The Federal Board of Revenue (FBR) has imposed a 10 percent processing fee on a wide range of commercial goods transiting through Pakistan into Afghanistan, aiming to address concerns about misuse of transit trade facilities.

A notification issued under SRO.816(I)/2025 amends previous regulations, expanding the fee beyond the initial five categories, which included footwear, confectionaries, garments, home textiles, and mechanical/electrical machinery. The revised policy now covers a broader range of industrial and agricultural equipment.

Government’s Justification for the Move

The Ministry of Commerce had previously raised concerns that Afghan transit trade was being exploited due to significantly lower customs duties in Afghanistan compared to Pakistan, enabling traders on both sides to manipulate the system. The misuse allegedly led to commercial goods intended for Afghanistan being redirected and sold within Pakistan, undermining local businesses and tax collection efforts.

To counter this, the government has introduced additional regulatory and financial safeguards, including:

• Replacement of Revolving Insurance Guarantees with 100% Bank Guarantees on all Afghan transit goods.
• A 10% ad valorem processing fee on transit goods showing unusual increases in volume, particularly where Afghanistan’s import duties remain negligible.

Expanded List of Affected Goods

Effective immediately, the processing fee applies to critical machinery and equipment, including:

• Pulley tackle, cranes, and forklifts used in industrial operations.
• Agricultural and construction equipment, including excavators, grading machines, and soil preparation machinery.
• Textile and manufacturing machinery, such as fabric processing equipment and extruders for synthetic materials.
• Electrical and digital systems, including optical readers, data processing machines, radio transmission devices, and telecommunication equipment.
• Electronic waste and scrap materials, categorized under industrial disposal regulations.

Economic Implications

The decision is expected to generate additional revenue for Pakistan, while discouraging unauthorized redirection of goods into local markets. However, Afghan businesses relying on imported equipment and manufacturing tools may face higher costs, potentially affecting production efficiency in key sectors.

Additionally, trade analysts warn that the policy could strain bilateral commercial relations, especially if Afghan traders push for exemptions or reduced fees in response to increased operational expenses.

Looking Ahead

As Pakistan takes stricter measures to regulate transit trade, the government may explore additional reforms, including enhanced tracking mechanisms and bilateral negotiations to ensure fair trade practices.

For now, businesses involved in the Afghan transit trade will need to adjust their pricing strategies, factoring in the higher costs imposed under the new policy.