CUSTOMS authorities currently work with a non-transparent auction system for confiscated and detained goods which breeds corruption and results in a trading monopoly of a few registered persons.

This deprives the national exchequer of the right bid price, taxes and duties.

Customs detain and confiscate cargoes normally prohibited for imports along with un-cleared goods by importers because of disputes. They are routinely offered for auction.

However, the auction process is cumbersome, difficult to follow and provides loopholes/cover to few licensed auctioneers to manipulate things to their advantage.

Generally, three categories of cargoes (belonging to trade and industry, Afghan Transit Trade (ATT) and diplomatic missions) that cannot at times get customs clearance are left at the port or terminal area, causing congestion at ports.

The auction of confiscated or detained goods imported by trade and industry is governed by Section 82 of the Customs Act, 1969. There is no problem in auctioning these goods except for undue delays caused by conflict of interest.

However, there is no law which allows auction of cargoes belonging to diplomatic corps and ATT goods. As a result enormous quantities of these two categories occupy huge space, resulting in congestion at ports and terminals for the last so many years.

For the last 56 years, no auction of Afghan cargo took place because the Afghan Trade Agreement (ATA) of 1965 had no such provision.

However, under the new Afghanistan-Pakistan Transit Trade Agreement 2011, the Afghan transit cargo detained by customs authorities can be put for auction. This will help in timely auction.

Customs officials disclosed that the government has been asked to take a policy decision in consultation with Afghan government for the auction of detained Afghan cargo imported under ATA 1965. The cargo not only occupies huge space inside port area but is pilferaged.

The customs officials were unable to give the exact quantity of detained or confiscated cargo stacked for auction.

However, on the directives of the Federal Tax Ombudsman, the customs have prepared a list of such cargo. The list shows that cargo detained way back in 2006 is yet to be auctioned and around 396 auction lots are lying inside the port area.

The situation is so grim that Pakistan Ships Agents Association (PSAA) has complained to the Federal Board of Revenue that thousands of containers are stuck up at ports due to long delayed cargo auctions. The PSAA argued that the delay in clearing containers is due to disputes between customs authorities and importers. It demanded immediate de-stuffing and handing over of empty containers to its members.

The PSAA also suggested that legislation may be passed so as not to tie up the containers with the detained cargo. However, customs authorities strongly objected to the idea and argued that the proposed legislation will be detrimental to the safety of detained cargo meant for auction. That would result in physical deterioration of goods due to environmental hazards.

Furthermore, it was stated, this move will negatively impact on the expected auction price and result in huge revenue loss. Above all, it would be next to impossible for the port authorities and terminal operators to completely de-stuff all such containers.

According to customs authorities, the root cause of long delays in inviting bids through auction was delay in getting “B” book from the port authorities showing details of detained cargo. The information includes lot number, place, index, import general manifest (IGM), consignee, description of goods etc. The customs official say after receiving “B” book a notice under Section 982 of Customs Act 1969 is issued.

A ten-day time is given so that containers are grounded for examination and a report is made. In the absence of proper official document, the report is compiled on a simple paper which leaves a lot of room for manipulation in quantity and category of goods.

After de-stuffing of containers, customs field officers establish value of goods and determine duty and taxes upon the reserve price for the purpose of auction is fixed. Undoubtedly it is a ‘big game,’ observed customs officers.

The auction of detained goods is controlled by bidders ‘mafia’ who operate with connivance of customs officials and have advance information with regard to movement of cargo, quantity and place where goods (containers) are stacked. The auction is carried out in a highly non-professional way and bidders generally gang up to force customs authorities to come to their terms.

It is a common practice that goods offered for auction only fetch half of the reserve price determined by customs department. Many a time the reserve price is not at all realistic because customs authorities do not bother to revise prices with the prevalent market rates and keep quoting from past records. This also results in huge revenue loss.

Many consignments detained by customs are directly linked with the invoice price. Therefore, co-relation between invoice price and auction price is also major factor which at times bring windfall to a bidder.

A new system needs to be evolved-- fully computerised, transparent and easily accessible to everyone —to facilitate direct participation in auction of household goods.