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Pakistan Reverses Course and Withdraws Import Taxes on Cotton

Trying to balance demands from importers and domestic manufacturers, and keep a handle on supply and demand issues, Pakistan’s Federal Board of Revenue has repealed a 5 percent tax and a 4 percent customs duty on cotton imports.

The government order, relevant to imports of raw and ginned cotton, is retroactive to Jan. 8 and should help curb costs for spinners that use imported material.

But the country’s cotton growers are said to be unhappy about the move, according to local reports, after lobbying against the withdrawal of the import duties. A delegation of the Pakistan Cotton Ginners Association had met the prime minister to urge that the customs duty and sales tax on cotton imports stay in place. A Pakistani newspaper report said millers were planning to launch a protest campaign against the removal of the import duties.

[Read more about Pakistan imports: Pakistan Leather Industry in a Lather Over Import Tariffs]

Pakistan has been importing long and extra-long staple cotton since 2001 as the country primarily produces short- to medium-staple length cotton.

Cotton production is expected to be around 11.1 million bales during the current crop year of 2017-18 against the revised production target of 12.6 million bales.

The government has been back and forth on the issue in an attempt to promote value-added production, while not hurting domestic growers. In January 2017, government had removed the customs and import duties, but the levies were restored after six months due to a forecast increase in cotton production.

Ginners and farmers oppose duty-free cotton imports, saying that would result in reduced local market prices and hurt their interests. Trading in the cotton market came to a standstill at the beginning of the month because of the tug of war between textile bodies and ginners, according to reports.

The Pakistan leather industry has also been lobbying for relief from what it sees as excessive import duties on raw materials. The Pakistan Tanners Association said additional regulatory duties on imported basic tanning chemicals and quarantine requirement imposed by the government are hampering the productivity of the leather sector, which ultimately affect the leather exports of the country.