Charter of the Economy Table 17.5: Number of Import Tariff Slabs, Average Effective Tariff and the Average Level of Effective Protection to Domestic Production Number of Slabs Minimum Tariff(%) Maximum Tariff(%) Average Weighted Tariff (%) Average Effect Rate of Protection(%) Early 90s 10 0 120 22.5 177 2007-08 to 2010-11 7 0 35 7.1 65 2012-13 7 0 30 5.7 52 2014-15 6 1 25 7.0 48 2015-16 5 2 20 7.2 35 2016-17* 4 3 20 9.0 33 2019-20* 4 0 20 9.2 33 *Higher because of Regulatory Duties Source: FBR Customs Tariffs and Estimates The maximum tariff rate was brought down to 35 percent in 2007-08 and then further reduced stepwise to 20 percent by 2015-16. However, there has been an increase in the average weighted tariff from 7.1 percent in 2010-11 to 9.2 percent in 2018-19. How did this happen in the presence of falling import tariffs? Insidiously, the previous Government took two steps to contain the growing imports. First, minimum import tariffs were introduced on various items. Second, a regime of regulatory duties was introduced. Initially, 731 items were subjected to regulatory duty vide SRO 1035(1)/2017, with duty rates ranging from 5 to 80 percent. The resulting effective rates of duty and the extent of duty exemption by commodity group is given in Table 17.6. The effective rate varies from a low of 3.6 percent on mineral fuels and 5.9 percent on machinery to a high of 28 percent in the case of vehicles and 48 percent on ceramic products. Almost 29 percent of the imports are duty free. This includes, first, imports from China under the RTA. Second, there are area wise and sector wise imports of machinery which are exempt from import duty. Third, import of crude oil is subject to zero duty. Fourth, raw materials and intermediate goods that are not available locally for production of exports have also been exempted to reduce the need for duty drawbacks. There is a case for levying a minimum import duty of 1 percent on all imports to cover the costs of customs valuation and clearances of consignments as is done in some other countries. This will fetch additional revenues of almost Rs 80 billion. 170