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April 29, 2014

Volume 7 Issue 3

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Pakistanis Criticize Base Oil Customs Benchmark

The Pakistan Economy Forum has accused the nation’s Customs Service of acting arbitrarily by setting U.S. $1.28 per kilogram as the benchmark value on which to calculate import duties on base oils. Critics complain that the benchmark amplifies tax bills for importers by over-valuing most shipments.

PEF Chairman Arshad Jamal told Lube Report Asia that the business group has asked the Federal Board of Revenue’s Customs Service to treat base oils like other commodities that include a range of products. He cited, as an example, the agency’s treatment of steels, the value of which is set according to prices from the London Metal Exchange.

“The LME is recognized globally as a benchmark for prices of [various grades of] steel,” Jamal said. In contrast, “an internationally recognized petrochemical market information provider, ICIS … has completely been ignored for obtaining the transactional value of base oils.”

Unlike ICIS, which reports market prices for various viscosity and quality grades of base stocks, the customs department uses a single benchmark value for all base stocks. As a result, critics say, it exaggerates the transactional value of for a large portion of base oils imported into the country. In fact, the value that the department assigns to base stocks exceeds market prices for many finished lubricants, which of course is not logical, Jamal said.

He also noted that base stocks differ in density, viscosity index, flash paints, pour points, kinematic viscosity and overall appearance. This makes it plain, he argued, that different stocks are of different quality and therefore should be assigned different values.

PEF has urged the chief collector for Pakistan’s southern customs zone to rectify the situation and value base oils in accordance with ICIS prices. Lube Report Asia tried to contact Chief Collector, South, Nashim Masoor Ahmed to ask about the government’s viewpoint, he was not available, and other officials refused to comment.

A top official of the Pakistan Business Council, speaking on condition of anonymity, said PEF’s demand may be reasonable but that the Customs Department is striving to implement unified valuation guidelines across the country, a strategy that is causing disenchantment in a variety of industries.