Threatened by the manipulative practices of importers and vested interest elements of bureaucrats who is going to ensure the survival of local industry of writing instruments?

Wood-cased pencils produced in Pakistan belong to non-traditional value added manufacturing industry. This industry is also labour-intensive and provides job opportunities to a large number of workers which is very much required, particularly in the current environment of growing unemployment.

Another commendable contribution of this industry is the development of quality products which has generated export potential in the quality-conscious markets of the Middle East, Europe and even South American countries.

With a progressive growth year after year in local market the time old brands of Goldfish and Deer have built good foothold by dent of the quality image and marketing efforts over 50 years.

However in the recent influx of imported pencils grossly under-invoiced and mis-declared is creating unhealthy price competition and affecting growth, rather the survival, of local manufacturing industry.

The price competition is not geared to fair business practices but by manipulative practices of savings fraudulently achieved on taxes and custom duties through under-invoicing and mis-declarations.

The custom authorities were kind enough to open objective discussions together with the association of writing instrument manufacturers and the importers as the outcome of the long painful deliberations concluded with the announcement of the new ITP’s, vide ITP Edition-5 Amendment No.40 Dated 02nd September, 1999 in SRO 33(KE)/99 Dated 22nd February, 1999 in the following manner:

Heading No. 9609.2000, First Schedule Custom Act, 1969

* Commodity Code No. 1010 Column 5, $1.40/gross to be substituted by $1.70/gross.

* Commodity Code No. 1020 Column 5, $1.50/gross to be substituted by $2.00/gross.

* Commodity Code No. 1030 Column 5, $1.65/gross to be substituted by $ 2.25/gross.

* Commodity Code No. 1040 Column 5, $1.80/gross to be substituted by $ 2.25/gross.

* Commodity Code No. 1050 Column 5, $2.10/gross to be substituted by $ 2.62/gross.

* Commodity Code No. 1060 Column 5, $2.50/gross to be substituted by $ 3.15/gross.

* Commodity Code No. 1070 Column 5, $5.00/gross to be substituted by $ 3.50/gross.

From the above it is clear that the minimum price of ordinary raw pencils was $1.7-/gross and accordingly the finished pencils in accordance with their finish and value addition had the ITP starting with $2.00/gross to $3.50/gross.

After the rescheduling of the ITP on pencils, the fraudulent under-invoiced imports were checked and subsequently for the next two years, the import dropped significantly providing much relief to the local manufacturing sector.

Now, again after discontinuing of the ITP regime and the new system of the declared value the old activity has again started since almost a year with mis-declaration of value and specifications of the products. A high quality pencil under the Commodity Code No. 1040 ($2.25/gross) and 1050 ($2.62/gross) is being imported after being declared as ordinary pencil as $0.90/gross.

It is estimated that 25 containers of pencils have been imported into the country in 2002-2003 valued at $ 12,150 per container having a total value of $303,750. Three to four containers are now entering the country monthly.

Taking into accounts, the actual price which according to ITP (1040) should have been $30,375 per container amounting to $759,375 for 25 containers.

Thus this manipulation,as has been worked out on the basis of 25 containers imported so far,has caused a revenue loss to the government of $140,600.

All the sales of the imported pencils are un-documented i.e. the sale is carried out with out proper invoicing to avoid detection of the manipulation by the concerned authorities.

How do other countries, even highly developed countries like the USA, protect their local industry in similar situation is illustrated below.

One can log on to the foreign trade division US Census Bureau, presented by Office of Trade and Economic and Analysis (OTEA, International Trade Administration US Department of Commerce) and find out export prices of pencils offered by various countries to the US imports for consumption, which for the period December, 2002 and 2002 year-to-date, according to which China exported 7.45631 million gross pencils at a value of $30.244 million, with an average cost of $4.0561/ one gross pencils.

Similar price average has been offered by Indonesia at $4.1573 and by Malaysia at $4.4268/gross pencils. These are the average prices of standard pencils offered by these countries to the U.S. market, which compared to European market is more price sensitive than quality.

The world total imports into U.S. for this period averages at $5.8158 gross pencils, which includes imports from all countries around the world including quality pencils from Europe.

Until 1994, China was exporting pencils to the US at a price of $1.00 per gross pencils, which was challenged by the American pencils manufacturers resulting in the government support to the industry by putting anti-dumping measures resulting in the existing fair price of $4.561 gross pencils.

In the light of above data it is pertinent that an immediate action is initiated to stop the mis-declared imports of pencils and check revenue losses faced by government as well as to save the local industry from collapse.