KARACHI, Aug 1: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to initiate action against shipping companies and freight forwarders and make some systemic changes to prevent the possibility of fraudulent release of containerised cargo at the port of entry.

In a decision, the FTO pointed out that the complainant had been a victim of illegal practices by shipping companies and freight forwarders, who got the consignment cleared after submitting inadmissible documents.

An exporter from Faisalabad lodged a complaint with the FTO regarding release of his containerised cargo at New York Port by two shipping companies and freight forwarders without original export documents on the basis of which goods were shipped by him.

The complainant felt that he had been defrauded as the consignment could not be released without original shipping and export documents, which were lying with his (complainant) bank in New York.

The exporter further informed the FTO that he had to undergo imprisonment for a period of five months because he could not make payment to his local suppliers and his cheques were dishonoured as no payment was received from abroad against the shipment. He also complained that as a result of these events, his business reputation had been badly damaged for no fault on his part.

During the course of these events, the exporter also approached the additional collector customs (Preventive), Karachi, through Pakistan Hosiery Manufacturers Association (PHMA).

On concerted efforts made by the additional collector, who is also the licensing authority for shipping companies and freight forwarders, one of the shipping companies settled the issue by making payment through cheque after the lapse of one year.

On the basis of these facts, the exporter approached the FTO to resolve the issue once for all as for the last many years business community had been complaining about such malpractices being committed by shipping companies and freight forwarders.

It had been a practice of freight forwarders to issue House Bill of Lading (B/L) on receiving export cargo from an export house. This resulted in change of title over the cargo because the B/L carries the title of a shipping company or freight forwarder.

This resulted in huge financial losses to the exporters, who have to accept terms and conditions (legal and illegal) of shipping companies and freight forwarders at the port of entry.

Sometime it also made the exporters to completely lose the ownership and title of cargo as has been in the case referred to the FTO.

PHMA chairman Naqi Bari said the FTO decision would go a long way in resolving outstanding issues of change of title of cargo between business community, shipping companies and freight forwarders.