WT/TPR/S/193 Trade Policy Review 
Page 36 
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. Since its last Trade Policy Review, Pakistan h as pursued trade liberalization, albeit unevenly 
and accompanied by seemingly increased industrial production/export assistance, including in textiles 
and clothing.  Trade openness is directed at pr omoting private sector investment and export-led 
growth. 
2. Pakistan’s main trade policy instrument remains the tariff, an increasingly important source of 
tax revenue, accounting for about a fifth of the total.  Virtually all tariffs (99.4%) are ad valorem ;  for 
2007/08 there are 29 different applied rates (seven main  bands).  Unilateral tari ff reductions gave way 
to "piecemeal" reforms from 2002/03.  The simple average applied MFN rate is 14.5%, down from 
20.4% in 2001/02, but exceeded slightly  the 2005/06 level of 14.4%.  Peak ad valorem  rates have 
dropped from 250% to 90% and remain focused in alcoholic beverages and automotive items.  Tariff 
escalation and disparities have increased, further compounded by the multitude of input tariff 
concessions/exemptions.  The scope of tariff bindings (now 98.0% of all lines) has risen considerably 
since 2001/02, thereby promoting market access transparency and predictability.   However, as the 
bound average tariff is some four times the applied le vel, substantial leeway exists to raise applied 
tariffs;  the authorities increased applied rates on some 600 items in 2006/07 and on a few items in 
2007/08 to protect against imports.  Pakistan has eliminated  all cases noted at the last Review where 
applied tariff rates exceeded binding commitments (t he last one in the 2007/08 Budget).  "Regulatory" 
duties, which provided additional protection for so me goods during the period under review, are no 
longer publicly scrutinized by the National Tariff Co mmission, whose role in general tariff policy-
making has diminished.  
3. Pakistan seemingly applies transaction value (c.i .f. price) and WTO customs valuation rules.  
Minimum values no longer exist, except on imported motor cycle parts under customs "take over" 
provisions.  It acceded to the Revised Kyoto Conven tion in October 2004.  Customs is being reformed 
and automated with the progressive implementation of the Pakistan Customs Computerized System (PACCS);  clearance times have been gene rally shortened from seven-ten days to under 
six-eight hours.  Enhanced risk management tec hniques have also lowered physical inspection rates 
on imports from 100% to 4% (2% on exports).  Sign ificant smuggling remains, albeit reduced, partly 
due to trade restrictions with India.  Preshipment  inspection is required on a range of used machinery 
and equipment for health and safety reasons. 
4. Import prohibitions and licensing are operated ma inly for health, safety, security, religious, 
and environmental reasons.  Im ported alcoholic beverages are banned for religious reasons; 
nevertheless, they are brewed locally for non-Muslims by a private monopoly.  The import ban on 
used machinery and equipment has been relaxed.  According to the authorities, imports from Israel 
(but not exports) remain prohibited but those from India are progressively being allowed.  Certain 
imports eligible for tariff exemptions/concessions re quire ministerial or other approval, and import 
quotas apply to some of these goods, e.g. certain chem icals and refrigerated trucks.  Recourse to anti-
dumping action has increased.   
5. The complex tax system, including tariff conces sions/exemptions, is used as a major industry 
policy tool.  Domestic sales and excise taxes discr iminate against imports in some cases, including 
favouring local content.  Instead of income tax, importers pay income withholding tax of up to 5% 
(reduced from 6% in the 2007/08 Budget) levied on the import’s tax- and tariff-inclusive price, 
effectively an additional import tax.  Import levi es fund development boards.  The capital value tax 
levied on imported motor vehicles was merged with the tariff in 2007/08. Pakistan WT/TPR/S/193 
 Page 37 
 
 
6. Production (and/or exports) is assisted by a range  of general and sectoral schemes that offer 
income and other tax exemptions/concessions (e.g. ge nerous taxation of expo rt and farm incomes), 
direct subsidies (e.g. on freight and research and development grants), concessionary credit, input 
subsidies (e.g. fertilizers and natural gas), and ag ricultural price and other domestic support (e.g. 
wheat and cotton).  Generous SBP (State Bank of  Pakistan) concessionary finance to exporters, 
especially of textiles and clothing, has distorte d industrial incentives.  The remaining deletion 
programmes on motor vehicles, involving local-content requirements, were replaced by a tariff-based scheme on 1 July 2006.  These schemes were designe d to promote industrialization and indigenization 
through lower rates on imported CKD kits than  on final products, concessional duties on raw 
materials not made locally, and qualitative minimum- processing requirements;  they also apply to a 
wide range of other engineering pr oducts.  Despite divestment, state involvement remains significant.  
The state-owned Trading Corporation of Pakistan, imports (and exports) major agricultural commodities (e.g. wheat, sugar, and urea), without special privileges, mainly to provide food subsidies to the poor and meet emergency situations .  Some state entities have exclusive import rights 
on certain raw materials at exempt/concessionary tariffs.  Transparency and management of 
government procurement has improved following regul atory and institutional arrangements;  price 
preferences of up to 25% remain, depending on th e domestic value-added.  Standards increasingly 
follow international requirements, are seemingly la rgely applied uniformly to imports and domestic 
goods, and are main voluntary.  SPS arrangements are generally internationally recognized, but their 
administration may be complicated by the many agencies involved, producing overlapping 
responsibilities and duplication.  Duty drawback arra ngements appear to be administratively complex 
and non-transparent; drawback rates, which are se t as a fixed percentage of each product’s f.o.b. 
value, provide the possibility of over- and unde r-compensation despite regular adjustments.   
7. Export requirements have been eased, alt hough contracts for cotton and urea must be 
registered.  Mandatory minimum export prices were  removed on rice in 2003/04 and subsequently on 
cotton yarn.  Minimum value addition is an export requirement for vegetabl e ghee and cooking oil.  
While export taxes are prohibited, "regulatory" dut ies apply to some exports, and exports are also 
levied income withholding taxes, unified at 1% of the f.o.b. value in 2007/08, as a seemingly 
concessionary means of taxing export income of more profitable firms, which is income-tax free.  A 
development surcharge of 0.25% f.o.b. is also le vied on exports to finance the Export Development 
Fund.  Wheat and fertilizer exports (including urea)  are effectively banned, and certain other exports 
must meet specified conditions.  The Export Promo tion Bureau has been transformed into the Trade 
Development Authority, to boost export prom otion and improve effectiveness.  Export quality 
inspections remain either compulsory on some goods (e.g. cotton) or encouraged, including by 
financial inducements, e.g. the freight su bsidy scheme terminated in end-July 2007. 
8. Pakistan has strengthened protection of intell ectual property rights, including enforcement, 
especially in optical piracy, by acceding to the Paris Convention (2004), creating the Intellectual Property Organization (2005), and including the Fede ral Investigation Agency in the enforcement of 
copyright crime (2005).  Monopoly oversight remains weak but regulatory and institutional improvements are planned.  Consumer protection,  mainly a provincial responsibility, is being 
improved slowly.  
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
(i) Registration and documentation requirements 
9. Importers no longer need to be registered w ith the Export Promotion Bureau (since 2002/03) 
nor to use a customs agent, but they must belong to an industry-based trade organization.1  B o t h  
                                                      
1 EIU (2006), p. 17. WT/TPR/S/193 Trade Policy Review 
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importers (and exporters) must ha ve a national tax number and a sal es tax registration number.  The 
Single Administrative Document (SAD) replaced ten documents in 2003.2   
10. Under the Customs Administration Reforms Programme (CARE) introduced in 
February 2002, the Pakistan Customs Computeriz ed System (PACCS) is replacing the Automated 
Clearance Procedure (ACP) applied to selective im porters from May 2004, to enable full electronic 
documentation and clearance.3  Introduced in April 2005 on a pilo t basis at the Karachi International 
Container Terminal (handles about one third of Ka rachi Port’s trade), the PACCS is being extended 
progressively to the rest of Karachi Port and el sewhere.  Its full roll-out, initially planned for 
June 2007, has slipped;  currently 25.2% of imports and 38.3% of exports (30.0% of trade overall) are 
covered.4  The steps needed in order to clear vessel s have been reduced from 26 to one;  the 
34 signatures and 62 verifications to declare goods  have been replaced with a single electronic 
declaration; clearance times shortened from 7-10 days to below 6-8 hours5;  physical cargo inspection 
rates reduced from 100% to 4% (2% for exports), and port dwell times from 11 to 4 days; and pre-
arrival declaration and processing introduced. 
11. Pakistan acceded to the Revised Kyoto C onvention in October 2004, and, according to 
authorities, has increased compliance by implemen ting many of the required changes to customs 
legislation and administrative practices in PACCS.6  It complies with 26 standards of the Kyoto 
General Annex, e.g. provisions on customs computerization, post-clearance audit, fiscal fraud, and alternative dispute resolution systems.
7  Temporary import facilities have improved, including 
application of the ATA Carnet Istanbul  and TIR Conventions in 2005/06.  
12. Administrative appeals against duty valuations a nd other customs decisions can be made to a 
Customs internal review, and to the Central Boar d of Revenue (CBR), which appoints a committee to 
consider the case.  Such decisions, including crimin al proceedings, can be appealed to the Special 
Court for customs, taxation, and anti-smuggling, and subsequently to th e Appellate Tribunal on 
Customs, Excise and Sales Tax, the provincial High Court and, in certain situations, the Supreme 
Court. 
13. Despite enhanced anti-smuggling efforts, smugg ling is still common, especially of vehicles 
and components, cloth, bicycles, cooking oil, and vegetable ghee (mainly from India and 
                                                      
2 World Bank (2006b), p. 139. 
3 PACCS comprises the Tariff and Integrated Policy (TARIP) system to provide import and export 
regulations (including tariff rates), and the Automated Customs Clearance System (ACCESS) system to perform 
customs functions using an automated risk-managemen t system.  The ACP covered importers with annual 
imports over PRs 30 million (PRs 50 million in January 20 05);  10% of declarations were randomly audited, 
including selective physical inspection. 
4 In October 2006, PACCS was expanded to two other terminals (Pakistan International Container 
Terminal at Karachi Port, and Qasim International Containe r Terminal at Port Qasim).  It currently covers all 
FCL (full container load) sea cargo for imports, exports, and transshipment, but is yet to include liquid and LCL 
(less than container load) sea cargo, air freight, and trade through land routes. 
5 Over 70% of consignments are cleared with in one hour (WTO document TN/TF/W/135, 
17 July 2006).  In early 2006, 25% of imports by value were cleared within one day and 70% within four days 
(World Bank, 2006b, p. 139).  Foodstuffs can take longer due to SPS requirements, but are normally cleared 
within a week (USDA, 2006, p. 9). 
6 Pakistan is also a signatory of the Nairobi and Istanbul Conventions and is to implement the World 
Customs Organization (WCO) Framework on Standards to Secure and Facilitate Global Trade. In partnership 
with U.S. Customs, Pakistan has established an internatio nal container cargo control te rminal at Port Qasim that 
complies with WCO and U.S. requirements for safe ports. 
7 In 2004, Pakistan did not comply with 30 provisions of the Kyoto General Annex and ten provisions 
of the Specific Annex (CBR, 2004a, pp. 49-50). Pakistan WT/TPR/S/193 
 Page 39 
 
 
Afghanistan), although, according to authorities, it h as fallen sharply due also  to trade liberalization 
(section (2)(v)(a)). 
(ii) Tariffs 
(a) Policy and general features 
14. Unilateral "tops down" tariff reform programm es ended in 2002/03; since then "piecemeal" 
reforms have mainly prevailed, including exte nding duty exemptions/con cessions.  Although lower, 
the anti-export bias from tariffs and other trad e restrictions remains high, favouring import 
substitution and reducing Pakistan’s resource- use efficiency, export competitiveness, and 
diversification.8  Pakistan reduced tariffs to zero on a number of items in the 2007/08 Budget9;  it 
intends to take further unilatera l tariff reforms to eliminate the anti-export bias and to encourage 
export-led growth. 
15. Tariff rates (inscribed in the First Schedule of  the Customs Act, 1969) are amended annually 
at Budget time and approved by Parliament in th e Finance Act.  The CBR determines annual tariff 
rates in close collaboration with key ministries, ma inly the Ministries of Finance;  Commerce;  and 
Industries, Production and Special Initiatives; along w ith the Engineering Development Board, which 
conducted the Competitiveness and Efficiency Impr ovement Exercise for the 2007-08 Budget.  This 
was aimed at rationalizing the tariff by providing sufficient tariff incentives, through cascading, to 
local industry and foreign investors, while impr oving competitiveness through facilitation rather than 
providing "undue" protection.10  The CBR circulates proposed tariff changes to relevant ministries and 
departments for comment.  It also receives tariff recommendations from the National Tariff Commission (NTC), which conducts public inquiri es into tariff assistance, and since 2004/05 has 
provided annual tariff proposals around April/May (Chapt er II).  Since the last Review, its role in 
tariff policy making, including on the imposition of "regul atory" duties, appears to have diminished as 
its functions in contingency protection have incr eased.  Changes in legislation introduced in 2006/07 
allow the Government to raise tariffs during the year  by up to 35 percentage points (section 18(5) of 
the Customs Act). 
16. The Government has general authority (sec tion 19, Customs Act) to apply tariff 
exemptions/concessions, and to add or modify import rules.  The Ministry of Finance/CBR issues these as Statutory Regulation Orders (SROs), wh ich are approved by the Economic Coordination 
Committee of Cabinet.  Transparency is being improved by  reducing  the number of SROs and 
incorporating these con cessions into the tariff.
11  The number of SROs providing tariff concessions 
has fallen from 35 in 2001/02 to 14 in 2007/08;  only three or four are used regularly. 
17. Tariff revenue was 19% of government tax recei pts in 2005/06, up from 15.3% in 2001/02.  
This was despite significant tariff reductions, due to substantial import growth associated with 
economic expansion, and better tari ff administration and collections.12  Most revenue accrues from 
indirect taxes, especially sales tax (section (4)(i)). 
                                                      
8 World Bank, 2006b, pp. 125-127. 
9 Government of Pakistan, (2007a), p. 12. 
10 EDB (2007b). 
11 Government of Pakistan (2006c), p. 7. 
12 Government of Pakistan (2006c), p. 8.  WT/TPR/S/193 Trade Policy Review 
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(b) Structure 
18. The Pakistan Customs Tariff (PCT) is the Harmonized Commodity Description and Coding 
System at the eight-digit tariff line level;  HS07 replaced HS02 (adopted on 1 July 2002) in 
July 2007.13  The number of tariff lines rose from 6,803 in 2006/07 to 6,909  in 2007/08 (5,477 in 
2001/02), due mainly to splitting existing tariff lines to  meet various sector needs.  The non-integrated 
tariff schedule, which is published annua lly on the CBR website, has only MFN rates. 
19. Tariffs remain the main trade policy instrument.  Although the simple average (unweighted) 
MFN tariff in 2007/08 of 14.5% is below the 20 01/02 rate, it rose to 15.0% in 2006/07 and still 
slightly exceeds the 2005/06 level of 14.4% (Table III.1).  The rise in 2006/07 was due mainly to the 
introduction of  higher tariffs for some 600 industrial pr oduct lines, while the reduction in 2007/08 
primarily reflected the introduction of zero rates on 5.8% of tariff lines and reduced or eliminated 
rates on raw materials, parts, and components used in manufacturing.14  The 2007/08 Budget also 
raised tariffs on a number of products, such as poultry meat and welded stainless steel pipes, to protect 
local industry against surging imports.15  
Table III.1  
Pakistan's tariff structure, 2001/02 and 2004/08 
(Per cent) 
    2001/02 2004/05 2005/06 2006/07 2007/08 Final 
bounda 
1.    Bound tariff lines (% of all tariff lines) 36.6 .. 98.4b98.0 98.0 98.0 
2.     Simple average applied rate 20.4 16.8 14.4 15.0 14.5 61.3 
    Agricultural products (HS01-24) 21.8 19.0 15.6 15.4 14.9 95.1 
    Industrial products (HS25-97) 20.2 16.5 14.2 14.9 14.5 56.6 
    WTO agricultural products 22.1 19.3 15.7 15.3 14.8 96.1 
    WTO non-agricultural products 20.1 16.5 14.2 15.0 14.5 56.7 
        Textiles and cl othing 26.4 21.7 18. 9 19.4 19.3 24.1 
3.    Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 0.0 0.0 0.0 
4.    Domestic tariff "peaks" (% of all tariff lines)c 0.9 1.2 1.1 1.0 1.1 0.0 
5.    International tariff "peaks" (% of all tariff lines)d 57.1 52.0 40.1 41.5 40.0 95.1 
6.    Overall standard deviation of  tariff rates 16.0 11.9 11.0 11.3 11.7 22.3 
7.    Coefficient of variation of  tariff rates 0.8 0.7 0.8 0.8 0.8 0.4 
8.    Duty free tariff lines (% of all tariff lines) 0.0 0.0 0.0 0.0 5.8 0.0 
9.    Non- ad valorem  tariffs (% of all tariff lines) 0.9 0.6 0.7 0.7 0.6 0.0 
10.  Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 0.9 0.6 0.7 0.7 0.6 0.0 
11.  Nuisance applied rates (% of all tariff lines)e 0.0 0.0 0.0 0.0 0.0 0.0 
.. Not available. 
a Based on 2006/07 tariff schedule.  Implem entation of the U.R. was reached in 2004.  Calculations on bound averages are based 
on 6,670 bound tariff lines (representing 98% of total lines), out of which 6,618 (97.2%) are fully bound and 52 (0.8%) are 
partially bound. 
b As of 26 October 2005. c Domestic tariff peaks are defined as those exceeding three times the overall simple average applied rate. 
d International tariff peaks are defined as those exceeding 15%. 
e Nuisance rates are those greater than zero, but less than or equal to 2%. 
Note: Calculations exclude specific rates and include the ad valorem  part of compound rates.  The 2001/ 02 tariff schedule is based on 
eight-digit HS96 nomenclature consisting of 5,477 tariff lines;  the 2004/05, 2005/06, and 2006/07 tariff schedules are based o n 
HS02 nomenclature consisting, respectively of 6,231, 6,336, and 6,803 tariff lines;  the 2007/08 tariff schedule is based on HS 07 
nomenclature consisting of 6,909 tariff lines. 
Source:  WTO calculations, based on data provided by the authorities of Pakistan.  
                                                      
13 In July 2007, Pakistan joined the WTO waiver until end-2007 on the application of GATT Article II 
to enable GATT Article XXVIII negotiations and cons ultations with Members on the adoption of HS07 (WTO 
document WT/L/675/Add.3, 31 July 2007). 
14 These included compressed natural gas (CNG) compressors, paper and paperboard, light engineering 
products, polystyrenes and their raw ma terials, and footwear (CBR, 2007). 
15 CBR (2007). Pakistan WT/TPR/S/193 
 Page 41 
 
 
20. The tariff remains relatively complex, with 29 (24 in 2001/02) different rates.  In 2007/08, it 
contained 14 ad valorem  rates ranging from zero to 90% and 15 specific rates (13 and 9 in 2001/02, 
respectively).  Peak ad valorem  rates have dropped in recent years from 250% to 90% and are 
concentrated on a few sensitive items (1.0% of all ta riff lines) e.g.  rates of either 65%, 75% or 90% 
on most motor vehicles (increased in 2007/08, see section 2(iv)(a));  80% on motorcycles (reduced 
from 90% in 2007/08);  and 90% on alcoholic beverages.  Seven ad valorem  rate bands (zero, 5%, 
10%, 15%, 20%, 25%, and 35%) account for some 98% of tariff lines, and 99.4% of lines are subject to ad valorem  rates.  Modal tariff rates for 2007/08 are 5% and 25% (Chart III.1).  Since 2001/02, 
average tariffs have declined most on agricultura l products, falling continuously (WTO basis) from 
22.1% to 14.8% in 2007/08.  During this period, the share of items with a tariff of 5% rose 
substantially (from 10.0% to 33.9%) as did those w ith rates of 15%, 25% and 35%, while those with 
rates of 10% and 30% fell sharply (Chart III.2).  Average MFN tariffs on non-agricultural products 
(WTO basis) rose in 2006/07 to 15.0% before falling to 14.5% in 2007/08;  the rise was due mainly to 
an increase in the average for textiles and clothing to 19.4%;  this is slightly lower in 2007/08, at 
19.3%, but remains well above the non-agricultural average.   
 
 (17.0%)
n.a. n.a.(32.0%)
(10.0%).
n.a.(39.1%)
n.a.(1.1%) (1.1%)  (5.8%)  (33.9%)
 (12.7%)
(7.0%) (13.4%) (19.6%) 
(0.4%)  (5.5%)
02004006008001,0001,2001,4001,6001,8002,0002,2002,4002,6002,800
zero 5% 10% 15% 20% 25% 30% 35% >35% Source:     WTO Secretariat calculations, based on data provided by the authorities of Pakistan;  and Pakistan Customs online 
                    information.  Viewed at:  http://www.cbr.gov.pk/newcu/TARIFF/Tarriff-2007-2008.asp.Number of tariff linesChart III.1
Distribution of MFN tariff rates, 2001/02 and 2007/08
Tariff rates 
Note:          Calculations exclude specific rates and include the ad valorem part of com pound rates.  Fi gures in parentheses denote 
                   the share of total lines.   The 2001/02 tariff consists of 5,477 tariff lines and the 2007/08 consists of 6, 909.MFN 2001/02
MFN 2007/08
n.a.             Not applicable.
 WT/TPR/S/193 Trade Policy Review 
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0.010.020.030.040.050.060.070.080.090.0100.0110.0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21Calculations exclude specific rates and include the ad valorem  part of compound rates.   Sections 1, 2, 4, 5, 6, 11 and 17 are not fully 
bound.  Final bound rates are based on 2006/07 tariff schedule.
WTO Secretariat calculations, based on data provided by the authorities of Pakistan;  and Pakistan Customs online information.
Viewed at:  http://www.cbr.gov.pk/newcu/TARIFF/Tarriff-2007-2008.asp.Per centChart III.2 
Average applied MFN and bound tariff ra tes, by HS section, 2001/02 and 2007/08
Note:
Source :01   Live animals & products        
02   Vegetable products03   Fats & oils      04   Prepared food, etc.05   Mineral products06   Chemicals & products07   Plastic & rubber
08   Hides & skins09   Wood & articles10   Pulp, paper, etc.11   Textiles & articles12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.15   Base metals and products16   Machinery17   Transport equipment18   Precision instrument19   Arms & ammunition
20   Miscellaneous manuf.21   Works of art, etc.MFN 2001/02
MFN 2007/08 
Final bound
Average applied rate 
2007/08  (14.5%)Average applied rate
 2001/02  (20.4%)Average final bound rate
(61.3% )
 
(c) MFN tariff bindings 
21. Pakistan’s coverage of tariff binding s rose considerably as from 26 October 2005.16  Som e  
97.2% of tariff lines are now fully bound and a furt her 0.8%, including mainly certain paper and paper 
products, are partially bound (36.6%  of items were bound in 2001/02)  (Table III.1).  All bindings are 
ad valorem .  Unbound items are mainly motor vehicles a nd parts, alcoholic beverages, mandarins, 
sorbitel, some seeds, and certain meat and meat pr oducts, e.g. some beef and preserved meats.  The 
authorities provided no comments concerning the unbound agricultural items. 
22. Ceiling levels mainly exceed applied rates.  The final average bound tariff rate of 61.3% is 
almost four times or 46.8 percentage points hi gher than the 2007/08 applied level (Chart III.2).17  This 
reduces predictability as substantial leeway exists to  raise applied tariffs;  on average, the gap is 
highest for agricultural products (bound levels exceed 95%).  In 2007, Pakistan eliminated  the last of 
the numerous cases where applied tariff rates exceeded commitments (under the HS02 tariff 
                                                      
16 WTO documents G/MA/TAR/RS/94, 14 July 2003; G/MA/TAR/RS/94/Add.2, 26 July 2005;  and 
WT/Let/502, 20 November 2005.  Pakistan has introdu ced several rectifications/modifications to its WTO 
schedule of tariff commitments as a result of bilateral arrangements, mainly in textiles. 
17 This gap is much larger on some agricultural ite ms, e.g. seven tariff lines (cane or beet sugar and 
chemically pure sucrose, in solid form) under HS code 1701 have an MFN applied rate of 10% and a bound rate 
of 150%;  one tariff line (08029010, Ar eca betel nuts) is bound at a rate of  200% while the MFN applied rate is 
5%;  and several other tariff lines have MFN applied and bound rates of 5% and 100%, respectively. Pakistan WT/TPR/S/193 
 Page 43 
 
 
nomenclature) (as noted in its previous Review).18  The increase of tariff lines resulting from the 
introduction of the HS07 tariff nomenclature in Ju ly 2007 (section (b) above) makes the transposition 
of Pakistan's existing binding commitments to the new nomenclature urgent;  Pakistan has taken no 
action under GATT Article XXVIII since its last Re view.  The 2007/08 Budget amended legislation 
to prevent "regulatory duties" (section (f)) bei ng levied on top of tariffs, which would exceed 
Pakistan’s multilateral commitments (section 18(5) of the Customs Act). 
(d) Specific or compound  duties 
23. Non- ad valorem  duties apply to 0.6% of tariff lines (0.9% in 2001/02).  Most are specific 
rates (e.g. on betel leaves (PRs 150/kg), certain animal and vegetable oils, including margarine 
(ranging from PRs 5,000 to 16,600/kg), certain se mi-manufactured silver (PRs 120/kg), and gold 
(PRs 2,500/kg).  Compound duties cover certain petroleum (lubricating) oils (PRs 0.88/litre plus 25%).  Non- ad valorem  rates can conceal relatively high pr otection, especially against cheaper 
substitutes and/or if world prices are declining, thereby potentially distorting efficiency.  The only 
ad valorem  equivalents (AVEs) available to the WTO S ecretariat covered four HS02 eight-digit items 
at rates ranging from 32.1% (petroleum oils) to 69. 3% (liquid soda); calcula tions were based on 1999-
2001 imports. 
(e) MFN tariff dispersion and escalation 
24. Tariff dispersion, as measured by the coefficien t of variation, has remained constant during 
the review period.  Maintaining lower duties on indust rial plant, machinery, and raw materials than on 
consumer goods and/or reducing tariffs  faster on inputs than on final goods to favour investment and 
industrial development a dds to tariff dispersion.
19  As efficiency losses from tariffs depend on both 
level and dispersion, wider disparities may undermin e the efficiency gains from reduced tariffs.  
International tariff peaks fell from 57.1% of tariff lines in 2001/02 to 40.0% in 2007/08, while the incidence of domestic tariff peaks increased slightly  to 1.1%.  Tariff escalation, usually associated 
with dispersion, remains pronounced and a "guiding pr inciple" of tariff policy;  primary raw materials 
are generally dutiable at tariffs of 0-5%, intermed iate inputs and components at 5-10% and finished 
goods at 20-25% (Chart III.3).
20  Including input concessions would increase tariff 
dispersion/escalation. 
                                                      
18 In 2001/02, applied tariff rates on 91 eight-d igit HS items (mostly textiles and clothing) exceeded 
their bound levels by up to 17 percentage points (WTO, 2002, p. 31).  The 2007/08 Budget reduced the MFN 
applied rate on aluminium waste and scrap – auto-parts (HS 7602.00.10) from 35% to the bound level of 30%. 
19 Government of Pakistan (2006c), p. 7. 
20 CBR (2007 ). WT/TPR/S/193 Trade Policy Review 
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n.a.n.a.051015202530
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.3
Tariff escalation by 2-digit ISIC industry, 2001/02 and 2007/08
n.a.n.a.051015202530
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherAverage applied rate in manufacturing
(20.9%)
Not applicable.
Calculations exclude specific rates and include the ad valorem part of compound rates.
WTO Secretariat calculations, based on data provided by the authorities of Pakistan;  and Pakistan Customs 
online information.  Viewed at:  http://www.cbr.gov.pk/newcu/TARIFF/Tarriff-2007-2008.asp.n.a.
Note:
Source :Per cent
First stage of processing Fully processed Semi-processedPer cent
Average applied rate in manufacturing
(15.0%)2001/02
2007/08
 Pakistan WT/TPR/S/193 
 Page 45 
 
 
(f) Regulatory duties 
25. "Regulatory duties" of up to 100% may be impo sed on specified imports in addition to tariffs 
and "special" duties (Customs Act, section 18(3)).  They are issued in SROs by the CBR and are not included in the tariff schedule (not hence, the Secr etariat’s tariff analysis).  Regulatory duties were 
being phased out at the time of the previous Revi ew, but are still imposed periodically under "certain 
peculiar and compelling circumstances".  The maximum duration of one year was removed in the 2005/06 Budget.
21  While no regulatory duties on imports are currently in force, seven SROs 
imposing regulatory duties were issued during the Re view period.  For example, duties of 5% were 
levied on raw and white crystalline sugar (both beet  and cane) in October 2006, and on emamectin 
benzoate in January 2007;  and duties of 5% and 15% were levied  on fixed wireless terminals and 
certain pharmaceuticals respectively, in November 2006.22  The removal in 2005/06 of the legislative 
requirement for these duties to be imposed subject to NTC recommendations was aimed at providing greater flexibility in using them;  however, it has reduced their transparency and public scrutiny. 
(g) Concessions and exemptions 
26. In addition to general powers to exempt tariffs, the Government can repay all or part of the 
tariffs paid on imported inputs used in exports or by  firms/organizations declared entitled to import at 
concessionary rates (Customs Act, section 21). 
27. While the number of authorizing SROs has been  consolidated, tariff concessions/exemptions 
remain a widely used industrial policy instrument  to promote investment, industrialization, and 
exports (section 3(v) and Table AIII.1).  Further tax concessions were introduced in 2006, especially 
on tariffs.
23 Various exemptions/concessions, including for designated/author ized persons, were 
superseded by an expanded list in June 2006 (Table AIII.2).24  Many exemptions/concessions are also 
directed at end use, covering specific activities (e.g. only phosphatic fertilizer manufacturers may 
import phosphoric acid tariff exempt), or users, especially manufacturers-cum-importers, though 
conditions are often attached, such as minimum in-house production facilities (Tables AIII.1, AIII.2 
and AIII.3).  Some are firm specific (incl uding state-owned entities), time bound or applied 
retrospectively, usually to rectify errors in the tariff, the Customs notifications or occasionally to 
comply with court decisions (section (vi)).25  Most exemptions/concessions are on imported inputs 
(raw materials, plant and equipment), and often require that these inputs are not produced locally, in order to maintain protection for local produ cers, but final goods are also covered.  
Exemptions/concessions were extended and deepened  in the 2007/08 Budget to assist manufacturing 
as part of the Government’s "S econd Generation" tariff reforms. 
28. Some 26% of tariff lines covering four SROs we re subject to tariff concessions (sections 19 
and 21) in 2006/07.
26  Revenue forgone from tariff exemptions/concessions, including refunds and 
rebates, totalled PRs 53.7 billion in 2005/06, up from PRs 19.4 billion  in 2001/02.  The average tariff 
collection rate of 9.2% in 2005/06, although higher than in 2001/02 (8.3%), remained well below the 
                                                      
21 Previously any SRO notification would expire at th e end of the financial year in which it was issued 
unless rescinded earlier (section (18(2)).   
22 Customs Notifications SRO No. 1074(I)2006, No. 1089(I)2006, and No. 44(I)/2007.  
23 Government of Pakistan (2006a), p. 25.   
24 Customs Notification SRO No. 655(I)/2006, No. 567(I)/2006;  and No. 575(I)2006;  and 
Government of Pakistan (2006c), p. 7.  
25 For example, only the private company M/s Pakist an PTA Ltd can import paraxylene and acetic acid 
duty free to make pure terephthalic acid until end-June 2008 .   
26 Customs Notifications SRO No. 565(I)2006, No. 567(I)/2006, No. 575(I)2006, and No. 693(I)2006. WT/TPR/S/193 Trade Policy Review 
Page 46 
 
 
average (unweighted) tariff in 2005/06 of 14.4%.  This  reflected mainly the wi despread use of tariff 
exemptions/concessions, and non-collection of customs duties.  
29. It is difficult to understand which concessions /exemptions still operate and to assess their 
incidence:  the extent to which new exemptions /concessions extend, replace or duplicate previous 
ones is often unclear.  While SROs on exemp tions/concessions are published in the official Gazette 
and simultaneously posted on the CBR website, no integrated schedule or publication of current 
concessions/exemptions exists.  Their wide use makes the tariff regime complex and less transparent.  By altering the structure of tariff incentives unp redictably, with uncertain effects on resource 
allocation, these concessions/exemptions may pote ntially counteract economic efficiency, for 
example, by raising tariff escalation and incr easing/widening effective rates of protection. 
(h) Tariff preferences and rules of origin 
Preferences 
30. Pakistan increasingly grants preferential ta riffs on imports under trade agreements and 
unilateral schemes (Chapter II).  The authorities prov ided no data on the share of imports entering at 
preferential rates, but indicated this would rise as existing and new trade agreements are phased in and 
tariff concessions deepened.  This report does not c over preferential duties in its tariff analysis since 
these were unavailable, either in an integrated electronic tariff schedule or the published customs 
tariff.   Preferential tariff margins and product covera ge vary widely across agreements/schemes. 
Rules of origin  
31. Preferential rules of origin exist under bilatera l/plurilateral trade agre ements and unilateral 
schemes (Table III.2).  They incorporate various va lue addition and change in tariff classification 
criteria, as well as usually providing for product-specif ic rules.  Pakistan intends to introduce non-
preferential rules of origin in the Import Policy Order. 
Table III.2 
Preferential rules of origin a nd tariffs in trade agreements, 2007  
Trade agreement Wholly 
produced or 
obtained Minimum value 
addition Cumulation rules Product 
specific rules Maximum 
tariffs/tariff 
margins 
South Asian Association 
for Regional Cooperation  Yesa 40% of f.o.b.;  
30% for LDCs;  
35% for Sri 
Lankab Minimum aggregate 
originating content of 
50% f.o.b.c Yesd Maximum 20% by 
2008 (5% by 2009 on 
LDC imports); maximum 5% by 
2013 
Organization of Islamic 
Conference Yesa 40% of f.o.b.;  
30% for LDCs Minimum aggregate originating content of 
60% of f.o.b.; 50% 
for LDCs Possible in 
accordance with 
negotiated 
sectoral agreements Maximum tariffs of 
25%, 15% and 10% 
on certain items; fast-
track programme to raise margins of 
preference to 50% 
Group of Developing Eight Countries  Being 
drafted  Being drafted Being drafted   Being drafted  Maximum 10% on 
certain items 
Economic Cooperation 
Organization Yesa 40% of f.o.b. Minimum aggregate 
originating content of 
60% of f.o.b. Possible in 
accordance with 
negotiated 
sectoral agreements Maximum 10% by 
2009 
Table III.2 (cont'd) Pakistan WT/TPR/S/193 
 Page 47 
 
 
Trade agreement Wholly 
produced or 
obtained Minimum value 
addition Cumulation rules Product 
specific rules Maximum 
tariffs/tariff 
margins 
Pakistan-Sri Lanka FTA Yesa 35% of f.o.b.e Minimum value 
addition of 25% in 
exporting countryf None Tariffs phased out on 
most goods by June 
2008 
Pakistan-China FTA Yesg 40% of f.o.b. Minimum value 
addition of 25% in 
exporting countryh None Tariffs phased out on 
many goods and 
maximum 50% margins of preference 
on others by 2012  
Pakistan-Malaysia PTA (Early Harvest 
programme)i Yesg 40% of f.o.b. Minimum value 
addition of 25% in 
exporting countryh Certain textiles 
and jewelleryj Tariffs of 5% 
eliminated and 50% 
margin of preference 
on 10% duties for a 
few goods 
Pakistan-Iran PTA Yes  .. .. ..  Margins of preference mainly of 
10% and 30%  
Pakistan-Mauritius PTA Yes .. .. .. Margins of 
preference of mainly 
50% extended to 100% after one year 
on selected goods  
Global System of Trade Preferences Yesa 50% of f.o.b.; 40% 
for LDCse Minimum total value 
addition of 60%; 
50% for LDCs Negotiable  Margins of 
preference of from 
40% to 65% 
.. Not available. 
a Fish caught in high seas must be in vessel registered in me mber country and operated by its citizens or an entity with domest ic 
equity (including state) of 65%, or 75% equity of all members. 
b Final good must be classified to di fferent tariff heading (4-digit HS) than all non-originating material inputs. 
c Also, must be minimum domestic minimum domestic value cont ent (value of inputs originating in the exporting member plus 
domestic value addition in the exporting member) of 20% of f.o.b.  value, and meet change in tariff classification requirements.  
d Generally require lower minimum value addition of mainly 30% or 40% and ch ange in 6-digit HS classification. 
e Final good must be in a different 6-digit tariff cla ssification than all non-orig inating material inputs. 
f Minimum total value addition in two countries of 35%. g Fish caught in high seas must be in vessels re gistered in member or entitled to fly its flag. 
h Minimum value addition in two countries of 40%. 
i EHP rules to be replaced under FTA. j Based on change in 4-digit tariff cla ssification (spinning, weaving,  bleaching, dyeing, printing and finishing sufficient 
transformation to be originating goods). 
Source: Compiled by WTO Secretariat. 
(i) Tariff quotas 
32. Pakistan has no MFN tariff quotas.  However, quot as on imports of certain goods eligible for 
tariff exemptions/concessions operate effectively as tariff quotas.  For example, new and used 
concrete-mixer lorries eligible for the 5% concess ionary rate are limited to an all-up quota of 
2,500 units, allocated on a "first come first ser ved" basis;  it is substantially under-utilized 
(Table AIII.2).  There are bilateral tariff quotas on te a, betel nuts, and certain clothing with Sri Lanka, 
and reportedly on certain textile products with  Mauritius under respective FTAs (Chapter II). 
(iii) Customs valuation, minimum import prices and preshipment inspection 
33. Pakistan legislated WTO customs valuation rules in 2000 (section 25, Customs Act).  
Transaction value is used, followed sequentially by  other WTO methods.  Un til June 2002, Customs 
checked declared values during transition using a prev iously constructed valuation data base;  this WT/TPR/S/193 Trade Policy Review 
Page 48 
 
 
practice was discarded amid allegations that th ese constructed valuations  were often applied.27  
Customs currently maintains reference prices only to check authenticity of decl ared values.  However, 
transaction value reportedly applies to only some 90- 95% of imports and is used unevenly on food 
and consumer goods.28  Customs has used its "take over" legislation introduced in 2006 to determine 
customs values of targeted goods to guard ag ainst rampart fraudulent under-invoicing.  These 
provisions allow Customs to "take over" (enforced purchase) specified imported goods where another person offers a "substantially" higher  value (20% or more) than the importer’s declared customs value 
(section 25A, Customs Act).
29  If the importer does not agree to rais e the declared value to this offer, 
Customs "takes over" the goods and sells them to th e local bidder, paying the importer his declared 
value plus 5%.30  Customs has "taken over" only one import consignment, of motor cycle parts.  
Customs values set for these goods have been review ed with input from the Engineering Development 
Board and the Association of Pakistan Motorcycle Assemblers.31 
34. Special customs valuation procedures apply to moto r vehicles.  Their c.i.f. price is constructed 
from f.o.b. values supplied by local agents of fore ign manufacturers plus the local agent’s commission 
and other incidental charges, freight to Pakistan  provided by the shipping lines, insurance (where 
unavailable at a rate of 1% of the C&F valu e) and landing charges (1% of c.i.f. value).32  Used 
vehicles of up to three years old (five years old until the 2006/07 Budget) can only be imported by Pakistani nationals once every two years either as personal baggage, transfer of residence, or gift, and are depreciated monthly at 2%, up to 50%.  "Special" provisions enabling payment of a lump sum specific duty, covering tariffs and other taxes (sales tax, income withholding tax, and capital 
value-added tax) based on engine capacity up to 1, 800 cc (Asian makes only) apply to imported used 
cars.
33  Used non-Asian cars with engine capacities ab ove 1,601 cc and Asian cars with engines above 
1,800 cc are taxed normally as for new cars and levied ad valorem  tariffs and domestic taxes 
separately, according to engine capacity. 
35. Pakistan has preshipment inspection requirement s on a wide range of allowable imports of 
second-hand goods (e.g. plant, machinery, equipment, and apparatus) by an authorized agency to 
certify age and workability, mainly for h ealth and safety reasons (section (2)(v)).34 
(iv) Other levies, charges and taxes 
(a) Domestic taxes   
36. While, with some important exceptions, domestic taxes (sales, excise, and income 
withholding taxes) apply at the same rate on dom estic and imported products  and may not generally 
discriminate against imports, any assessment is made difficult by their non-transparency and 
                                                      
27 CBR (2003c), p. 54. 
28 USTR (2007a), pp. 441-442. 
29 Cosmetics and toiletries; floor coverings and sheets; self-adhesive tape; coated abrasive and bonded 
abrasive paper; motor cycles; auto-parts; soap;  polyester yarn; fabrics; air conditioners; and soda ash 
(CBR, 2003c). 
30 The bidder must provide a pay order of 25% of the offer (plus tariffs and other duties), which is 
forfeited if the sale fails.  The goods are then releas ed to the original importe r at the declared value. 
31 EDB  (2006), p. 16. 
32 On the rare occasion that domestic models are impor ted the certified f.o.b. value of a similar export 
model uplifted by 5% of its C&F price is used as the basic c.i.f. price on which to add the other components.     
33 The combined specific duty ranges from US$4,000 (Asian makes with engines up to 800 cc) and 
US$6,000 (for non-Asian makes up to 800 cc) to US$21,000 for Asian makes with engine capacity from 
1,601 cc to 1,800 cc, or the equivalent in PRs. 
34 Authorized inspection firms are Lloyds of Lon don, Quality Tech LLC, ABS, Bureau Veritas, SGS 
and IMTECH (Trade Policy 2006-07, Part A, IPO 2006-07, Appendix H). Pakistan WT/TPR/S/193 
 Page 49 
 
 
complexity, including in how they are administered  differently on imports.  Thus, such taxes may 
have broader discriminatory effects on imports (section (4)(i)).  
Capital value tax  (CVT) 
37. The capital value tax (CVT), levied only on imported motor vehicles (excluding hire cars  and 
three wheelers), including used vehicles, was merg ed with the tariff in June 2007, thereby raising 
tariffs on cars with engines above 800 cc by either 5,  10 or 15 percentage points depending on engine 
capacity.35  The CVT on foreign travel air tickets (1.5% of value) was eliminated in 2006. 
(b) Other 
38. Changes to the Customs Act (section 18D) in th e 2007/08 Budget allows fees and charges to 
be levied on imports for services, such as examina tion, scanning, and inspection;  the legislation does 
not specify that these charges and f ees are to be on a cost recovery basis.  A maximum fee of US$50 
(0.5% of the value if lower) is payable on the invoiced value of tea imports from Kenya, for the attestation of certificates of origin by the Pakist an High Commission in Nairobi and, according to the 
authorities, to cover the service costs of verifica tion of quality for valuation purposes (Import Policy 
Order).  While the ad valorem  alternative duty may not seem to represent the approximate cost of 
services rendered, the fee is capped at a relatively lo w level.  The authorities indicated that a revenue 
surcharge of 1%, announced in the 2007/08 Budget, w as not implemented;  it was  to be levied on all 
imports, except mainly vegetables and pulses, edible oils and ghee, crude petroleum, medicines and 
fertilizers.
36 
39. Revenue from cesses of PRs. 0.05 per kg on impo rted edible oils and 10% of the tariff 
collected on oilseeds imported for crushing purposes (Chapter IV) are used to find the Pakistan 
Oilseed Development Board. 
(v) Import prohibitions, quotas, restrictions, and licensing 
40. The Government can prohibit or restrict impor ts by notification (Customs Act, section 16), 
and ban imports from all or any source if deemed in the "public interest" (Import Policy Order 2006, 
section 19).  Such measures are contained in the Mi nistry of Commerce’s annual Import Policy Order 
(Part-A, Trade Policy).  All goods are freely imported, subject to tariffs and other taxes, unless 
included in prohibited (Appendices A and B)  or restrictive (Appendix C) lists. 
41. The 2006-07 Trade Policy changed several import rules, including allowing:  government 
organizations to import directly, without recourse to  the Ministry of Commerce, provided they have 
foreign exchange from the Ministry of Finance; pub lic and private limited companies to import new 
or used aircraft, subject to relevant licensing fo rmalities; and research laboratories and educational 
institutions to import acetone, sulphuric acid, and hydrochloric acid after obtaining a "no-objection" 
certificate (NOC) from the Ministry of Narcotics Control (previously allowed for industrial firms 
only).  Specialized sporting clubs and associations may now import guns, parts, and slugs, subject to 
                                                      
35 CBR (2007).  The CVT rose progressively from 3.75%  of the tax- and tariff-inclusive price for cars 
with engines above 800cc to 7.5% with engines of 1,600 cc and over.  It was greater on non-Asian small 
vehicles (US$6,000), and the top amount for vehicles with engines from 1,601 to 1,800 cc applied only to Asian 
vehicles, excluding jeeps.  The tariff analysis in this report excludes thes e duty increases on motor vehicles as a 
result of the inclusion of the CVT with the tariff.  Th e new tariff rates are 55% for vehicles with engine 
capacities from 800 to 1,000cc; 60% from 1,000 to 1,500 cc; 75% from 1,500 to 1,800cc;  and 90% for larger 
engine vehicles up to 3,000cc. 
36 CBR (2007). WT/TPR/S/193 Trade Policy Review 
Page 50 
 
 
notified procedures, and pharmaceutic al raw materials may be importe d provided they conform to the 
Drugs Imports and Exports Rules 1976.  Palm steari n may be imported subject to certain technical 
standards.37  The Government has continued to relax import restrictions on second-hand plant and 
equipment, including in the 2006-07 Budget.   
(a) Prohibitions 
42. Pakistan continues to ban imports of a range of items, mainly for health, safety, security, 
religious, and environmental reasons (e.g. under the Montreal and Basle Conventions).38  Imports of 
alcoholic beverages, and re-treaded and used pneumatic tyres also remain banned.39  Since the last 
Review of Pakistan, the ban on imported iron and st eel waste and scrap has been relaxed and that on 
cotton waste lifted.  While second-hand machiner y was also removed from the prohibitive list, 
imports of a wide range of used pl ant and equipment remain prohibited  (Table AIII.4).  Imports of 
used equipment are subject to pre-shipment inspecti on, by authorized companies, to be certified in 
good working order and ten years old or less.  Constr uction, mining, oil, gas, and petroleum industries 
may import second-hand plant, machinery, and equipment (and used or re-conditioned parts), 
including of specified machinery and specia lized vehicles (Import Policy Order), provided 
construction companies are registered with the Pakistan Engineering Council (from 2007/08).40 
43. Pakistan bans all imports from Israel, and restricts imports from India according to a steadily 
increasing positive list that currently covers 1,07 7 eight-digit HS codes (over 600 in mid 2000).41  A 
further 1,000 tariff items of raw materials not made in Pakistan can be imported from India for use in 
exports (since 2002).  Pakistan’s policy is to gradually  open trade with India, particularly in products 
where it is uncompetitive, especially for inputs42;  however, the authorities are concerned that unless 
India removes its non-tariff barriers, this could wor sen Pakistan’s trade balance with India.  The 
authorities indicate that extending MFN status to Indi a is being considered, as this could reportedly 
raise bilateral trade to US$2-4 billion;  it is supported by the private sector, which does not believe it would threaten Pakistani industries.
43  Informal/smuggled trade between the two countries, either 
directly, through Afghanistan, or re-routed throu gh third country ports, mainly Dubai and Singapore, 
is estimated at US$500 million annually (mainly cloth, textiles, pharmaceuticals, machinery, 
cosmetics, jewellery, and tyres) (Chapter II).44  
44. Imports of rough diamonds from Cote d’ Ivoire were banned in January 2007.45  While no 
specific imports from Afghanistan are prohibited,  a negative list prevents certain imports by 
                                                      
37 EIU (2006), p. 67. 
38 The Montreal Protocol on Substances that Deplet e the Ozone Layer, and the Basel Convention on the 
Control of Transboundary Movement of Hazardous Wastes and their Disposal.  Imports of most ozone depleting substances are to be phased out progressively by 2010, 2015 or 2040. 
39 The domestic brewery producing for the non-Mus lim market is a private monopoly, and alcoholic 
beverages cannot be sold freely in Pakistan. 
40 This was introduced to ensure that only genuine construction companies imported second-hand 
machinery and equipment.  The 2007/08 Budget also extended this permission to commercial importers of such 
goods (except for dump trucks and concrete-mixer lorries) on behalf of construction companies registered with 
the Pakistan Engineering Council, as well as mining and petroleum firms, subject to the same pre-shipment 
inspection requirements.   
41Import Policy Order, Appendix G, and SRO No. 1100(I)/2006, 3 November 2006.  While India 
granted Pakistan MFN treatment in 1995/96 Pakistan has not reciprocated. 
42 SBP (2006d), Chapter 2, p. 17. 
43 Ministry of Industries, Production and Special Incentives (2005), p. 153;  SBP (2006d), Chapter 2, 
p. 24. 
44 World Bank (2007b). 
45 Notification SRO No. 1/2007. Pakistan WT/TPR/S/193 
 Page 51 
 
 
Afghanistan from transiting through Pakistan, so as to discourage the smuggling of these goods back 
into Pakistan.46 
(b) Restrictions and licensing 
45. Certain imports are restricted unless they meet specified conditions, such as prior approval or 
clearance, passing certain testing arrangements, or satisfying procedural requirements (Import Policy 
Order, Appendix B).  While these are mainly for h ealth, safety, security, and environmental reasons 
(covering many imported second-hand specialized vehicles,  ships, trawlers, aircra ft and related parts, 
and equipment), this does not always seem to be the case e.g. for motor vehicles and the oil and gas sector (Table AIII.5).
47  Certain goods may be imported only by the public sector or industrial 
consumers (e.g. active ingredients for formulati on/manufacturing pesticides).  The requirement for 
prior approval from the Ministry of Petroleum and Natural Resources to import light, mineral, and base oils was removed in 2002/03.  The 2007/08 Budget allowed imports, for own use, of prime 
movers of 380 horsepower and above,  up to four years old (initially only in 2007/08), by registered 
transport companies and established fleet operators with at least 25 prime movers, subject to the 
imported movers being EURO-III compliant.
48  Imports of waste, parings, and scrap of polyethylene 
and polypropylene, previously allowed to industria l users subject to certification from the exporting 
company and by the Pakistan Council for Scientific  and Industrial Research (PCSIR) as being hazard 
free, must (from 2007/08) be covered by mandatory certification in the exporting country or by a specialized preshipment inspection company; the PC SIR is no longer involved due to its inability to 
certify the hazard-free status of imports.  
46. Imports of certain goods eligible for tariff exem ptions/concessions require ministerial or other 
approval (Tables AIII.2 and AIII.3).  For example, the Ministry of Health must approve specified 
finished pharmaceuticals, and packing and raw materials for in-house manufacture of certain 
pharmaceutical substances to be im ported at concessionary tariff rates;  and the Ministry of Food, 
Agriculture and Livestock must certify duty-free imports of wheat flour, and approve manufacturers or formulators of agricultural insecticides permitted to import at concessionary/exempt tariffs.  The 
Economic Coordination Committee of Cabinet can aut horize a plant to be eligible for concessionary 
tariffs.   These concessionary arrangements may operate as a type of import licensing regime. 
47. Pakistan has not submitted replies to the WT O Questionnaire on Import Licensing Procedures 
since its last Review.  The authorities indicate that  this is because Pakistan no longer operates an 
import licensing system.  
(c) Quantitative restrictions 
48. Certain imports (e.g. ozone-depleting substances, certain chemicals) are subject to 
quantitative limits set on a domestic needs basis or by the CBR in consultation with competent 
government agencies (Table AIII.5).  There is a quot a of 1,500 units for imports of used refrigerated 
lorries not older than ten years for 2006-07.
49 
                                                      
46 This list has been reduced to cigarettes and auto parts (cooking oil is now excluded).  
47 Imports of CKD kits for motorcycles and motor vehicles are limited to registered assemblers. 
48 Each import order must be of at least ten prime movers and the importers cannot dispose of the 
vehicles until after five years. 
49 Trade Policy 2006-07, Part A, Import Policy Order, Appendix C, p. 45.  Viewed at: 
http://www.epb.gov.pk/v1/tradepolicy/pdf/ 0775-31072006-ipo.pdf [11 October 2007]. WT/TPR/S/193 Trade Policy Review 
Page 52 
 
 
(vi) State trading 
49. Despite on-going efforts to reduce its involvement  in the economy, the State participates in a 
wide range of trade and/or trade-related activities (section (4)(iii)).  The Government and numerous 
state-run corporations are major importers.  The au thorities did not provide data on the Government’s 
share of total imports, including those by SOEs.  Pakistan last notified the WTO in 2003 that it had no state-trading enterprises within the meaning of Article XVII:4(a) of the GATT 1994;  it also noted that existing state firms are not granted any excl usive or special rights (including statutory or 
constitutional powers) allowing them to influence the level and/or direction of foreign trade.
50  
50. The state-owned Trading Corporation of Pakist an (TCP), the Government’s trading house, 
imports essential commodities for non-profit, socio-political reasons under directives from the Economic Coordination Committee (ECC) of Cabine t (and exports agricultural goods produced by 
public-sector corporations and agencies).  The TCP has no import monopoly or exclusive trading 
rights, and pays full taxes and tariffs on imports .  It mainly sells imported urea to fertilizer 
manufacturers, but also imports other crops, especially wheat and sugar, and periodically pulses 
(daal), when in short supply.
51  Imports are sold by the TCP and the state-owned Utility Stores 
Corporation (USC) at subsidized prices to lower in come households.  Consumption subsidies, almost 
totally on sugar, totalled  PRs 65.5 billion in 2005/06 (forecast at PRs 85.7 billion in 2006/07).  TCP 
plans to import up to 500,000 tonnes of sugar in 2006/07 and to sell a monthly quota of 32,000 tonnes 
through the USC at subsidized prices.  The USC is also required to maintain strategic sugar reserves 
of 500,000 tonnes.  The ECC of Cabinet has instigat ed a review of stocks and commodity prices, 
including for sugar and pulses.  
51. While most exemptions or concessions are available to private firms and SOEs, several SOEs 
benefit, exclusively, from tariff exemptions/concess ions.  Pakistan Steel Mill, which operates as a 
private company, can import iron ores and "concentrates non-agglomerated" duty free. 
(vii) Government procurement 
52. Pakistan is not a signatory or observer to the Plurilateral WTO Agreement on Government 
Procurement and does not currently have plans to jo in;  it has not participated in the work of the 
Working Group on Transparency in Government Proc urement.  In June 2004, Pakistan reformed the 
public procurement practices for its federal ministri es and agencies (including autonomous and semi-
autonomous bodies under their administrative control) in  the light of perceptions of political influence 
in procurement, official corruption, and long dela ys.  They must conduct procurement efficiently and 
economically in a "fair and transparent manner" to achieve "value for money" and giving equal 
opportunity to bidders (Presidential Ordinance, 200 2, section 4).  The Public Procurement Regulatory 
Authority (PPRA), established in May 2002 as a permanent statutory body, regulates public 
procurement of goods and services, including construction works.52  It provides a code of ethics on 
public procurement and recommends new or revised la ws, policies, and procedures, with particular 
emphasis on improving governance, transparency, accountability, and quality of public procurement 
(Presidential Ordinance, section 5).  According to the authorities, Pakistan’s current government 
procurement framework is based upon international best practice aimed at eliminating corruption, 
improving transparency, reducing delays , and enhancing accountability.   
                                                      
50 WTO document G/STR/N/9/PAK, 7 July 2003. 
51 In 2005/06, TCP sugar and urea imports totalled PRs 26.8 billion (US$447 million), equivalent to 
about 2% of Pakistan’s total merchandise imports.  
52 The Ordinance was amended in 2006 to exclude privatized entities from its purview, including the 
Pakistan Telecommunications Company limited (PTCL).   Pakistan WT/TPR/S/193 
 Page 53 
 
 
53. The principal procurement method, open competitiv e bidding, is used for all contracts above 
PRs 100,000 (or PRs 500,000 in some cases).  Procurement contracts generally from PRs 0.1 to 2.0 million must be advertised on the PPRA website, and if higher also in na tional newspapers.  Pre-
qualification of bidders must be based on ability to  perform satisfactorily.  Direct and negotiated 
contracting are permitted subject to prescribed c onditions;  direct tendering is allowed when no 
advantage is envisaged from competitive bidding or where proprietary rights are involved.  Legislative amendments in 2006 allowed direct te ndering when the Government or any authority 
"fixes the price of goods, services or works" or when buying "motor vehicles from local original 
manufacturers at manufacturer’s prices" (section 42(c)).  In these cases competitive bidding is 
considered unnecessary as prices are either fixed or known.  These changes may advantage domestic, 
including resident foreign, suppliers relative to firms located overseas.  
54. Bidding is open to any nationality, unless limite d to national bidders;  and certain nationalities 
are prohibited by government policy (section 24) .  Procuring agencies must provide domestic 
(including foreign) suppliers price preferences where this is government policy.  Price preferences of up to 25% remain on all government purchases de pending on domestic value added content;  the 
maximum preference requires at le ast 30% domestic value added.  
55. Provincial governments handle their own procurem ent, and are not subject to PPRA authority 
or regulations.  However, they are establishing simi lar authorities to regulate their own procurement.  
Two have already adopted the Federal Government framework and others are expected to follow. 
56. Pakistan’s total government procurement mark et for goods and services was estimated at 
PRs 366.1 billion (US$6.3 billion) in 200/01.
53  The authorities did not provide updated figures nor 
and indication of the share of federal procurement covered by the PPRA.   
(viii) Local-content requirements and indigenization programmes 
57. Since its last Review, Pakistan has elimin ated the "voluntary" Indigenization/Deletion 
Programme that provided incentives by way of du ty concessions on prescribed imported components 
and parts used to assemble and manufacture engine ering goods, electrical items, automobiles (cars, 
tractors, motor cycles, commercial vehicles, and buses), subject to meeting deletion lists.54  While 
86 plans covering machinery and domestic appliances were removed by end 2003 , a further 16 for the 
motor vehicle industry were not repealed until replaced by a tariff-based scheme on 1 July 2006 (Chapter IV).
55   
58. A number of excise tax concessions favour local content (section 4(i)).56  Aerated waters 
made wholly from indigenous juices of fruits, vegeta bles, and food grains that contain no other local 
or imported ingredient (except sugar, colouring mate rials, preservatives or additives) are taxed at 10% 
of the retail price instead of 12%.  Non-aerated beverage concentrates used to make non-aerated 
                                                      
53 WTO (2002), p. 54.  
54 The only remaining deletion programme, on exports of arms and ammunition, is proposed for 
elimination in consultation with the Ministries of Defense and Interior. 
55 In light of the programme's inconsistency with  the WTO Agreement on Trade-Related Investment 
Measures (TRIMs), Members granted Pakistan several ex tensions to eliminate these schemes, the last until 
end 2003.  Pakistan’s request for another extension until end 2006 to eliminate the motor vehicle plans, due to 
developmental, financial, and trade needs, was subsequently withdrawn in May 2006 since the schemes were being eliminated (WTO documents G/C/W478, 22  December 2003, and G/C/M/83, 1 May 2006). 
56 Federal Excise Act, 2005, First and Th ird Schedules (Table I).  Viewed at: 
http://www.cbr.gov.pk/newce/FEActandRules/2005/Fed eral%20Excise%20Act%202005updateduptoJune2007.
pdf [11 October 2007]. WT/TPR/S/193 Trade Policy Review 
Page 54 
 
 
waters wholly from the same ingredients are exempt from the 50% excise tax.  Crude vegetable oil 
(excluding cooking oil) obtaine d from locally grown seeds is exempt from the 15% excise tax. 
59. Indigenization requirements still encourage industrialization.  These are generally 
implemented by the Ministry of Industries, Produc tion and Special Initiatives, in conjunction with the 
Engineering Development Board (EDB), which has an Indigenization Committee.  Indigenization of 
motor vehicles and components is encouraged by the tariff-based plan and concessionary tariff 
arrangements (Chapter IV).  Manufacturers of air c onditioners, refrigerators, and visicoolers;  deep 
freezers and coolers;  and washing machines th at meet minimum qualitative processing requirements 
may import specified raw materials, components, and assemblies that are not produced locally, at 
concessionary/exempt tariffs (Table AIII.3).  Th e EDB must also recommend and/or approve 
concessionary imports for in-house manufacture of a wide range of plant, machinery, and equipment. 
(ix) Contingency measures 
60. The National Tariff Commission (NTC) c onducts anti-dumping, countervailing, and 
safeguards investigations.57  The Appellate Tribunal, formed in March 2003 and terminated six 
months later, heard appeals against anti-dumpi ng and countervailing decisions.  The Government 
intends to re-establish an Appellate  Tribunal.  In addition, parties can appeal to the High Court and 
subsequently, the Supreme Court against impositi on of anti-dumping, countervailing, and safeguard 
actions.  Pakistan has taken no countervailing or  safeguard actions.  The only NTC safeguards 
investigation, on footwear imports from a ll sources, was terminated in August 2005.58  I t  h a s  
conducted 24 anti-dumping investiga tions and imposed 19 measures since July 2002.  Pakistan began 
applying anti-dumping measures in July 2002 (tin plate from South Africa), and took action on two 
more products in 2007 (Chinese ceramic tiles and polyester staple fibre imported from Indonesia, Korea, and Thailand) (Table III.3).  At end-June  2007, Pakistan had definitive anti-dumping duties on 
eleven products from thirteen countries.  The anti-dumping duties on tin plate from South Africa, 
which expired in July 2007, were re-newed.
59   
Table III.3 
Anti-dumping actions, as at July 2007 
 Product Initiation  Provisional measures Final measures Dumped imports 
as % domestic 
consumption 
A.  For six months ending June 2007 
China Ceramic tiles 27.03.06 30.11.06 of 0-21.02% 30.03.07 of 14.85-23.65% 33.00 
Indonesia Polyester staple fibre 09.08.06 09.02.07 of 0-8.33% 07.06.07 of 0-10.26% 9.43 
Korea, Rep. of Polyester staple fibre 09.08.06 09.02.07 of 0-8.33% 07.06.07 of 0-10.26% 
07.06.06 price undertaking of 
6.92% 9.43 
Thailand Polyester staple fibre 09.08.06 09.02.07 of 0-8.33% 07.06.07 of 0-10.26% 9.43 
Table III.3 (cont'd) 
                                                      
57 The respective legislation is the Anti-Dumping Ordinance 2000 and Anti-Dumping Duties Rules, 
2001;  Countervailing Duties Ordinance 2001 and the Co untervailing Duties Rules, 2002; and the Safeguard 
Measures Ordinance 2002 and the Safeguard Measures Rules, 2003. 
58 WTO document G/SG/N/9/PAK/1, 4 October 2005. 
59 WTO document G/ADP/N/161, 11 September 2007. Pakistan WT/TPR/S/193 
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 Product Imposition Period 
B.  Outstanding definitive duties, end-June 2006   
China Urea formaldehyde moulding compound 
Tiles 18.07.05 
30.11.06 5 years 
France Sorbitol 70% solution 19.07.03 5 years 
Finland Formic acid 07.07.06 5 years 
Germany Formic acid 07.07.06 5 years 
India Phthalic anhydride 13.02.06 5 years 
Indonesia Sorbitol 70% solution 
Polyester filament yarn 
Polyester staple fibre  19.07.03 
12.11.05 
07.02.07 5 years 
5 years 
5 years  
Iran PVC resin 26.10.04 5 years  
Korea, Rep. of PVC resin 
Polyester filament yarn 
Polyester staple fibre 26.10.04 
12.11.05 
07.02.07 5 years 
5 years 
5 years  
Malaysia Polyester filament yarn 12.11.05 5 years  
South Africa Electrolytic tin plate 22.07.02 5 years  
Chinese Taipei Glacial acetic acid 25.02.04 5 years  
Thailand Polyester filament yarn 
Polyester staple fibre 12.11.05 
07.02.07 5 years 
5 years  
Uzbekistan Acrylic tow 13.08.04 5 years 
Source: WTO document G/ ADP/N/158/PAK, Semi-annual Report Under Article 16.4 of the Agreement, Pakistan , 
3 August 2007, and Paki stani authorities. 
(x) Standards and other technical requirements 
(a) Standards and quality certification 
61. The Pakistan Standard and Quality Contro l Authority (PSQCA) remains the national 
standardization body;  it develops and adopts sta ndards, and provides conformity/testing assessments.  
Imports are subject to the same national quality stan dards or regulations as similar domestically made 
goods (Import Policy Order, 200 6-07, section 16A(b)(vii)). 
62. Pakistan, as a member of ISO, IEC, and the International Organization of Legal Metrology 
(OIML), continues to harmonize standards with international requirements.  It has some 
27,000 national standards, covering mainly agricultu re, foodstuffs, chemicals, civil and mechanical 
engineering, and textiles;  about 15,000 are ISO standards and 7,000 are IEC/OIML standards.  
Reportedly, enforcement remains poor, due largely to limited inspection resources.60  Standards 
covering 47 products (e.g. edible o ils, biscuits, and bottled water) are mandatory for human safety and 
public health reasons under the Compulsory Ce rtification Mark License Scheme.  These goods, 
whether imported or domestic, must meet Pakistan  standards, which are generally harmonized with 
international requirements, and have  a Certification Mark issued by the PSQCA to be made, stocked 
or sold domestically;  domestic manufacturers and expor ters to Pakistan must be registered with the 
PSQCA to ensure compliance.61  Imports and domestic goods under go the same conformity testing 
procedures, according to the authorities.  PSQCA also sets mandatory standards, generally in line with 
international requirements (e.g. WHO and CAC), to be incorporated in technical regulations for 
public health and safety (m ainly on food and exports).    
                                                      
60 USDS (2007). 
61 The list was expanded in 2007 with the addition of polypropylene woven sacks for sugar.  WT/TPR/S/193 Trade Policy Review 
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63. The Pakistan National Accreditation Council (PNAC) remains the national accreditation body 
for testing laboratories and other conformity assessment facilities.62  It applies international standards 
and has accredited 24 testing and calibration laborat ories, including in pharmaceuticals, textiles, 
chemicals, engineering, and food.  The PCSIR also  provides testing facilities (mainly to exporters).  
Pakistan’s 24 certification bodies are almost entirely foreign based.  The Trade Development 
Authority funds 60% of the investment costs and consultancy charges of laboratories being 
accredited.63  The 2004 National Quality Policy and Plan is being implemented to strengthen related 
infrastructure, at an estimated cost of PRs 3. 6 billion during 2005-10;  already 30 projects/proposals 
costing an estimated PRs 1.5 billion are at various  stages of approval or implementation.  The 
PSQCA’s System Certification Centre was recently est ablished and is to be fu lly operational shortly.  
64. Pakistan’s only notifications to the WTO under the TBT Agreement since its last Review 
were all submitted in June 2007.  The 25 notificati ons covered health and sa fety standards adopted, 
covering mainly sampling and testing procedures as well as labelling, packaging, storage, and 
transport of a number of food and other products.  
(b) Sanitary and phytosanitary regulations 
65. Imports of edible products unfit for human c onsumption are banned (e.g. under the Import 
Policy Order).  A national strategy to implement the WTO SPS Agreement has been formulated based 
on a National Animal and Plant Health Inspection Syst em, accreditation of laboratories, and review of 
SPS-related laws.64  No WTO Member has rai sed concerns about Pakistan's SPS measures in the SPS 
Committee; its single latest WTO notification dates back to 2000.  
66. The Ministry of Food, Agriculture and Liv estock has overall responsibility for formulating 
and implementing animal/plant qua rantine and regulating pesticid es A National Animal and Plant 
Health Inspection Services (NAPHIS) was recently established.  Pakistan's SPS Enquiry Point and 
National Notification Authority are located within this ministry.  Other ministries involved are Commerce, Science and Technology, and Health.  Implementation of Pakistan's sanitary and 
phytosanitary regime is reportedly complicated by  the number of federal and provincial agencies 
involved, often causing overlapping functi ons, duplication, and poor coordination
65;  however, 
according to the authorities, no provincial agency is involved in implementing such measures.  A National SPS Taskforce formed in early 2006 assists stakeholders to disseminate information and 
develop strategies to implement SPS policies.   
67. Pakistan’s SPS-related legisla tion is reportedly outdated, la gging behind international and 
trade-partner needs.
66  The Government is reviewing legislati on, aimed at making revisions to enable 
the adoption of international standard s in line with SPS requirements.  
Plant quarantine and protection   
68. The Department of Plant Protection (DPP), a member of the FAO International Plant 
Protection Convention (IPCC, ratified in June 2003) , amended the 1976 plant quarantine legislation 
                                                      
62 The PNAC is an associate member of the In ternational Laboratory Accreditation Cooperation 
(ILAC); an accreditation body member of the Internati onal Accreditation Forum (IAF); an associate member of 
the Pacific Accreditation Cooperation (P AC); and in June 2004 became a full member of the Asia Pacific 
Laboratory Accreditation Cooperation (APLAC). 
63 World Bank/UNIDO (2006), p. 9. 
64 WTO document G/SPS/GEN/661, 28 March 2006. 
65 World Bank/UNIDO (2006), p. 6. 
66 World Bank/UNIDO (2006), p. 10. Pakistan WT/TPR/S/193 
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in 2000.67  According to the authorities, no major changes that adversely affect imports were made 
during the period under review, and  Pakistan’s phytosanitary measures follow IPPC guidelines.  
Imported plants and plant materials must be inspected  by the DPP for pathogen and pest infestations 
and, where restricted, be issued with "import re lease orders" (Import Policy Order).  Imported cotton 
seeds require prior approval from the Ministry of Food, Agriculture and Livestock.  Imported fresh 
and dry fruits and whole red chillies must be certified pest and disease free by the DPP.  Phytosanitary 
requirements apply on a consignment basis to all c ountries and for all fruits.  Seed imports must be 
registered with the Federal Seed Certificati on and Registration Department (Seed Act, 1976). 
69. Pakistan adopted the Biosafety Guidelines of the Cartagena Protocol in May 2005 (Pakistan 
Bio safety Rules and Regulations) and an implemen tation action plan, including the formation of the 
National Biosafety Committee within the Ministry of  Environment.  Pakistan allows the production, 
import, and export of all genetically modified (GM)  crops;  it imports GM soybeans and soybean oil.68   
Animal quarantine and protection 
70. Pakistan belongs to the Codex Alimentarius  Commission and the International Office of 
Epizootics (OIE).  The Animal Quarantine De partment (AQD) administers the 1979 animal 
quarantine legislation, but no longer certifies importe d animal products as fit for human consumption 
after imposition of the Customs Administrative Reforms (CARE);  such imports are in practice cleared by Customs, and, according to authorities, th is may need to be re-examined for health reasons.  
All imports of animal products must be accompanied by a health certificate issued by the exporting country certifying it has no specified diseases.  The AQD  approves imports of live animals, including 
animal semen and embryos, which must also be accompanied by quarantine certificates from the 
exporting country.  The Import Policy Order also prohi bits, until further notice, live animal imports, 
meat and bone meal, tallow containing protein, an d feed ingredients from BSE-infected countries.  
Imports of live poultry (including birds) and poultr y products from countries with Avian Influenza are 
also banned until further notice.  The Import Policy Order list of prohibited imports is updated during 
the year, at the request of the affected country, in line with OIE recommendations;  Pakistan accepts 
"disease free" status of countries according to OIE results.  Imports of Indian livestock and meat 
products were allowed in May 2005 subject to insp ection and tests;  live animals require a maximum 
22-day quarantine (minimum 7 days if the quarantine offi cer is satisfied with their health status).  The 
National Veterinary Laboratory provides internat ional standard testing facilities, according to 
authorities, and works closely with provincial lives tock services to analy se, monitor, plan, and 
formulate disease control and eradication programmes. 
(c) Other foodstuffs 
71. Foodstuffs consumed in the country of origin are generally permitted.  Codex standards and 
regulations are being applied to imported food, including on add itives, preservatives, vitamins, and 
maximum residual limits (MRLs) of contaminants e.g. pesticides.  MRL limits are claimed to apply 
only to imports as Pakistan lacks capacity to apply them to locally made foodstuffs.
69  However, 
according to the authorities, Pakistan implements EC requirements on MRL in animal casings.  It 
occasionally imposes its own special food contamination requirements.  To prevent imports of cheap dyes hazardous to health, only specified food colo urs and food lakes can be imported and each 
consignment must have a government certificate of use or registration in the exporting country (Import Policy Order).  Most consumer foods do not n eed to be registered by the Ministry of Health 
but if required the importer must be the manufacturer ’s sole agent to enable registration in joint 
                                                     
 
67 Pakistan is also a member of the Asia  and Pacific Plant Pr otection Commission.   
68 USDA (2006), p. 4.  
69 USDA (2006), p. 7. WT/TPR/S/193 Trade Policy Review 
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names, for an initial (extendable) one-year period.   Registration can take three months.  Imported 
foodstuffs, including ingredients, must have at least 50% of the original shelf life left upon importation (Import Policy Order).
70  Provincial Health and Food Departments as well as local 
government authorities can prohibit the sale, including import and export, of unwholesome foodstuffs 
(Pure Food Ordinance, 1960). 
(d) Marking, labelling, and packaging 
72. Pakistan still has no uniform labelling and ma rking system, and there have been no major 
changes during the review period.  Imports faili ng to meet labelling and marking requirements are 
seized and destroyed by Customs.  Special labelling requirements apply to certain goods e.g. specified 
food colours must be "fairly" and "truly" labelle d (Import Policy Order).  Also, all pharmaceutical 
imports must meet the Drugs (Labelling and Packag ing) Rules, 1986, and the retail price generally 
must be displayed on the drug label at the time of  importation.  Cigarette manufacturers must print 
their names on packets (from 2006/07).  Packaging requirements normally follow Codex rules, and Pakistan generally accepts packaging material if allowed in the exporting country.  Most foodstuffs 
are imported in consumer-ready packaging.  The requ irement for refined vegetable oil to be imported 
in bulk for re-packaging is aimed at encouraging local packaging and saving foreign exchange.   
(3) M
EASURES DIRECTLY AFFECTING EXPORTS  
(i) Registration, documentation, cleara nce, inspection and minimum prices  
73. In general, exporters no longer have to be registered with  the Export Promotion Bureau (EPB) 
(since 2002/03).  The Government has taken steps to  expedite export clearance , which is claimed to 
take about 30 minutes under PACCS and up to 2 days otherwise.71  The CBR closely monitors exports 
to Afghanistan;  special procedures and authorized  border crossings must be used.  All goods not 
manufactured in bond can be exported  to Afghanistan or, in transit, to Central Asian Republics either 
in rupees or convertible currency.  However, tho se exported in rupees or contained on a negative list 
(Export Policy Order, Schedule III) exported in conver tible currency are ineligible for zero-rating on 
sales tax, excise tax rebates, or tariff drawback. 
74. Preshipment registration of export contracts with the Trade Development Authority (formerly 
the Export Development Board) remains in place for cotton and urea.  A security deposit of 1% for 
cotton will be forfeited unless the contract’s irrevocable  letter of credit is opened within 35 days of 
shipment and the contract completed within 180 days;  the authorities indicate that is to ensure that 
exporters fulfil their contracts in the event that domestic cotton prices rise.  Exporters must also 
generally have a grading and classification certificate issued by the Pakistan Cotton Standards 
Institute.72  Quality (preshipment) inspection of rice, enforced by the Ministry of Commerce (with 
participation of the Pakistan Rice Exporters Asso ciation), ceased in 2003/04 (except for basmati rice), 
when the setting of quality-related mandatory minimum benchmark U.S. dollar f.o.b. prices was terminated on all rice exports.  Rice exporters mu st belong to the Rice Exporters Association.  The 
previous mango freight subsidy w as conditional on quality pre-shipment inspection by one of three 
nominated international inspection firms (section (3)(iv)(b)).  While PSQCA has legislative quality 
inspection and testing responsibilities for e xports, its role is relatively minor.   
                                                     
 
70 Customs should accept a certificat e issued by the manufacturer or  principals where dates are not 
printed on the packing (Import Policy Order).  The re maining shelf life requirement was increased to a 
minimum of 75% in the2004/05 Budget but returned to 50% in 2005/06. 
71 World Bank, 2006b, p. 139. 
72 The Association's costs for standardizing and cl assifying cotton are met by  a cess on ginners of 
PRs 10 per bale produced.   Pakistan WT/TPR/S/193 
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75. Jewellery and gemstone exporters must be regi stered with the Trade Development Authority 
in order to import gold duty and tax free.73  They must export gold jewellery within 180 days of 
importing gold or pay leviable duties and taxes plus a 5% penalty for the first month and 10% 
thereafter.  Unless sale receipts are realized with in 240 days from export, a monthly 1% penalty of 
sale proceeds is incurred.  A valuation committee for clearing exports was abolished in 2005/06.  
Exporters of horticultural commodities must be registered with the Pakistan Horticulture 
Development and Export Board. 
76. The All-Pakistan Textile Association no longer  sets minimum export prices on cotton yarn.  
According to the authorities the special mechanism mentioned in the 2006 Export Trade Order for 
monitoring metal exports, including prices, was not established. 
(ii) Export duties and taxes  
77. Export taxes are prohibited (section 18(2), Cu stoms Act).  However, the CBR can impose 
"regulatory duties" of up to 100% on exports, by notification without parliamentary approval 
(section 18(3)).  Duties of 25% were applied to e xported ferrous and non-ferrous waste and scrap in 
June 2006 and of 35% on pulses in 2006/07, due to domestic shortages74;  "regulatory" duties also 
apply at 15% on exports of sugar, 30% on leat her goods, 20% on hides and skins and, from the 
2007/08 Budget, 25% on specified metals and articles thereof.75  The authorities indicate that such 
measures are used to control supply of commodities for local consumption and not to raise revenue or assist domestic users of these goods;  nevertheless export taxes can implicitly subsidize users of 
affected goods by reducing domestic prices.  
78. An export development charge of 0.25% of the f.o.b. value is levied on all exports (except 
from export processing zones) to finance the Export Development Fund (EDF) (section (3)(iv)).  
79. Exporters pay income withholding tax instead of income tax:  the rate s ranged across products 
from 0.75% of f.o.b. sales to 1.5% until they were unified at 1% in the 2007/08 Budget (section (2)(iv)(a)). 
(iii) Export prohibitions, restrictions, and licensing 
80. Under section 3 of the Imports and Exports (Control) Act, 1950, the Government may 
prohibit, restrict, or control exports.  The Ministry of Commerce announces export policies and measures at budget time as part of its Trade Policy (Part B, Export Policy Order).  Exports are allowed unless listed in Schedules I or II of the Export Policy Order. 
(a) Export prohibitions 
81. Export prohibitions focus on health, social, religious, or environmental protection under 
international treaties e.g. CITES.
76  They also cover exports of wood and timber generally, and 
exports to Afghanistan of vegetable ghee and c ooking oil manufactured in bond, and acetic anhydride 
(Export Policy Order 2006, section 8(5)).  Wheat fl our exports were also banned in 2007 due to 
                                                      
73 Notification SRO No. 789(I)/2005. 
74 Customs Notification SRO No. 573(I)2006;  and Government of Pakistan (2006d), p. 32.  
75 CBR (2007). 
76 In addition to wildlife, prohibited exports also cover alcoholic beverages, wood and timber, and 
counterfeit products (Trade Policy 2006-07, Part B, Export Policy Order, Schedule I.  Viewed at:  
http://www.epb.gov.pk/v1/tradepo licy/pdf/0776-31072006-epo.pdf). WT/TPR/S/193 Trade Policy Review 
Page 60 
 
 
domestic supply shortages.  According to the au thorities, Pakistan maintains no country-specific 
export prohibitions (including to Israel). 
82. Exports of imported goods in their original and unprocessed form are generally prohibited 
(section 10, Export Policy Order 2006).  Minimum- value-added requirements of 2.5% on some of 
these exports were removed in 2005/06.77  
(b) Export licensing and restrictions 
83. Specified exports are permitted if certain cond itions are met (Schedule II) (Table AIII.6).  
Exports are no longer reserved for public-sector agencies.  Exports of wheat, although permitted on a limited basis for the first time in 2006/07 were s ubsequently suspended indefinitely, and fertilizers, 
including urea, while classified restricted are eff ectively banned;  urea exports must be approved on a 
case-by-case basis by the ECC of Cabinet (none processed since 2003).
78  Exports of vegetable ghee 
and cooking oil are allowed if there is minimum va lue addition of 15% for edible uses in packs up to 
16 litres for cooking oil and 16 kg for vegetable ghee,  and 50% value addition for non-edible uses in 
packs up to 0.5 litres or 0.5 kg.79  Precious and semi-precious stones and gold jewellery are subject to 
special procedures.  
(c) Access-related export quotas 
84. Pakistan's textile and clothing exports were s ubject to quotas in the EC, the United States, and 
Canada under the WTO Agreement on Textiles and Cl othing (ATC) until end 2004;  the United States 
and the EC had expanded these quotas prior to their definitive removal.  The EC has imposed anti-
dumping duties on Pakistani bed-wear exports.   
(iv) Export subsidies 
85. Exports are accorded a high priority under th e Government’s Rapid Export Growth Strategy, 
and receive substantial financial assistance.80  Direct export assistance is financed through the Export 
Development Fund (EDF), which the authorities indicate is fully funded from the Export Development Surcharge charged to exporters at 0. 25% of the f.o.b. value of shipments.  Export 
assistance includes general schemes that benefit many exporters, and various sectoral schemes 
targeting particular exports, such as textiles and garm ents;  these have received priority to help meet 
greater competition in developed markets from othe r developing countries (e.g. China and Viet Nam) 
following termination of the MFA.  The numerous a ssistance schemes add complexity to Pakistan’s 
trade regime, undermining transparency and opening the possibility of distorting competition, trade, 
and production patterns at the expense of resource-use efficiency.  Pakistan has not notified any 
export assistance to the WTO since its last Review.  
                                                     
 
77 USDS (2007). 
78 Amendments to the Export Policy Order in January 2007 allowed wheat exports of 500,000 tonnes 
under procedures and conditions prescribed by th e Ministry of Food, Agriculture and Livestock 
(Order SRO No. 54(I)/2007).  A total of 1.3 million tonnes was exported in three shipments.  Such exports were 
suspended in May 2007.   
79 Trade Policy 2006-07, Part B, Export Policy Order, Schedule I.  Viewed at: 
http://www.epb.gov.pk/v1/tradepo licy/pdf/0776-31072006-epo.pdf. 
80 A scheme under which firms exporting at least 50% of production were classified as category A 
(value added) priority indu stries no longer operates. Pakistan WT/TPR/S/193 
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(a) General schemes 
86. Although the freight subsidy introduced on new exports in 2002/03 to diversify exports was 
temporarily suspended from October 2005, a modi fied scheme was re-introduced from August 2006 
until 31 July 2007.  It provided a freight subsidy of 25% of proceeds (up to PRs 5 million annually per 
company/exporter) on all exports;  certain goods cont ained in a negative list are ineligible for the 
export subsidy.81  Exports of "developmental" goods (those considered by TDA to have export 
potential e.g. fish and fish preparations, fruits, vegetables, chemical and chemical products, and 
pharmaceuticals) are subsidized if exported to the top 20 destinations of the previous year.  The 
subsidy could require certain cond itions, such as voluntarily adopti ng international quality standards 
on horticultural exports set by the Pakistan Horticulture Development and Export Board 
(section (3)(i)).82  The authorities indicated that claims for the freight subsidy were expected until end-
September 2007.  Its total cost was estimated at PRs 328 billion. 
87. Assistance of PRs 100,000 (US$1,934) provided by  the Ministry of Commerce to exporters 
achieving ISO 9000/14000 quality standards was wit hdrawn in 2004/05.  Exporters receive a 25% 
subsidy on the cost of acquiring software to im prove competitiveness.  Consultant’s costs for 
developing accredited testing facilities to internationa l standards are fully subsidized, and an interest 
rate subsidy of up to 6% applies to loans for inv esting in quality testing a nd research and development 
equipment.  Certification costs of EUR EPGAP, ISO 14000 and 17025, HACCP, WRAP and eco-
labelling are subsidized by 50%.  SME exports will benefit from the SME Export House when established.  Official fees paid by exporters to register products with Pakistani trade marks overseas 
are subsidized by 50%.  Exporters also benef it from subsidized finance provided by the SBP 
(section (2)(vii)). 
88. Exports are also seemingly subsidized by in come tax concessions.  Exporters pay income 
withholding tax instead of income tax:  the rate levied on products previously ranging from 0.75% of 
export proceeds to 1.5% but was uni fied at 1% in the 2007/08 Budget.
83  While the tax base of gross 
f.o.b. receipts would substantially exceed taxable net income on which company tax would be levied, 
the substantial difference in tax rates (company ta x rate of 35%) suggests possible sizeable subsidies 
for the more profitable exporters.84  According to the authorities, information suggests that most 
exporters are penalized and not assisted by the in come withholding tax arrang ements;  however, this 
would be contrary to government policies of enc ouraging exports and would suggest that reform of 
the income tax treatment of exporters would be  a more efficient policy choice than providing 
assistance.  
89. According to Pakistan’s latest notification to the WTO (2001), in 1997-98, it provided export 
subsidies of US$2.65 million for fresh fruits and vegetables, US$0.004 milli on for citrus (kinnow), 
and US$0.38 million in freight subsidies for potatoes.85  The authorities indicate that updated 
notifications will be submitted to the WTO by end 2007. 
90. Exporters with at least 10% growth over the previo us year’s exports, in U.S. dollar terms, can 
retain 50% of additional export proceeds in fo reign currency accounts maintained in Pakistan.86  For 
                                                      
81 The negative list covers all cereals, cement products , fertilizers, raw hides, skins and leather, and 
silk, wool, cotton and other vegetable textile  fibres, yarns, and fabrics (EPB, 2006). 
82 Government of Pakistan (2004a), pp. 30-31.  The Board has approved no horticulture products for 
payment of the freight subsidy since 2004/05.  
83 Income Tax Ordinance, 2001, section 154. 
84 However, non or low-profitable firms are penalized as they must still pay income withholding tax.  
85 WTO document G/AG/N/PAK/9, 20 August 2001. 
86 Government of Pakistan (2003b), Annex-V, p. 174. WT/TPR/S/193 Trade Policy Review 
Page 62 
 
 
many specified services exports, 35% of proceeds can be held in foreign currency accounts within 
Pakistan.  Such foreign currency can be used for a wide range of legitimate purposes (e.g. promotion 
and market studies) without Central Bank approval. 
(b) Sector-specific schemes 
91. A number of sector-specific schemes also assist exports  (Table III.4).  Exports of computer 
software and IT-related services are exempt from in come tax until end-June 2016 (from 1 July 2003).  
Exporters of garments and from 2006/07 home textiles and footwear receive a research and 
development subsidy at rates of 3%, 5% or 6% of  the f.o.b. value depending on product type, to be 
reduced to a uniform 3% rate in 2007/08.  At e nd-May 2007, a total of PRs 18.4 billion had been 
disbursed under the scheme, mostly assisting garments (PRs 14.3 billion).87  The 2007/08 Budget 
extended the research and developmen t export subsidy to fibre manufactur ers at the rate of 3.5%.  A 
separate freight subsidy was introduced in 2005 for leather garment exports.88  A freight subsidy of up 
to PRs 250 million (funded by the EDF), paid at the rate of PRs 15 per kg by air and PRs 10 per kg by 
sea, assisted mango exports to Europe from 1 July to 15 October 2006.89  Under a textile package 
approved in July 2006, the State Bank provided "debt swaps" for long-term loans extended for 
importing plant and machinery under the LTF-EOP Sc heme until end-2006.  This was available only 
on value-added textiles (doubling, twisting, combi ng, slubbing, lycra and yarn dyeing, but excluded 
spinning).  An amount of PRs 34 billion has been ex tended under this Scheme at reduced mark-ups of 
7% and 6% for seven and three years, respectivel y.  Electricity used by many export-oriented 
manufacturing units was zero rated for GST in 2005 as well as for inputs and outputs of five 
export-oriented sectors. 
Table III.4 
Sectoral export subsidies, 2006/07 
Export/industry Description 
Horticultural products Pakistan Horticulture De velopment and Export Board provides marketing and 
export promotion; concessionary finance encourages investment in greenhouses 
and cool-chain infrastructure; EDF finances the first 6% mark-up on borrowings 
(introduced in 2004/05 to export-oriented infrastructure but extended to all such 
investment in 2006-07) 
Priority export sectors of leisure equipment, 
fisheries including shrimp farming, horticulture, 
furniture, gems and jewellery, footwear, and medical equipment  Efforts to reduce capital co st of infrastructure 
Pharmaceuticals 50% subsidy on costs of Pakistan  firms registering products overseas; salary of 
3 medical representatives subsidized for 2 years, up to monthly maximum of 
US$500 each (30% higher for designated high-cost countries) 
Enhancing quality and vol ume of developmental 
sectors (fisheries including shrimp farming, 
horticulture, marble and granite, furniture, gems 
and jewellery, sports leis ure equipment, surgical 
instruments, carpets, and IT enabled businesses) Qualified consultants engaged and paid from EDF 
Finished furniture and products of marble and 
granite  Inland freight subsidy of 25% for factor ies located beyond 250 km from exporting 
sea port 
Gems and jewellery Bank financing scheme whereb y exporters can import gold using an acceptable 
collateral arrangement 
Table III.4 (cont'd) 
                                                      
87 Government of Pakistan (2007a), p. 8. 
88 Government of Pakistan (2006g), p. 18.  
89 Trade Development Authority of Pakistan online information, Freight Subsidy Scheme.  Viewed at: 
http://www.epb.gov.pk/v1/exporterbenefits/freight _subsidy.php?PHPSESSID=16fe9f2f1f04ad65d3280b912db2
b26b [17 October 2007] Pakistan WT/TPR/S/193 
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Export/industry Description 
Footwear Financial assistance to establish footwear development centres at Lahore and 
Karachi; research and development support of  6% of f.o.b. value available from 
2006/07 (reduced to 3% in 2007/08) 
Textiles, ready-made garments and knitwear Research and development support at 6% of f.o.b. value, to be reduced to 3% in 
2007/08.  Expanded in 2006/07 Budget to include dyed/printed fabrics and white 
home textiles, both woven and knitted at a rate of 3%, and dyed/printed home 
textiles, whether woven or knitted, of 5% 
Carpets Financial assistance to establis h "carpet cities" in Lahore and Karachi 
Meat Halal meat export zones established in  Karachi, Lahore, Preshawar, and Quetta 
and interest rates on credit used to set up cool-chain facilities subsidized up to 6%.  
Costs of refrigerated transportation of meat to export markets subsidized 
IT services or enabled services, computer software Income exempt from tax for the period 1 July 2003 until 30 June 2016. 
Source: Government of Pakistan, Trade Policy , various years. 
(v) Duty and tax concessions  
92. A multitude of selective tariff and tax exemptions/concessions, mainly on raw materials, 
intermediate inputs, plant, and equipment, are aimed at improving international competitiveness, 
including of export-oriented firms (sections (2)(ii)(g ) and (iv)).  For example, in 2005/06 tariffs were 
removed and sales tax zero-rated on machinery and ra w materials for priority sectors with export 
potential, including marble and granite, poultry a nd meat, gems and jewellery, horticulture, and 
pharmaceuticals;  these concessions also apply to domestic sales.90  The Government zero-rated the 
sales tax on five major export categories in 2005/ 06 for imported inputs not made domestically91;  
Cotton ginning is also zero-rated.  Tariff concessions via repayment of tariffs up to specified limits 
(expressed mainly as a percentage of the f.o.b. va lue of exports) were introduced or extended in 
August 2006 on many raw materials for specified export products.92  The 2007/08 Budget zero-rated 
the sales tax on utility charges paid by rice exporters. 
Drawback and rebate schemes  
93. The CBR administers the duty drawback scheme (DDB) to refund tariffs paid on imported 
inputs used in exports.  In 2005/06, drawback  of tariff revenue amounted to PRs 11.8 billion 
(PRs 15.4 billion in 2004/05), some 10% of gross tariff collections.  Most benefits go to textiles 
exporters of clothing, and leather, followed by engineering goods and metal products.  Drawback is 
based on rates set by the CBR (Input Output Coeffici ent Organization), the latest in 2006, using input-
output coefficients and actual duties paid on inputs.  They are mainly ad valorem  rates based on f.o.b. 
export values, and ranged during 2 006/07 from 0.02 to 3.24% for textiles, 0.12 to 4.83% for leather 
products, 0.01% to 9.15% for engineering or me tal goods, and 0.01 to 8.28% for miscellaneous 
products (Table III.5).  Rates are normally revised annually, based on C&F prices of the preceding year
93;  other factors taken into account when dete rmining DDB rates include local production of 
inputs relative to imports and the availability of co ncessionary tariffs.  Drawback at times appears to 
                                                      
90 Exporters spend about 20% of their time dealing with sales tax refunds and most have felt it 
necessary to set up costly dedicated refund depart ments (Ministry of Industries, Production and Special 
Initiatives, 2005, p. 52). 
91 The 2007/08 Budget removed zero-rating on chemicals used in these industries that were also being 
used in other activities.   
92 Customs Notifications SRO No. 837(I)/2006, No. 838(I)/2006, No. 839(I)2006 and No. 840(I)2006. 
93 DDB rates may also be revised following a specifi c request by an exporter or an exporters' 
association.  Exporters may also apply to CBR for DDB rates to be set on goods not covered by current 
notifications. WT/TPR/S/193 Trade Policy Review 
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be used as a policy instrument.  For example, DDB was removed on clinker in 2001 due to the 
substantial domestic availability of inputs but retained on cement, except during April-
November 2006 when cement exports were temporar ily banned to ease domestic shortages.  The DDB 
system is administratively complex and non-transparent,  and as it does not directly relate duty paid on 
imported inputs to refunds, it is likely to have an  uneven impact across export items.  Any remaining 
subsidy (excess refunds) is likely to have fallen, due to lower averag e refund rates (6.7% of eligible 
export values in 2001/02 compared with 2.1% in 200 4/05), due mainly to lower tariff rates, including 
concessionary rates, and technically improved input-output coefficients.94  However, while it is 
unclear whether the drawback scheme overall under- or over-re funds exporters, the authorities 
emphasize that customs legislation prohibits DDB  rates from subsidizing exports, and that are 
carefully calibrated based on actual duties incurred on imported inputs to ensure no such subsidy. 
94. While DDB automation under PACCS has improve d efficiency, it has only yet happened at 
the "Model Customs Collectorate" in Karachi, where the authorities indicate that DDB payment 
occurred within 2-3 days of export.  Document ary and administrative requirements also remain 
substantial.  According to Customs, claims ar e generally processed in 7-10 days (with 95% paid 
within 3-4 days), but businessme n indicate about 1-2 months.95  The authorities state that claims are 
now being processed within 2-3 days at Karachi, an d 95% at other customs posts within 3-4 days.  
The 2005/06 Budget reduced DDB notifications from 110  to four standard not ifications and reduced 
the 723 DDB rates to 465.96 Overdue claims of 35,000-40,000 in December 2004 (PRs 2 billion) were 
reduced to 3,500-4,000 (PRs 0.5 billion) in mid 2006 , and stood at PRs 0.9 billion at end May 2007.97 
Table III.5 
Duty drawback rates on exports, 2006/07 
(Per cent of f.o.b. value or PRs per kg unless otherwise indicated)  
Imported 
input/manufactured 
export Duty drawback rate Imported 
input/manufactured 
export Duty drawback rate 
Textiles and allied products Miscellaneous products 
Schedules I-V  0.04-1.15% ;  PRs 0.15-3.09, 0.18-
1.13%;  0.22-0.43%;  0.63%;  0.56% and 1.16% Schedules I-V 2.46-7.34%, PRs 1.53;  2.85% and 6.13%;  
2.36%;  2.30% and PRs 2.67; 2.88-5.98% 
Schedules VI-X PRs 0.87-3.90;  PRs 1.27-4.95;  PRs 
0.97-4.35;  PRs 0-4.35;  PRs 1.59 Schedules VI-X  PRs 1.08; PRs 0.61-5.52 per pair;  1.50%; 
PRs 0.53 per piece;  3.07%, PRs 0.66 and 
PRs 1.25 per dozen 
Schedules XI-XV 1.45%;  1.04% and 2.38%;  PRs 0.47;  
0.60%;  1.04% Schedules XI-XV 1.27-2.14%;  PRs 0.03-2.29; 3.50%, PRs 
0.23 per 50 kg bag; 2.14-4.79%;  PRs 5.51-
12.48 per 20 packets, 3.07% 
Schedules XVI-XX 0.74-1.85%;  1.17% and 1.22%;  0.24-
4.18%;  0.32-0.62% Schedules XVI -XX 0.47-8.80%;  2.80%; 1.94%;  PRs 25.08 
per tonne;  PRs 0.54-1.07 per bag 
Schedules XXI-XXV 0.01%;  PRs 0.54-1.61;  PRs 0.03; 
2.29% and 4.75, PRs4.82-8.67;  PRs 1.37-6.09 Schedules XXI-XXV  PRs 0.84; 2.52%; PRs 0. 18 per 1,000 toilet 
rolls, PRs 0.26 per carton of 1,000 tissues, PRs 0.55 per carton of 1,000 pocket packs, 1.64%;  1.56% and 2.17% 
Schedules XXVI-XXX 0.70-1.53%;  1.33% and 1.89%;  PRs 
0.05-4.71;  PRs 0.78-2.92;  PRs 0.49 Schedules XXVI-XXX 1.42-7.39%;  2.60-4.75%;  5.35%; PRs 
0.15 per 100 sticks;  1.03-1.80% 
Schedules XXXI-XXXIV PRs 0.80; 5.32%;  1.16%; PRs 2.50 
and PRs 2.63 Schedules XXXI -XXXV PRs 7.02 per tonne; 2.29-5.89%;  PRs 
57.18 and PRs 9681.83 per tonne;  PRs 
10.34 per case of 24 cans;  PRs 32.64-
317.24 per 1,000 packs 
Table III.5 (cont'd) 
                                                      
94 World Bank (2006b), p. 176.  
95 World Bank (2006b), pp. 175-176. 
96 Four notifications cover DDB rates:  on textiles;   leather goods, footwear and sports goods;  
engineering goods and metal products; and miscellaneous goods. 
97 World Bank (2006b), p. 177. Pakistan WT/TPR/S/193 
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Imported 
input/manufactured 
export Duty drawback rate Imported 
input/manufactured 
export Duty drawback rate 
Leather and allied products  Schedules XXXVI-XL PRs 0.08 per litre and PRs 0.83; 2.07% and 
6.26%;  2.51-8.13%;  PRs 0.06-0.10 per 
litre, PRs 0.79;  1.89% 
Schedules I-V 0.23-5.24%;  0.12-4.28%;  1.29-
3.70%;  0.65-5.25%;  0.14-4.19% Schedule XLI -XLV 1.48-3.90%;  0.28% and 0.32%; 0.01-
4.45%; PRs 0.05-0.99, PRs 6.87 per case; 2.70%; 1.55%, PRs 0.08-3.49 
Schedules VI-VI 3.73% and 4.10%;  0.48-4.25% Schedules XLVI-L PRs 39.37 per tonne;  PRs 25.00 per 
10 gms;  PRs 4.65 and PRs 9.29 per M2n/5mm; 0.72%; 0.33% 
Engineering/metal and allied products  Schedules L-LV PRs 10.84; 1.38%;  0.59-3.54%;  1.52%; 
3.38% and 3.68%, PRs 3.03 
Schedules I-V 0.47% and 2.08%;  0.84-4.04%; 
3.46%;  2.74%;  5.43% Schedules LVI-LX 0.46-6.57%;  PRs 2.09-4.81; 6.09%, PRs 
17.61 per sheet; 0.59-1.06%; 2.25-6.97%, PRs 0.85-13.78 
Schedules VI-X 3.12-4.48%;  8.62%;  6.90%;  3.37% 
and 3.58%;  4.95% Schedules LXI-LXV 3.55%; 2.06% and 2.87%; 1.94-5.36%; 
1.45% and 1.98%; 1.90-8.31 
Schedules XI-XV 0.90%;  PRs 6.11;  0.25-1.15%;  
0.80%;  PRs 6.35 per piece  Schedules LXVI-LXX 1.23-3.14%; PRs 0.10 and PRs 0.11 per 
syringe;  PRs 0.21 per set;  PRs 2.01 and 
PRs 5.02 per 100 pieces;  3.67-9.17%;  
1.33-3.80% 
Schedules XVI-XX 2.92%;  0.75-1.59%;  2.95%;  6.17% 
and 6.27%, PRs 2.39 and PRs 3.45;  
PRs 0.68 and PRs 2.64 per container Schedules LXXI-LXXV PRs 0.52-3.09;  PRs 4.14-83.70;  PRs 
10.98-96.59;  0.62% and 1.43%;  4.49% 
and 5.08% 
Schedules XX-XXV 0.19%;  PRs 0.09 per centimeter; 
1.76%;  PRs 803.32-1,806.92 per 
tonne;  2.11-2.87%   
Schedules XXVI-XXX  6.62-12.90%;  5.75%;  PRs 1.08-3.09 
per piece;  0.21%;  PRs 17.73-407.49 per 1,000 pieces   
Schedules XXXI-XXXV  0.92%;  0.97-5.64%;  5.64%; 2.74-
3.63%;  4.87%   
Schedule XXXVI-XL  3.66%;  PRs 95.23-273.35 per 1,000 
pieces;  11.45%;  9.18%;  9.47-13.75%   
Schedules XLI-XLV 0.35-3.50%;  3.83%;  2.89%;  1.55-
3.70%;  2.49% and 2.59%   
Schedules XLVI-L  0.12-10.70%, PRs 0.32 per piece and 
PRs 1.86;  0.75-2.60%;  4.82%; 
4.26%;  1.92% and 4.62%   
Schedules LI-LV  1.06-2.12%;  1.71%; 0.65%;  2.17% 
and 9.70%;  2.05%   
Note: The drawback rates give either the range or the actual rates corresponding to each  schedule (separated by semi-colon) wit hin the 
group given in the left hand column. 
Source: CBR, Customs Notifications SRO No. 784(I)/2005, No. 785(I)/2005, No. 786(I)/2005, and No. 787(I)/2005. 
95. The duty and tax remission for exports (DTR E) scheme, introduced in 2003/04, allows 
exporters tariff- and tax-free imports  of input used in exports.  Modified in 2005/06, it allows 
exporters (direct and indirect) to source inputs (i ncluding domestically) free of tariffs and other taxes 
(sales, excise, and income withholding taxes) upon provision of an irrevocable bank guarantee to 
cover duty/tax liability. Direct exporters may regist er for DTRE on individual contracts or if they 
exported at least US$100,000 in each of the past two years.  The DTRE also covers sales tax on gas, 
electricity, and other services.98  Despite the advantages of DTRE, it has taken off slowly, with only 
1,712 exporters approved during 2001-05.  In 2006/ 07, 509 DTRE approvals were granted, involving 
duties/taxes of PRs 3.5 billion (corresponding figures for 2005/06 were 484 approvals and 
PRs 3.3 billion). 
                                                      
98 Refunds are permitted where the value of inputs s ubject to tax, excluding electricity, gas, and 
services, is less than 20% of the export’s f.o.b. price. WT/TPR/S/193 Trade Policy Review 
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(vi) Export-processing zones 
96. The Export Processing Zones Authority (EPZA) c ontinues to administer export-processing 
zones (EPZs).  Firms in EPZs receive generous tax be nefits e.g. income tax holidays, indefinite carry 
forward of losses, duty-free imports, and freedom from national import restrictions.  They must export 
at least 80% of production from 2004/05 (section 13( 5), Import Policy Order 2006).  Domestic sales 
of 11 products are permitted.  EPZ exporters pay th e same income withholding tax as other exporters 
plus a service charge of 0.5% of f.o.b. value to  the EPZA.  Certain goods (e.g. cotton ginning, sugar, 
vehicles, and cement) cannot be produced in EPZs.  Preferred activities for EPZs are export-oriented 
industries that require advanced technology and ma rketing and use local raw materials and labour.  
Plans are to expand the network of EPZs, includi ng by public-private joint-ventures;  18 are 
scheduled.99  At present four manufacturing and three mining EPZ’s are operating.  The Gawadar Free 
Economic Zone (FEZ) incorporates an EPZ around the air port and a deep seaport, and is administered 
provincially by the Gawadar Development Author ity.  The Karachi EPZ, with Phase II finished, 
currently has 98 operating industrial units.  The Gove rnment intends to introduce an export-oriented 
units (EOUs) scheme that will provide essentially the same incentives as EPZs.100 
97. Many industrial estates, which provide infrastructure but, unlike EPZs, do not usually offer 
fiscal incentives, have closed during the review peri od.  The Sundar Industrial Park near Raiwind is 
being developed at a cost of PRs 3 billion (one thir d funded by Punjab province and the rest by land 
sales).  Annual production of PRs 60 billion and 60,000 new jobs are planned within three years.  
Most firms with suitable in-house manufacturing facilities that started commercial operations in 
special industrial zones before end 2002, invest ed over US$10 million, and employed at least 
100 staff were entitled to a concessionary tariff marg in of 25% on imported raw materials not made 
locally.101  
(vii) Export finance, guarantees, and insurance 
98. The State Bank introduced a concessionary expo rt Long Term Fixed Rate Financing Scheme 
(LTF-EOP) in May 2004 to meet  exporters' project financing re quirements (including machinery 
imports), for establishing new units or up-grading existing facilities;  locally made machinery is 
ineligible for financing.  Banks allocated PRs 8.6 billion to the scheme, and prioritized projects 
identified by the Government.  Reducing the  maximum bank interest spread from 3% to 2% in 
July 2006 lowered borrowing costs by 1%.  The loan term is up to 7.5 years.  Interest rates, linked to treasury bill yields, are revised annually and were 4%  for loans of up to three years and 5% for longer 
periods (July 2006);  some PRs 50 billion has been disbursed under the scheme.
102  The SBP also 
provides concessional re-financing support (currently at  an annual interest rate of 6.5%) to exporters 
under the Export Finance Scheme.  Pre- and post-sh ipment funds are provided for up to 180 days 
(270 days for hand-knotted carpets and exports to South America).  The concessionary value of the 
scheme has been reduced.  Monthly export finance rates equal the weighted average yield on six-
month Treasury bills.  The annual rate is 7.5% (ba nk refinance rate of 6.5% and a 1% bank margin). 
                                                      
99 The Karachi Export Processing Zone started in 1981, while the Saindak Processing Zone (the Gold 
and Copper Project) and the Risalpur Export Processing Zone opened in July 2006.  Development work has 
been completed at the Sialko t Export Processing Zone.  
100 Existing units exporting at least 80% of output w ill be eligible for registration as EOUs, while new 
units will have to export all production (Government of Pakistan, 2007a, p. 18). 
101 Firms starting commercial operations before end-June 1999 were entitled to a ten-year tariff and 
GST exemption on imported raw materials not made locally (Customs Notification SRO No. 71(I)/95). 
102 Government of Pakistan (2007a), p. 6. Pakistan WT/TPR/S/193 
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99. As well as impeding monetary management, th ese schemes distort the in dustrial incentives 
structure.103  To improve monetary management and e fficiency, the export finance limits of banks 
under the EFS have been fixed at end-June 2007 leve ls, with the SBP only allowing 70%  re-financing 
against these limits;  the remaining 30% is to be  funded by the banks.  A new Long Term Financing 
Facility (LTFF) was also introduced in 2007/08 to finance exporters’ purchases of new, imported and 
locally made, plant and machinery;  exporters must export at least 50% of output or US$5 million to be eligible.  SBP finance would be up to 70%, subject to yearly limits.  
100. A commercial export-credit-guarantee scheme operated by the state-owned Pakistan 
Insurance Corporation covers all e xports not covered by letters of cr edit.  It covers 80% and 90% of 
losses from commercial and political risks, respectivel y.  The Pakistan Export Finance Guarantee 
Agency, established in 2001 with equity from pr ivate banks and the Asian Development Bank, 
provides minimal non-subsidized trade finance guara ntees and credit facilities, including pre-shipment 
export-finance-guarantees and post-shipment insurance, ma inly to SMEs.  It is to be re-structured to 
include insurance of exporters’ credit risks.
104   
101. A US$150 million foreign currency export finance facility, which enabled exporters to import 
by borrowing at the Libor 2% (plus or minus) inte rest rate and to repay from export proceeds, ceased 
ahead of schedule in 2004 due to low utilization.   
(viii) Export promotion 
102. The state-owned Export Promotion Bureau ( EPB) has been transformed into the Trade 
Development Authority of Pakistan (TDAP) (Presidential Ordinance November 2006) (Chapter II).  
The Government intends to boost export promotion as a key factor in raising exports.  The TDAP’s 
main role is market promotion, e.g. trade delega tions, research and trade exhibitions, and facilitating 
exporters’ activities.  It focuses on product and ma rket diversification, including greater value 
addition, in identified core areas (garments, raw co tton yarns, fabrics, towels, art silk and synthetic 
textiles, rice, leather products, carpets and wool, surgical instruments, and petroleum products) and 
developmental products.   
103. EPB expenditure in 2005/06 was PRs 863 million, two thirds of which (PRs 576 million) was 
spent on "grants, subsidies and write off of loans" under the Export Development Fund.105  The Fund 
is administered by a Board chaired by the Minist er of Commerce and develops export infrastructure 
and capacity, including mainly advertising and promotion.   Such programmes are implemented by 
various government agencies, including the TDA, as well as private sector and business support 
bodies, e.g. chambers and trade associations.   The TDA is funded directly by the government budget 
(PRs 0.9 billion allocated in 2007/08).  An equity fund is being established to assist Pakistani firms 
acquire overseas brands and/or brand holding compan ies and to invest in setting up SPS facilities and 
testing laboratories.106 
104. Export promotion and facilitation is provided fo r specific products by a number of sectoral 
boards, such as the Pakistan Hor ticulture Development and Export Board.  The Pakistan Software 
Export Board  promotes exports, and has proposed a four-year  strategic plan based on annual targets 
aimed at increasing the information technology industr y to US$10 billion by 2010.  It has developed 
an export plan to be incorporated into Pakistan’s ov erall export strategy and targets.  The Ministry of 
Textile Industry promotes textiles and garment e xports.  The Defence Export Promotion Organization 
                                                      
103 SBP (2007c), p. 2. 
104 Government of Pakistan (2007a), p. 20. 
105 Government of Pakistan (2006b), p. 198. 
106 Government of Pakistan (2007a), p. 19. WT/TPR/S/193 Trade Policy Review 
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promotes and coordinates exports of defence produc ts, and the Pakistan Tobacco Board promotes 
cultivation, manufacture, and export of tobacco a nd tobacco products (funded by a tax levied on 
production). 
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Taxation 
105. Pakistan increasingly relies on indirect tax re venue, which accounted for well over two thirds 
of tax receipts in 2005/06 (section (2)(iv)(a)):  sal es tax accounted for 60% of indirect tax revenue 
(excise tax 12%);  the income withholding tax account ed for some 60% of direct tax collections, and 
some 20% came from imports.  Many indirect taxes remain unduly complex and lack transparency 
due to: different tax bases across products and speci fied minimum levels;  a multiplicity of taxes, 
often narrowly based due to numerous concessions/ex emptions; administrative inefficiency with 
corrupt elements; cumbersome assessment procedures; and endemic tax evasion due to the large informal economy.
107  However, the Government has made important tax reforms during the review 
period (Chapter I). 
General sales tax (GST) 
106. GST, a value-added type tax, has been unified at  a standard rate of 15%  (Sales Tax Act, 1990, 
Sales Tax Rules, 2002 and 2004, and Sales Tax Procedure Rules, 2006).108  Some excisable goods are 
subject to GST.  The registration threshold for ta xpayers is minimum annual turnover of PRs 5 million 
or, from the 2007/08 Budget, manufacturers paying an annual electricity bill exceeding PRs 600,000.  In 2005/06, GST was applied to the printed reta il price on selected consumer goods (e.g. perfume, 
cosmetics, toiletries, biscuits, confectionery, t ea and footwear);  coverage was extended in the 
2006/07 Budget (e.g. spices and light bulbs).
109 
107. There are many exemptions (Sixth Schedule of th e Sales Tax Act or in notifications issued by 
CBR under section 13), including on basic or unproc essed foodstuffs, medicines, books, and computer 
software.  While government policy is to redu ce exemptions/concessions, many remain, and more 
were issued in the 2006/07 and 2007/08 Budgets.  A wide range of agricultural goods e.g. meat 
products, sea food, and eggs are GST exempt;  all ag ricultural inputs, except seeds, are levied GST.  
Agricultural machinery, equipment, and implements  were exempted from sales tax in June 2004, and 
plant and equipment, including parts, were zero ra ted in the 2004/05 Budget.  Dairy products are zero 
rated.  Other exemptions from sales tax include leather, textiles, carpets, sports goods, certain 
chemicals, and dried unsweetened milk.110  Imported goods not made locally are frequently exempt 
from GST. 
108. GST is generally levied at the same rate on imported and domestic goods.  However, some 
exemptions discriminate directly against imports.  For example, edible fresh, frozen or otherwise 
                                                      
107 WTO (2002), p. 67. 
108 Rates of 2%, 18%, 20% and 23% were abolished in 2004/05.  However, the 2007/08 Budget 
increased the GST rate to 20% on specified raw material s, including some chemicals, used in making iron and 
steel, plastics and paper to discourage informal production.  
109 In lieu of paying sales tax based on the printed retail prices, biscuit and confectionary manufacturers 
may pay tax totalling 15% of the ex-factory or cl eared price and 15% of a value addition of 12%. 
110 Sales Tax Notification SRO No. 525(I)/2006, and No. 552(I)/2006. Pakistan WT/TPR/S/193 
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preserved fruits (excluding bottled, canned or packag ed) are GST exempt unless imported (other than 
from Afghanistan).111 
109. Although hard to assess, the minimum value additions set by the CBR under Division 7A of 
the Sales Tax Act to levy GST on certain goods, in cluding if they are imported may also potentially 
discriminate against imports.112  Until 10 June 2007, commercial impor ters were required to pay GST 
on imports using a minimum value addition of 10% of the landed-duty-paid import price (or 15% of 
the retail price on goods where GST is specified on retail price);  according to the authorities, the 
minimum value addition system for commercial impor ters was abolished.  For some imports it was 
higher, for example, the 2006/07 Budget raised the minimum value addition to 30% on pesticides113;  
this was subsequently reduced to 15%.  Mini mum value addition is often lower on equivalent 
domestic products than on imports.  Also, mini mum value additions on several imported goods, 
including potato chips, light bulbs/tube light/lamps, PCs and computer monitors is fixed in U.S. dollars.
114  The minimum value additions on imported and domestic white crystalline sugar were 
set in April 2006 at US$440 per tonne and PRs 29 per kg, respectively.115  While the removal of the 
system for commercial importers has lessened the potential discriminatory impact on imports, 
minimum values remain on selected imports to equate sales tax treatment with local manufacturers 
that are levied GST on retail prices of these pr oducts.  These arrangements may still potentially 
discriminate, especially against cheaper imports. 
110. Exports are generally zero rated (as are other pr oducts included in the Fifth Schedule of the 
legislation and in notifications issued under secti on 4).  Zero rating was extended to several major 
exporting activities, including cotton ginning in 2004/05, textiles, carpets, leather, sports, and surgical 
goods in 2005/06, and to dairy products, stationery items, and trucks and la rger dumpers in 2006/07.  
The 2007/08 Budget allows the CBR to direct that G ST refunds on exports be paid along with duty 
drawback.   
Federal excise duty (FED) 
111. The FED replaced the central excise duty from 1 July 2005 (Federal Excise Act, 2005 and 
Federal Excise Rules, 2005).  Excisable goods curren tly cover nine tariff items (mainly edible oils, 
vegetable ghee and cooking oil, aerated waters, t obacco products, cement, natural gas, petroleum 
products, beverages and beverage  concentrates, perfumes and toiletries, and cosmetics).  Ad valorem 
rates (ranging from 10-15%, but up to 50% on concentr ates for aerated beverages) apply to the retail 
price;  specific rates apply mainly to certain tobacco products, petroleum products, natural gas, and 
cement.  The FED is being phased out gradually , except on items requiring regulated consumption 
(e.g. cigarettes, beverages, and cement).116  It was taken off soaps and detergents in 2005/06 to 
stimulate production and curb smuggling.  The FED is levied on specified services as if it was a sales tax, mainly at rates ranging from 3% to 25% (usually 15%).
117  Imports of certain raw materials for 
                                                      
111 Sales Tax Act 1990, Sixth Schedule.  Viewed at:  http://www.cbr.gov.pk/. 
112 CBR (2006). 
113 Sales Tax Notification SRO No. 553(I)/2006. 
 114 Sales Tax Notification SRO No. 679(I)/2006, No. 680(I)/2006, No. 732(I)/2006, and 
No. 1021(I)/2006. 
115Sales Tax Notification SRO No. 314(I)/2006. 
116 Government of Pakistan (2006c), p. 10. 
117 Provincial governments have had to legislate for the Federal Government to collect FED on services 
as if it was sales tax under the sales tax legislati on because, under the Constitution, it cannot levy GST on 
services.  These include TV advertisements, air travel (ext ended to international travel , including charter flights, 
in the 2006/07 Budget when it was removed on up-market train travel), inland air cargo, shipping agents’ commission on handling international services, most ba sic telecommunication servi ces, non-life insurance (3% WT/TPR/S/193 Trade Policy Review 
Page 70 
 
 
specified uses, sometimes specified by manufactur er’s name, are exempt;  e.g. carbon black oil 
imported by the National Petrocarbon (Pvt) Ltd to make carbon black, and solvent oil used to make shoe adhesives are exempt from FED.
118  The 2007/08 Budget abolished FED on a number of further 
products e.g. petrol, jet fuel, and petroleum bitumen.  
112. While FED rates on imports a nd domestic products were gene rally equalized in 2002/03, 
some differences still seem to exist, e.g. the rate on imported edible oil, includ ing crude oil, vegetable 
ghee and cooking oil, is PRs 1 per kg instead of th e standard rate of 15% of value, levied on 
domestically made products;  the authorities indicate that these rates are equivalent in ad valorem  
terms.  Even on cigarettes with uniform rates, the  FED incidence may fall heaviest on imports, since 
the highest excise rate (63% of retail prices) app lies to cigarettes selling at prices above PRs 12 per 
pack of ten, which are more likely to be imported.119  Another example of discrimination is the 
exclusion of the 15% FED on telecom services provided by Pakistan Telecommunication Corporation Ltd (PTCL), which disadvantages new, including foreign, suppliers.
120  Exemptions also discriminate 
against imports by favouring domestic cont ent under local-content-type arrangements 
(section (2)(viii)).   
113. It is not clear whether the tax base for levying FED on imports and domestic goods is always 
uniform.  Such differences may be a possible source of discrimination against imports.  The tax base is generally either the retail price or "value" fo r home-made goods, and the landed-duty paid price for 
imports;  however, if the domestic tax base is "value" then the import’s retail price is used.
121  Such 
uncertain discriminatory effects were compounded in the 2006/07 B udget by allowing the government 
to fix minimum values for levying FED, including of imports.122  The authorities indicate that these 
arrangements generally discrim inate in favour of imports. 
Income withholding tax (WHT)  
114. The income withholding tax (WHT), which is co llected at source, is sometimes readjusted 
subsequently upon filing of returns;  where this is not the case, it represents final income tax payment 
on the transaction, and therefore is not really an  income withholding tax.  The WHT coverage has 
been extended during the review period to some 25 activities.  Commercial importers pay WHT on 
clearing imports at the general rate of 5% (reduced  from 6% in the 2007/08 Budget) of the tax- and 
tariff-inclusive value of the goods as final income tax payment.123  Some imports, however, are levied 
at concessionary rates, usually tied to there being no local production (Table III.6).  The 2007/08 
                                                                                                                                                                     
of premium) but excluding marine insurance for export, and from 2006/07 certain (mainly commercial) financial 
services, foreign exchange brokerage, cable TV operators, and franchise serv ices.  Internet and e-mail services, 
value-added data services, and international leased lines used by software exporting firms registered with the 
Software Exporting Board are exempt.   
118Federal Excise General Order No. 8 of 2006, CBR No. 1/2-STB/2006. 
119 Cheaper cigarettes retailing below PRs 5.32 are taxed at PRs 2.27, and those priced above PRs 5.32 
at this plus 69% of the incremental price above PRs 5.32. 
120 Federal Excise Act, 2005.  Viewed at: http://www.cbr.gov.pk/newce/FEActandRules/2005/ 
Federal%20Excise%20Act%202005updatedupto June2007.pdf. 
121 The retail price is the manufacturer s’ price to consumers, inclusive of all charges and taxes (except 
FED).  Where goods do not indicate retail prices, excise is levied on "value" at a rate of 500% for cigarettes and 
40% for other products.  From 2006/07 imported cigarettes must display retail prices.  The "value" of home-
made goods is the "wholesale cash price". 
122 The 2006/07 Budget fixed the minimum retail price for levying FED on the cheapest category of 
cigarettes at 84% of PRs 5.32 per pack of ten.  This was increased by 7% in the 2007/08 Budget.  
123 Income tax is adjusted up on tax filing for WHT paid by manufacturers on imports of raw materials, 
plant, machinery, equipment and parts for own use (unified at a rate of 1% in the 2007/08 Budget), and from 2006/07 on fertilizer and CBU cars. Pakistan WT/TPR/S/193 
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Budget reduced the rate on imports of edible oils , bitumen, pesticides, and weedicides to 2%, and 
extended the 5% WHT to imported polyester filame nt yarn.  WHT therefore effectively imposes an 
additional levy on imports (similar to a tari ff) while exempting importers from income tax.124  This 
indirect tax may potentially discriminate against imports.  According to the authorities commercial 
importers are not supposed to pass on the WHT through higher prices. 
Table III.6 
Concessionary rates of WHT on imports, 2006/07 
PCT Code/Product WHT 
rate 
Fibres, yarns, and fabrics (excluding cotton) 1 
Condemned ships for breaking 1 
Urea fertilizer 1 
Phosphatic fertilizer 1 
Cooking oil or vegetable ghee 1 
Potassium  fertilizer 1 
Capital goods (plant, machinery, equipmen t, spares and accessories to produce goods or used in mining, agriculture, 
fisheries, animal husbandry, floriculture, horticulture, livest ock, dairy and poultry industries, or services); cement, coal, 
gold, mobile telephone sets, silver, sugar, wheat, raw wood,  trucks in CBU condition ha ving Gross Vehicle Weight 
exceeding 5 tons (PCT 8704.3290 and 8704. 9090), dump trucks classified (PCT 8704) and buses (PCT 87.01, 
8702.1090); and as cove red by SRO No. 575(I)/2006 of 5 January 2006 unde r the Customs Act, 1969 medical, surgical, 
dental or veterinary machinery/equipm ent, fixtures, fittings, furniture and di agnostic kits not manufactured locally, 
equipment relating to call centers not manufactured locally, disinfectants used in poultry business, pre-fabricated 
structures for poultry farms, livestock and raw materials a nd intermediary goods used in the manufacture of packing 
material for the packing of dairy products, ripening chambers , hot water treatment plant, vapour hot treatment plant, 
modern cold storage, packing machinery, power generating se ts of 10–25 KVA and battery operated fork-lift trucks used 
in horticulture and floriculture business, processing and packing machinery/equipment required for fish farming, 
medicines for cancer, drugs used for kidney dialysis and ki dney transplant, all type of vaccines for hepatitis, Interferon 
and other medicines for Hepatitis, all vaccines/anti-sera, car diac medicines, injection anti-D Immunoglobulin, blood bags 
CPDA.1, all medicines for HIV/AIDS and all medicines for thalassemia, broadcasting equipment; newsprint as covered 
by SRO No. 567(i)/2006 of 5 June 2006 of the Customs Act,  1969; computer hardware, parts and accessories (PCT 8471 1 
Raw materials for steel industry, including re-meltable/ re-rollable scrap, making poultr y feed, and stationery 2 
PCT Codes 801.1100, 801.3200, 802.1200, 802.9010, 902.4010, 902.4090, 2101.1110, 2101.1120, 0902.2000, 904.1110,  
907.0000, 908.1000, 3702.3100, 3705.2000, 3707.9000,  4011.2090, 6301.1000, 8204.0000, 8301.1000, 8511.1000, 
8525.4000, 8529.9010, 9004.1000, 0904.1120 (white pe pper), 0904.1190 (long pepper), 0906.1000 (cassia), 0813.4010 
(tamarind), 0908.3020 (small cardamom), 0908.3010 (big cardamom), 0909.1000 (star aniseeds), 0802.5000 (pistachio), 1211.9000 (medical herbs), 1301.1010 (seed lac), 1903.0010 (sago seeds), 1301.9090 (gum gopal), 3706.9000 (cinematographic film), 9613.1000 (pocket lighters, gas fuelled, non-refillable)  and 9613.2000 (poc ket lighters, gas 
fuelled, refillable) and other goods notified by CBR 2 
Pulses 2 
Edible oils, and goods covered by the Zero Rating Regime for Sales Tax 3 
Source: Central Board of Revenue (CBR) (2001), Income Tax Ordinance,  Second Schedule, Exemptions and Tax 
Concessions, Part II Reduction in Tax Rates, Islamabad. 
Income tax 
115. Income taxes provide a declining share of govern ment tax revenue, equal to about one third in 
2005/06;  about two thirds of income tax is paid by companies.  This largely reflects continued use of 
income tax incentives, including generous depr eciation provisions, as a major policy instrument 
(sections (2)(iv)(a), (3)(iv), (3)(vi) and (4)(ii)).  The direct tax system also has a narrow base, 
equivalent to about 1.5% of the population.125  A universal self-assessment system operates and 
appears to have increased compliance.  Large and me dium taxpayer units have also been established.  
Company tax rates are being unified gradually at 35% by 2007/08, except for "small" companies 
                                                      
124 The tariff equivalent will exceed the WHT rate sin ce its base is the tariff/tax inclusive import price. 
125 CBR (2005c), p. 43. WT/TPR/S/193 Trade Policy Review 
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which will continue to be taxed at 20%.  In 2006/07, 35% and 37% (43% in 2003/04) respectively for 
public and private non-banking companies, a nd 38% (47% in 2003/04) for banking firms. 
(ii) Production assistance 
116. In addition to various income tax and other tax exemptions/concessions to assist investment 
and exports, Pakistan provides producers various form s of financial assistance, mainly as income tax 
concessions/exemptions or direct subsidies.  The 2006/07 Budget exempted direct subsidies 
(including on exports) from income  tax (section 102A, Part I of the Income Tax Ordinance, 2001).  
(a) Income tax exemptions/concessions 117. The Government may exempt from tax any t ype of income (section 53, Income Tax 
Ordinance, 2001);  they are published in the Or dinance’s Second Schedule (Exemptions and Tax 
Concessions).
126  Some automatically lapse unless renewed, and many assist producers generally 
(Table.III.7).  Many remain despite attempts to reduce them. 
Table III.7 
Income tax concessions assist ing producers generally, 2006/07 
Product/activity Concession type 
Industrial undertakings covering new activities set up by companies 
with registered offices in Pakistan  and located in a special industrial 
zone, excluding activities engaged in, inter alia,  alcohol (except 
industrial alcohol), cotton ginning, spinning (except as part of an 
integrated textile unit, sugar ma nufacturing (white), flour milling, 
steel re-rolling and furnace, tobacco industry, ghee or vegetable oil 
industry, plastic bags (including Polypropylene, and Polyethylene), 
beverages (excluding fruit juices),  polyester industry, automobile 
assembly, and the cement industry   Income exempt from tax for 10 years 
Commencement date:   establishment between 1 July 1995 and 
end-December 2002 
Electric power generation, excluding oil-fired plants established 
between 22 October 2002 and 30 June  2006, but including dual fuel 
(oil and gas) set up after 1 September 2005 Income exempt from tax, pr ovided it is new; owned and 
operated by a company registered  in Pakistan with its head 
office in Pakistan; and is at least 50% privately owned 
Commencement date: 1 July 1988 
Kot Addu Power Station upon privatization  Income exempt from tax for 10 years 
Commencement date: 28 June 1996 
All activities Withholding tax on divide nds paid to Pakistani residents 
reduced to 5% (non-residents pay 10%) 
Commencement date:   not available 
Mining, excluding petroleum Withholding tax on  dividends paid to non-residents reduced 
from 10% to 7.5% 
Commencement date:   not available 
Privatized power generating firm or a company set up to generate 
electricity  Withholding tax on dividends pa id to non-residents reduced 
from 10% to 7.5% 
Commencement date:   2002 
Resident engaged in shipping Presumptive in come tax not to exceed the equivalent of 
US$1 per tonne. 
Commencement date:   2002; terminate from 1 July 2020. 
Distributors of cigarettes made in  Pakistan Amount of minimum tax reduced if applicable by 80% 
Commencement date:  not available 
Source: Central Board of Revenue (CBR) (2001), Income Tax Ordinance, 2001 , Islamabad.  
118. Agricultural income from rent of farm land, sal e of produce by cultivator or from buildings 
located on farmland is taxed at pr ovincial rather than federal le vel.  However, income from 
commercial farming activities, such as poultry farmi ng, dairying, and livestock grazing is subject to 
federal income tax.  Income of some commerc ial SOEs, such as the Pakistan Water and Power 
Development Authority, is tax exempt. 
                                                      
126 Part I (Exemptions from Total Income), Part II (Reduction in Tax rates), Pa rt III (Reduction in Tax 
Liability), and Part IV (Exemptio n from Specific provisions). Pakistan WT/TPR/S/193 
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(b) Direct financial assistance (subsidies) 
119. Domestic support to agriculture includes governme nt funding of general and infrastructural 
services, such as research, storage marketing, extens ion, irrigation and drainage and reclamation, 
flood control and on-farm water supply facilities.  This amounted to US$239  million in 1999/2000, 
most being spent on irrigation and drainage.127  Following a report by the Sub-Committee of the 
National Textile Strategy Committee, the Governme nt is also consideri ng an incentives package 
worth PRs 29 billion to assist the ailing textile sector ;  this is designed to improve competitiveness, 
generate employment and raise exports by 40% by increasing cotton production and improving value-
added products.128 
Input subsidies 
120. The budgetary cost of the subsidies on phosphatic and urea fertilizers to assist farmers 
(Chapter IV) is forecast to rise to PRs 12.3 billi on in 2006/07 (PRs 5 billion in 2005/06).  The 2007/08 
Budget increased the rate of subsidy from PRs 400 to PRs 470 per bag.  Farmers in Baluchistan also 
benefit from an electricity subsidy, costing US$12.6 million in 1999-00129;  irrigation subsidies are 
also large with charges set well below cost rec overy.  The 2007/08 Budget introduced a 25% subsidy 
to farmers on electricity charges for tubewells;  the funding contribution is to be shared equally 
between the national and provincial governments. 
121. Gas used as feedstock (and not fuel gas) by urea and nitrogenous fertilizer manufacturers is 
supplied at concessionary rates (Chapter IV).  Paki stan Railways also provides a freight concession of 
30% on imported fertilizer.  A domestic  freight subsidy on cement of PRs 60 per bag, forecast to cost 
PRs 720 million in 2006/07, has been withdrawn.130  The Government hopes to stabilize cement prices 
at PRs 285-295 per bag.  The Textile Garments Sk ill Development Board, funded by the EDF, was 
formed in 2006 to support the garmen t sector develop worker skills.   
Concessionary credit 
122. Concessionary credit schemes assist various activ ities.  In agriculture, the Government’s 
credit targets were again met in 2007 when credit of PRs 169 billion was disbursed (target of 
PRs 160 billion), assisted by State Bank "sector friendly policies".131  The SBP administers, through 
banks, the Revolving Credit Scheme to provide thr ee-year rolling finance to farmers for buying inputs 
and funding cultivation;  this was modified in mid- 2003.  It accounts for some 70% of all production 
loans granted to agriculture.  Until July 2005, the SBP also set mandatory credit targets for the five 
big commercial banks based on expected credit de mand in each province and bank performances.  It 
subsidized bank losses on such loans by 50%.  Banks failing to meet their targets were penalized.  
Since then, SBP has set indicative credit targets fo r an expanded range of banks, including specialized 
banks, based on credit requirements and their capacity to  provide loans.  Banks are allowed to set their 
own lending rates using KIBOR as a benchmark based  on their cost structures and risk profiles of 
borrowers.   According to the authorities, only the specia lized bank, Zarai Taraqiati Bank Limited  
(ZTBL, formerly the Agricultural Bank of Pakistan ) provides concessionary interest rates of 8-9% 
annually, under government directives.  The SBP released prudential regulations for agricultural 
financing in October 2005, and bank guidelines on livestock financing in August 2006 and on 
                                                      
127 WTO document G/AG/N/PAK/8, 20 August 2001. 
128 Daily News, "Rs. 29.76 billion package for textile sector in the offing", March 2007. 
129 WTO document G/AG/N/PAK/8, 20 August 2001. 
130 Government of Pakistan (2006d), p. 32. 
131 SBP (2006c), p. 1.  WT/TPR/S/193 Trade Policy Review 
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fisheries financing in March 2007.132  The SBP has developed a strategy to increase agricultural credit 
to PRs 330 million within 3-5 years.    
123. The State Bank operates a credit scheme, through banks, to assist farmers, flour millers and 
wheat traders to construct storage facilities.  Banks  are also encouraged to provide financing facilities 
for licensed wheat traders and flour millers to procure domestic (but not imported) wheat.  The State 
Bank also operates, through banks, a financing scheme to purchase locally manufactured, but not imported, machinery.  The scheme was revised in  July 2004 and was largely intended to help 
domestic machinery manufacturers.  The maximum term of the loans was 7.5 years, and interest rates were linked to treasury bills and 5-year PIBs.  However, the scheme was under-utilized, and is being 
merged with the SBP Scheme for Long Term Fina ncing for Export Oriented Projects (LTF-EOP);  
both schemes are to be replaced with a new L ong Term Financing Facility (FTFF) in 2007/08 
(section (3)(vii)).   
Small and medium-sized enterprises (SMEs) 
124. Policies on SMEs are handled by the Small a nd Medium Enterprise Development Authority 
(SMEDA).  The Government’s first SME policy, appr oved in January 2007, highlights logistical and 
infrastructural support and the need to lower co sts of "doing business", such as by providing an 
improved business environment, easier credit access,  human resource development, and support for 
technology up-grading and marketing.  The State Bank issued new prudential regulations for SME 
financing in 2004 to raise credit access by SMEs.  Banks can now extend cash-flow lending to them 
using personal guarantees.  The SME Bank was restru ctured and is expected to be privatized in 
2007/08.  The SME Business Support Fund makes gran ts to SMEs of up to PRs 1.8 million, on a 
shared-cost basis.  SMEDA is also working on  a number of state funded sectoral development 
programmes to facilitate SMEs, including in dairyi ng, gems and jewellery, stone, and furniture. 
Development boards 
125. A number of public sector boards promote development.  The government-funded 
Engineering Development Board (EDB), a technical arm of the Ministry of Industries, Production and 
Special Initiatives, was restructured in late 2004  to encourage the industry’s growth.  The EDB 
focuses on "thrust" sectors, such as automotive, home appliances, electrical goods, capital goods, and 
sub-contracting businesses.  It is working with the Government to promote assembly of computer 
numerical control (CNC) machine tools from imported CKD kits by eliminating the 5% duty on such kits while maintaining it on finished machines and tools.  To promote compressed natural gas (CNG) 
buses and reduce pollution the EDB has recomme nded banning imports of used CNG buses.
133  
However,  used buses of less than five years old can be imported;  no tariffs apply to imported CKD 
kits.  The EDB also prepared an Auto Industr y Development Programme (AIDP) to advise the 
Government on post-July 2006 motor vehicle arrangement s, aimed at helping the industry to adjust to 
the replacement of the compulsory local-cont ent programmes by the tariff-based system.  
(c) Price support and controls 
126. The Trading Corporation of Pakistan and th e Pakistan Agricultural Storage and Supplies 
Corporation provide market support by intervening in the market by purchasing, as required, to support guaranteed minimum procurement prices set for cotton and certain other agricultural 
commodities (Chapter IV).  
                                                     
 
132 ACD Circular No. 01. 
133 EDB (2006), p. 25. Pakistan WT/TPR/S/193 
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127. Price controls apply to vari ous products, including pharmaceuticals and utility services, under 
the Price Control and Prevention of Hoarding Act, 1977.  Administered by the Ministry of Industries, Production and Special Initiatives, it regulates maxi mum prices of "essential commodities", including 
imports, to achieve "equitable distribution" and "f air prices."  The list of items covered has been 
reduced from 62 to 38 (e.g. beef and mutton,  and cement prices were controlled in 2006).
134  
According to the authorities, such controls have  been relaxed under the G overnment’s deregulation 
policies and in practice amount to regular monitoring of prices and no fixing of maximum prices per 
se.  Some provincial governments also have similar legislation, e.g. the Sindh Essential Commodities 
Price Control and Prevention of Profiteering and Ho arding Ordinance of 2006, which controls prices 
of 66 commodities, 18 of which are its responsibility.  Petroleum prices have been deregulated, except 
for gas, petrol, and diesel, which are set by the Oil Companies Advisory Committee (Chapter IV). 
(iii) State-owned enterprises 
128. State-owned enterprises (SOEs) have an important, but declining role in line with the 
Government’s on-going privatization programme (Chapter I).  State involvement occurs mainly in 
manufacturing (e.g., fertilizers, steel, and engineeri ng goods), energy (oil, gas, and electricity), 
mining, and key services (e.g., banking, insurance, and transportation (Table III.8).  Dividends from 
SOEs were PRs 63.8 billion in 2005/06, equivalent  to 6% of total government receipts, but are 
forecast to fall with further privatizations.  If th e large state electricity losses are included, state-
owned enterprises substantially drain the government  budget (Chapter IV).  Several government-
sponsored foundations have large commercial interests.135 
129. The privatization programme, implemented by the Privatization Commission, has slipped due 
mainly to resistance from vest ed interests, regulatory uncertainty, especially in utilities and 
infrastructure services, and negative market sentiment (Privatization Commission Ordinance 2000).   
The Cabinet Committee on Privatization (CCOP), chai red by the Prime Minister, sets policy and must 
approve all enterprises to be privatized, including divestment prices and winning bidders.  Proceeds 
accrue to the Privatization Fund to finance povert y alleviation programmes (10%) and retire public 
debt (Privatization Commission Ordinance, section 16).136  Since August 2000, 57 sales have occurred 
worth in gross terms PRs 396.7 billion, mainly  in telecommunications, energy, and banking 
(Table AIII.7).  In 2005/06, privatization proceeds were PRs 90 billion, and the Privatization Fund 
stood at PRs 268.2 billion;  the Government comple ted six sales in 2006/07, totalling PRs 69.9 billion 
(until May) and anticipates raising US$3.505 b illion in 2007/08 from 23 sales (US$15 billion over the 
next five years) (Table III.8).  The major privatiza tion so far has been the sale of a 26% strategic stake 
in Pakistan Telecommunications Corp Ltd (PTCL)  to UAE investors.  A major setback was the 
Supreme Court’s nullification of the 75% sale of Pakistan Steel Mills in June 2006, due to the 
Commission's failure to meet certain procedural fo rmalities;  the case is under appeal in the Supreme 
Court.  An initial public offering for Pakistan St eel Mills is now expected to be completed by 
end 2007. 
                                                      
134 Notification SRO No. (I)/2006. 
135 The Fauji Foundation has holdings in sugar, textile s, cereal production, powe r plants, gas, tobacco, 
fertilizer, corn, and polypropylene;  the Shaheen Foundation in construction, aviation, air cargo, clothing, 
electronics, agriculture, and television; the Baahria Foundation in finance, industry, and natural gas; the Army 
Welfare Trust in several large farms, ghee factories, flour mills, engineering works, cotton-ginning plants, travel agency, bicycle plant, several banks, an insurance co mpany, pharmaceuticals, ceme nt, and footwear; and the 
National Police Foundation in a sheet-glass factory (EIU, 2006, pp. 11-12).  
136 The Government accrues some 60% of  privatization proceeds.  The re mainder is mainly returned to 
companies being sold, used to meet restructuring expenses, and to fund the Privatization Commission. WT/TPR/S/193 Trade Policy Review 
Page 76 
 
 
Table III.8 
Main state-owned enterprises and privatization plans, May 2007 
Entity State 
equity 
share Plans Entity State 
equity 
share Plans 
A.  Energy and natural resources E.  Utilities 
Pakistan Mineral Development Corp. 100.0 1st qter 2008 Water and Power Development Authority              .. .. 
Petroleum Storage Development Corp. .. .. Karachi Nuclear Power Plant .. .. 
Working Interests in Oil and Gas Fields .. .. F.  Transport   
Oil and Gas Development Corp. 85.0 2nd qter 2008 Pakistan Intern ational Airlines Corp. .. .. 
Pak Arab Refinery Company Ltd 60.0 4th qter 2007 Civil Aviation Authority .. .. 
Pakistan Oilfields Ltd .. .. National Tanker Co .. .. 
Pakistan Petroleum Ltd 78.35 3rd qter 2007 Pakistan Railways .. .. 
Pakistan State Oil Company Ltd 25.51 2nd qter 2007 Pakistan National Shipping Corp. .. .. 
Saindak Development Corp. .. .. Pakistan Railways .. .. 
Sui Northern Gas PipeLines Ltd 54.0 1st qter 2008 Sindh Road Transport .. .. 
Sui Southern Gas PipeLines Ltd 60.43 1st qter 2008 Republic Motors Ltd .. .. 
National Power Construction Co .. 3rd qter 2007 G.  Telecommunications    
Kot Addu Power Co 46.0 3rd qter 2007 Telephone Industries of Pakistan, Haripur             .. .. 
Jamshoro Power Co 100.0 3rd qter 2007 H.  Tourism    
Faisalabad Electric Supply Co  100.0 1st qter 2008 Pakistan Tourism Development Corp.            100.00 4th qter 2007 
Peshawar Electric Supply Co  100.0 2nd qter 2008 Services International Hotel Lahore               100.00 3rd qter 2007 
National Fertilizers Corp. .. .. PTDC Motels & Restaurants .. .. 
Hazara Phosphate & Fertilizers Ltd 100.0 2nd qter 2007 Roosevelt Hotel .. 3rd qter 2007 
Lakhra Coal Mines .. .. I.  Infrastructure    
B.  Financial Port Qasim Authority .. .. 
House Building Finance .. .. Karachi Port Trust .. .. 
Investment Corp. of Pakistan .. .. National Highway Authority .. .. 
National Investment Trust Ltd  .. 3rd qter 2007 J.  Chemicals    
Pakistan Industrial Credit and Investment .. .. Federal Chemical & Ceramics Corp. Ltd  .. .. 
Pakistan Industrial Development .. .. K.  Ghee units  
SME Bank 95.89 3rd qter 2007 Ghee Corp. .. .. 
First Women Bank .. .. Morafco Industries 77.48 2nd qter 2008 
United Bank Ltd 19.78  L.  Other    
Initial Public Offering  4th qter 2007 Pakistan Television .. .. 
Global Depository Receipt  3rd qter 2007 Federal Chemical and Ceramics .. .. 
Habib Bank Ltd  41.5  Pakistan Automobile  Corp. .. .. 
   Initial Public Offering  3rd qter 2007 Pakistan Broadcasting Corp. .. .. 
   Global Depository receipt  4th qter 2007 Pakistan Engineering Co .. .. 
National Bank   Pakistan Security printing .. .. 
   Global Depository Receipt 76.8 4th qter 2007 Ravi Rayon .. .. 
National Insurance Corp. .. .. Printing Corp of Pakistan Ltd 100.00 2nd qter 2008 
Pakistan Insurance Corp. .. .. Shalimar Recording Co .. .. 
State Life Insurance Corp. .. 2nd qter 2007 Tomato Paste Plant .. 4th qter 2007 
C.  Engineering  Republic Motors 100.0 3rd qter 2007 
Pakistan Engineering Corp. 33.0 1st qter 2008 M.  Corporations and others (status to be determined)  
National Construction Ltd .. .. State Cement Corp. .. .. 
Heavy Electrical Complex 100.0 3rd qter 2007 State Petroleum Refining &  
Pakistan Machine Tool Factory 100.0 1st qter 2008   Petrochemicals Corp. .. .. 
Pakistan Steel Mills Corp.  100.0  Pakistan Industries Development Corp. .. .. 
  Initial Public Offering  4th qter 2007 Utility Store Corp.  .. .. 
Pakistan Steel Fabricating Co Ltd .. .. Cotton Export Corp.  .. .. 
Sindh Engineering Ltd 100.0 1st qter 2008 Rice Export Corp. .. .. 
D.  Marketing and trading   Export Processing Zone Authority .. .. 
Cotton Export Corp. of Pakistan .. ..    
Rice Export Corp. of Pakistan .. ..    
Sindh Sugar .. ..    
Trading Corp. of Pakistan  .. ..    
.. Not available. 
Source: Privatization Commission and Government of Pakistan. Pakistan WT/TPR/S/193 
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(iv) Competition and consumer policy 
(a) Competition policy 
130. The Monopolies and Restrictive Trade Practices (Control and Prevention)  Ordinance, 1970 
prohibits "undue concentration of economic pow er", "unreasonable monopoly power" (ability of one 
or more sellers to set non-competitive prices or rest rict output without losing substantial market share 
or to exclude others from the market) or "unr easonable restrictive trade practices" (unreasonably 
prevent, restrain or otherwise lessen competition).  The minimum asset threshold for the operation of 
provisions on undue concentration of econom ic power was raised from PRs 300 million to 
PRs 4 billion in September 2005.  Unreasonable monopoly power is deemed to exist if two 
competitors maintain a relationship, including me rgers that create monopoly power or substantially 
lessen competition, if they have at least one third ma rket share.  Exceptions are:  if the relationship 
contributes "substantially" to efficiency, technical  progress or exports; less restrictive means to 
competition are unavailable; and the associated benef its "clearly" outweigh anti-competitive effects.  
Unreasonably restrictive trade practices cover both horizontal and vertical constraints.  Companies 
must register a range of undertakings defined in the legislation with the Monopoly Control Authority 
(MCA).  Full or majority SOEs (including those of  provincial governments) are not covered by the 
legislation, nor are markets subject to sectoral re gulators (e.g. electricity, telecoms, oil, and gas). 
131. The MCA examined and investigated 895 cases a nd issued 372 Orders in 2005/06.  Major 
cases related to cement and sugar.  Penalties were imposed on 18 cement factories that failed to 
comply with MCA Orders to abolish a cartel and restore competitive prices.  The MCA also directed 
47 undertakings to make timely grower payments and to release sugar stocks following a sudden rise 
in prices through "cartel like" activity.  It regular ly monitors sugar production and prices, including 
those paid to growers.  It has conducted many confidential sectoral studies.  
132. The government has launched competition policy development as a key "second generation" 
initiative.  To strengthen monopoly oversight a new modernized competition law has been drafted to 
replace the MCA with a new Competition Commission.  It will prohibit abuse of market dominance, 
certain types of anti-competitive agreements, deceptive  market practices, and mergers or undertakings 
that substantially reduce competition.  The Commissi on will have increased powers, such as authority 
to:  publicly issue non-binding opinions;  obtain fo rced entry and search of premises;  impose higher 
penalties, which can be recovered from sources other than arrears of land revenue.  Improved 
appellate procedures are to be introduced, including  the establishment of an Appellate Bench, and 
allowing appeals to the Supreme Court in addition to  the current appeal arrangements direct to the 
High Court. 
(b) Consumer policy 
133. Consumer protection is primarily a provincia l responsibility.  While most provinces have 
legislation, implementation has la gged.  Consumer protection councils  are yet to be established and 
consumer courts are not yet functional.  
(v) Intellectual property rights (IPR) 
134. Pakistan has taken decisive steps to strengthe n intellectual property protection, particularly 
enforcement.  However, while a long-standi ng member of the World Intellectual Property 
Organization (WIPO), Pakistan participates in only two of its 24 treaties;  it acceded to the Paris WT/TPR/S/193 Trade Policy Review 
Page 78 
 
 
Convention for the Protection of Industrial Property on 22 July 2004.137  Pakistan is making efforts to 
improve its capacity and resources for implementi ng intellectual property protection, and would 
consider acceding to other WIPO treaties in several years when technically feasible. 
135. Rules were published on patents in December 2003 (Patents Rules 2003) and on trade marks 
in 2004 (Trade Mark Rules 2004);  copyright rules were amended in 2004.  Draft legislation 
protecting plant variety rights has been approve d by Cabinet, and the Intellectual Property 
Organization (IPO) (see below, and Annex II.1) will be responsible for maintaining the plant 
breeders’ rights registry.  The Government can re portedly grant public institutions, including the 
National Book Foundation, royalty-free compulsory reprint rights where considered in the public 
interest, without the holder’s authorization;  some se e this as not in line with relevant provisions of the 
WTO Agreement on Trade-Related Aspects of Inte llectual property Rights (TRIPs) and the Berne 
Convention (Copyright Ordinance, section 36(3)).138  The authorities indicate that this provision has 
never been used.  It is also claimed that trade ma rk protection is inadequate, since rights of prior use 
are not recognized in the Trademarks Registry.139  However, the authorities indicate that the 
legislation provides "substantial" trade mark protect ion for prior use by merchants or manufacturers, 
and that these provisions have been upheld by se veral judicial precedents.  Changes to patent 
legislation in 2002 are claimed to have eliminated use patents, restricted patent filings to single 
chemical entities, limited protection for deri vatives, and introduced barriers to patenting 
biotechnology-based inventions.140  Pakistan is considering introducing a "section 3(d)-type" 
provision designed to exclude from patentability th e "mere discovery of a new form of a known 
substance which does not result in enhancement of  known efficacy of that substance, the mere 
discovery of any new property or new use of a known substance, and the mere use of a known 
process, machine or apparatus – unless that process results in a new product or employs at least one new reactant", thereby allowing only new pharmac eutical discoveries and not subsequent medical 
uses to be patented.
141 
136. In 2006, 247 patents were granted (225 to non-residents), 3,260 trade marks (1,648), 
416 industrial designs (137), and 1,120 copyrights (23).  Applications for patents (and for designs or 
layouts of integrated circuits) must be made usi ng a Pakistani legal practitioner.  Applications for 
trade marks can be made directly, provided the a pplicant has Pakistani representation, or through a 
registered local trade mark agent or  attorney based in Pakistan.  Copyright applications do not require 
a Pakistani lawyer. 
137. To improve enforcement the customs provisions on products with intellectual property were 
revised in the 2004/05 Budget (Customs Act, secti ons 15, 16 and 17), which prohibit import or export 
of goods infringing copyright, patents, and trade marks).  Import or export (Export Policy Order) of 
counterfeit products is prohibited, along with go ods having a counterfeit trade mark, false trade 
description within the meaning of the copyright la w or violating other intellectual property laws.  
Customs may detain, seize or confiscate illegal imported or exported goods (section 16).  The 
                                                      
137 Pakistan is also a member of the Berne Co nvention, and the Universal Copyright Convention 
administered by UNESCO.  It has bilateral agreements with Australia, New Zealand, Sri Lanka, and the United 
Kingkom to protect inventions and designs, and with Canada for inventions only (EIU, 2006, p. 26). 
138 IIPA (2005) and (2007), p. 355. 
139 EIU (2006), p. 25. 
140 USTR (2007b), p. 444. 
141 Such provisions have possible implications on the patentability of incremental innovations (building 
on existing innovations) and so-called "evergreening" (e xtending the patent’s term by making inconsequential 
changes).  While a major Swiss pharm aceuticals company challenged them in  Indian courts as non-compliant 
with the TRIPS Agreement, the Chennai High Court dismissed the case in August 2007 on the grounds of its non-competency to decide  on issues relating to the TRIPS Agreement.    Pakistan WT/TPR/S/193 
 Page 79 
 
 
autonomous IPO, attached to the Cabinet Divisi on under the Prime Minister’s supervision, was 
formed in April 2005 to strengthen the institutional setting and streamline intellectual protection;  its 
budget was increased considerably in 2006/07.142  It handles all intellectual property and implements 
an Enforcement Coordination Initiative to crack do wn on illegal products.  In  April 2005, to boost 
enforcement and reduce piracy, copyright crime also became the responsibility of the Federal 
Investigation Agency (FIA) and of the district  police and customs authorities.  Enforcement 
committees among relevant agencies exist in severa l cities, and "anti-piracy" cells have been 
established at all international airports to more ef fectively prohibit pirated goods, e.g. by inspecting all 
exports of discs. 
138. Enforcement efforts, including major seizures, ra ids and arrests, are be lieved to have closed 
piracy operations and reduced illegal im ports, especially of business software.143  A s  a t  e n d -
January 2007, the FIA had conducted a total of 38 raids, including four in January.144  These 
substantial improvements in IPR protection, and especially enforcement, are recognized 
internationally.145  However, efforts to control book piracy (e.g. sales at Urdu bazaars) where 
enforcement has lagged that of optical piracy have reportedly been far less successful (although this is 
rejected by the authorities).146  Book piracy as well as end-user software and cable piracy appear to be 
widespread.147  Also, while optical disc production for export has largely ceased, key prosecutions in 
2005 remain outstanding and illegal imports  from Malaysia and Indonesia are rising.148  According to 
the authorities, this largely reflects Pakistan’s success in shutting down illegal domestic operations.  
Some see fines and criminal penalties, such as no mandatory minimum sentences in some areas, e.g. 
copyright, as an inadequate deterrent.149  Claims that trade marks are w eakly enforced are rejected by 
the authorities.  There are also claims that ther e is patent infringement in pharmaceuticals by firms 
being licensed to produce patented drugs, with inconsistent enforcemen t of court injunctions, 
protection against unfair commercial use of test or other data submitted to authorities for registration 
is also said to be inadequate.150  According to the authorities th e possibilities of misuse are being 
contained effectively by placing the Controller Patent s on the Ministry of Health’s Drug Registration 
Board, and government is actively considering the ne ed for legislation to protect against unfair use of 
test data. 
                                                      
142 Previously, the Patents and Designs Office was handled by the Ministry of Industries, Production 
and Special Initiatives;  the Trademarks Registry by the Ministry of Commerce;  and the Copyright Registry by 
the Ministry of Education. 
143 Pakistan was estimated to have had one of the highest piracy rates for optical discs (59%), with at 
least 230 million pirated discs exported  in 2004 (IFPI, 2005).  Disc capa city exceeded demand by over ten times 
in 2004.   
144 Imports of polycarbonate, the main raw material for making optical discs, fell by more than 50% (by 
volume) during 2003-05. 
145 The United States terminated its re view of Pakistan’s intellectual property regime as part of its GSP 
scheme in early 2006, and downgraded Pakistan from the Special 301 Priority Watch List to the Watch List in April 2006, in recognition of its progress on IPR enforc ement. Pakistan remains on the Watch List in 2007, 
subject to an "Out-of-Cycle" Review to monitor progress (USTR, 2007b). 
146 The IIPA has estimated that piracy rates remain high for records and music (100% in 2006, up from 
83% in 2002), books, business software (up from 80% to 84%), entertainment software, and motion pictures 
(IIPA, 2007, p. 356).  The Business Software Alliance al so estimated software piracy in Pakistan at 86% in 
2006, up from 84% in 2004.  
147 IIPA (2007), p. 354.  
148 In 2005, six pirated factories were shut down and another four plants closed, 400,000 pirated discs 
seized, and nine people arrested (IIPA, 2007, p. 358).   
149 USTR (2007b), p. 355.  The maximum penalties for copyright infringement are imprisonment for up 
to three years and/or a fine up to PRs 100,000 for first offence.    
150 USTR (2007a),  p. 444.