NTBs put food importers in a bind

Published March 25, 2019
The government must allow importing companies enough time to comply with the new labelling requirements.
The government must allow importing companies enough time to comply with the new labelling requirements.

THE decision by the Ministry of Commerce to ban the import of those consumer goods that do not have ingredients, nutritional facts and usage instructions printed in Urdu and English — as well as the logo of a Halal certification body — on their packaging Feb 19 onwards has drawn a lot of flak from importers.

The statutory regulatory order (SRO) issued by the ministry to amend the Import Policy Order (IPO) 2016 directs importers to ensure that the “labelling should not be in the form of a sticker, overprinting, stamp or scratched labelling,” and their shipments be accompanied by a Halal certificate. In addition, no product with less than 66 per cent of shelf life from its date of manufacturing is allowed to enter the country, according to the amended IPO.

Importers say they can face losses running into billions of rupees because the customs are not clearing the cargo that already arrived at the port or sailed for Pakistan after the issuance of the order. Although some importers say they have requested their foreign suppliers to put future shipments on hold till the resolution of the matter, at least 2,400 containers carrying fast-moving consumer goods (FMCGs) either have arrived at the Karachi port or are on the way.

The government must allow importing companies enough time to comply with the new labelling requirements

Few will disagree with the new conditions imposed on the imports of consumer packaged goods, particularly food products. But the way the order has been issued and implemented left little time for businessmen to comply with it. Analysts say the new labelling requirements are meant to curb imports rather than protect consumers, noting that they amount to non-tariff barriers.

The government has taken many measures in recent months to reduce the country’s import bill. The imposition of a higher regulatory duty to make what are often called luxury goods pricier is one of such measures. But these steps have more or less failed to significantly dent the demand for such products in the country where less than 1pc of the population, mostly from the middle-income groups, file income tax returns.

The country’s trade deficit, which is the primary driver of the current account gap, narrowed just 2.8pc to $19.3 billion in the first eight months of 2018-19. There was a slight rise in exports in spite of many anti-import measures. Imports of FMCG products, especially food items, that historically stood somewhere between $1.5bn and $1.7bn a year are believed to have come down by less than 10pc — much less than the government’s expectation. It indicates that higher prices of such items have affected the affordability of only a small number of the fixed-income middle class consumers.

The potential impact of the restrictions on imports of packaged consumer goods and durables on the country’s trade deficit and current account woes aside, there are certain practical issues that the policymakers should have reckoned.

Foreign suppliers may agree to meet the requirement about their products’ higher shelf life, but they are unlikely to agree to change the labelling on their packaging for Pakistan. This is so because smaller volumes are economically unfeasible for them to make line stoppages. According to importers, those suppliers that already have Halal certificates from existing Halal certification bodies have also refused to get new certificates from other bodies immediately because of its high cost. Some of them consider the labelling conditions for importers discriminatory in nature because they don’t apply to local suppliers of similar products.

“Even if foreign suppliers agree to meet the new requirements, it will take them a few months to make these changes. How can we comply with these conditions in the case of a cargo that has already reached the port or sailed before the order was issued? The government must take a sympathetic view and give us a few months to make the changes,” an importer from Karachi said.

Even the companies that are prepared to import these products in bulk and package within the country require time to build the infrastructure and overcome other practical problems. For example, they say Urdu is a ‘limited’ language and it is difficult to translate the names of a number of ingredients from English. Moreover, there is no accredited agency in Pakistan to certify local packaging.

Many fear, and rightly so, that the sudden implementation of the order will only limit consumer choice, hurt competition between local and imported products, push local brands to increase their prices, lead to job losses and encourage smuggling.

There’s hardly another view on the need for protecting consumers. But the government must rethink its implementation strategy at least to the extent of allowing importing companies enough time to comply with the new requirements. Sudden actions only disrupt the market.

Published in Dawn, The Business and Finance Weekly, March 25th, 2019


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