
o Any country or territory
o Formally notified by the Federal Government in the official Gazette
📌 Only notified countries qualify for preferential treatment.
Government’s Power to Change Preferential Rates
4️⃣ Emergency & Policy Powers
Notwithstanding existing concessions, the Federal Government may:
• Discontinue a preferential rate
• Increase it (up to the standard duty rate)
• Decrease it further
📌 This power is exercised in the interest of trade, including export promotion.
📌 Changes are enforced through Gazette notifications.
Snapshot: Section 18C at a Glance
| Aspect | Explanation |
| Governing Law | Section 18C, Customs Act 1969 |
| Benefit | Reduced or preferential duty |
| Condition | Proof of origin required |
| Default Rate | Standard duty applies |
| Claim Timing | At time of importation |
| Eligible Areas | Notified preferential/FTA countries |
| Govt Powers | Modify or withdraw preference |
Why Section 18C Matters in 2026
✔ Encourages regional and global trade
✔ Supports exporters through reciprocal access
✔ Prevents misuse of trade concessions
✔ Ensures transparency in origin determination
✔ Allows quick policy response to market changes
Frequently Asked Questions (FAQs)
Can preferential duty be claimed after import?
No. The claim must be made at the time of importation.
Is a certificate of origin mandatory?
Yes. Proof of origin is required under rules issued by the Federal Government.
Can the government withdraw concessions suddenly?
Yes. Preferential rates may be modified or withdrawn by notification for trade or policy reasons.
Conclusion
Section 18C of the Customs Act, 1969, applicable for tax year 2026, ensures that customs duty concessions under trade agreements are applied transparently and fairly. While Pakistan offers reduced duty rates under FTAs and PTAs, importers must meet strict origin and procedural requirements to benefit from them.
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax, or professional advice. While it is based on Section 18C of the Customs Act, 1969 as updated for tax year 2026, trade agreements, duty rates, and government notifications may change. Importers and traders should consult official Gazette notifications, FBR rules, or a qualified customs professional before relying on this information. The publisher assumes no liability for reliance on this content.