Spice importers in Pakistan said at the end of June that they would refuse to open letters of credit (L/Cs) for new purchases until the government revokes its decision to increase import duties.

Import duty on spices increased from 15 per cent to 20 per cent with effect from 18 June, after which date the importers say they will not open new L/Cs. Spices awaiting clearance are also lying in ports as traders await a government U-turn.

Opportunities for spice smugglers

Bona fide importers are particularly galled by the increase in duty because they say it will further open the market to spice smugglers who apparently pay a cumulative duty of just 15 per cent compared with the 59 per cent burden carried by genuine importers.

Official imports of spices fell by 21 per cent in the 11 months to May 2001 while retail prices have remained level. Although imports have fallen, analysts say that prices stayed static because smuggled spices have prevented shortages in the market.

Import duty on tea has also been raised by 5 per cent to 30 per cent, an increase that observers say is also likely to stimulate smuggling in this commodity.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.