The Institute of Chartered Accountants of Pakistan (ICAP) has put forth recommendations to ensure that foreign trade conducted through the China Pakistan Economic Corridor (CPEC) remains free from smuggling and illegal activities.
In its proposals for the budget of 2023-2024, ICAP highlights the importance of addressing the potential risks associated with CPEC, similar to those experienced in the Afghan Transit Trade.
ICAP emphasizes that the success of CPEC depends on three factors: security arrangements, infrastructural development, and smooth e-based Customs operations. While initiatives have been taken in the areas of security and infrastructure, Customs operations have received limited attention. To safeguard foreign trade in CPEC from smuggling and illegal trade, ICAP suggests the following steps:
1. Installation of Scanners: Scanners should be installed at the Pakistan-China borders, as well as at Gwadar and Karachi ports. These scanners will verify the contents of each container to ensure that they are exported or imported without any misuse.
2. Cross-Verification of Scanning Images: Scanning images of exports from China border should be compared with scanning images of goods delivered from Gwadar/Karachi ports, and vice versa for imports. Entry should remain open for scrutiny until verification is complete.
3. Integration of WeBOC Systems: Chinese exporters/importers should file their entries in the WeBOC system of China, and Pakistan should have access to the Chinese WeBOC system to mark cleared containers green in the WeBOC. Containers that have not been cleared, are in transit, or remain uncleared after 7 days of release from Pakistani ports should be marked red for further inquiry.
4. Verification of Exports: Goods should only be allowed in containers loaded in China, and evidence of shipping line booking and Bill of Lading should be obtained as proper evidence.
5. Customs Offices along CPEC Routes: Custom offices should be set up at intervals of 200 km along the CPEC routes to ensure effective monitoring of transit trade flows.
6. Implementation of E-Tagging: E-tagging should be installed on vehicles carrying cargo. When a vehicle crosses a designated customs office on the pre-marked route, the data of cargo movement should automatically enter the system, providing location and brief description of goods. This information should be accessible to both customs offices at the port of entry and exit.
7. Strengthened Customs Controls and EDI Linkage: Both governments should agree to strengthen customs controls at the border and establish an Electronic Data Interchange (EDI) linkage between Pakistan and China on a real-time basis to reconcile export/import data of cargo routed through the CPEC route.
8. Evidence of Payment and Bank Guarantee: In the case of imports, evidence of payment for goods by Chinese importers to their suppliers and submission of a bank guarantee equivalent to government levies to be collected on China imports by Pakistan Customs should be required before release.
ICAP emphasizes that these measures are crucial to prevent smuggling, pilferage, and disruptions in the CPEC trade. They draw attention to the challenges faced in Afghan Transit Trade and the adhoc arrangements that failed to achieve desired results. By implementing effective customs facilitation, monitoring, and control mechanisms, Pakistan can safeguard the integrity of the CPEC trade and avoid negative repercussions on its own industry and duty-paid goods.