ISLAMABAD: The government has proposed new amendments in the Customs Act to control trade mis-invoicing used for transfer of funds across borders based on the false declaration of price, quantity or quality on an invoice.

In this regard, a new section 32C was proposed in the customs Act 1969.

It has been observed that it is one of the mechanisms used for trade-based money laundering.

As per details, trade mis-invoicing may include overstatement of value of imported goods, understatement of value of exported goods or vice versa.

However, all such possible scenarios of trade mis-invoicing are not expressly covered under the provisions of the Section 32 of the Act.

After the introduction of the new amendment, Chairman Federal Board of Revenue (FBR) Shabbar Zaidi has ordered to identify the extent of mis-invoicing in export declarations in order to ascertain the suspected items or sectors and destination for such mis-declarations.

Moreover, it has also been decided to categorise exporters on the basis of risk profiling by segregating compliant exporters from those engaged in mis-invoicing.

One of the Financial Action Task Force’s major recommendations for the Pakistan Customs is to effectively deal with currency smuggling, a source of trade-based money laundering and terror financing, particularly at entry and exit points of the country and to install a system for tracking the money trail.

An official statement said the customs operation wing based at FBR has tasked the director general customs valuation to submit a report in this regard.

The directorate was further directed to develop a risk based system to intercept this trend without compromising export facilitation. It is worth mentioning that punitive action will be taken against unscrupulous exporters under the proposed Section 32 C of the Customs Act.

According to the statement, this initiative has come on the back of reports indicating mis-invoicing in exports, which includes under-invoicing resulting in loss of remittance of foreign exchange and over-invoicing used to transfer excessive funds abroad.

One of the suspected methods used in under-invoicing in exports is through the medium of port cargo.

Export cargo are misdeclaration by under-invoicing the values of export commodities, and shipped via port where in new declaration with actual values are re-shipped for final destination.

As a consequence, lesser amount of foreign exchange is remitted to Pakistan and a major portion of export proceeds is retained in the other country.

In order to penalise the officers and taxpayers who are involved in commission or omission of an act for personal benefits and undue advantage, a new Section 156A is proposed in the Customs Act, which makes both the officers and the taxpayer liable for criminal proceedings in such cases.

Published in Dawn, June 14th, 2019