Customs fraud causes loss of billions

Express Tribune

18-03-2025

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In a major system breach, importers have tampered with over 10,000 Goods Declaration (GD) forms by altering originally declared quantities and descriptions of goods in connivance with the Pakistan Single Window (PSW) to evade billions of rupees in taxes.
The scam has shaken the belief that a GD form—the document carrying details of importing companies, agents, imported goods, and due duties and taxes—once filed online, cannot be altered or changed.
The Federal Board of Revenue (FBR) has ordered a post-clearance audit of Transshipment (TP) GD forms, effective from the fiscal year 2022, after The Express Tribune pointed out the massive system breach. The tampering was carried out in collaboration with officers of the PSW, a government-established company responsible for handling trade-related business.
To remain undetected, the corrupt network did not alter the Harmonised System (HS) code — a unique numerical identifier for traded goods. However, they manipulated the descriptions and quantities of goods, according to documents reviewed by The Express Tribune.
In response to inquiries, an FBR spokesperson confirmed that "HS codes and quantities were changed in the declarations filed at dry ports." However, he added that "nonetheless, these consignments were subjected to physical and documentary scrutiny by Customs at dry ports."
The large-scale tampering had been ongoing for years and was uncovered through log edits of these GDs, according to sources.
FBR Chairman Rashid Langrial appears determined to dismantle the corrupt network and immediately ordered an inquiry. However, some senior officers attempted to 'technically manipulate' the issue. Initially, FBR officials focused only on cases where HS codes were changed, ignoring alterations in descriptions and quantities.
When the issue was raised again, the FBR, on March 13, ordered "a detailed importer-wise analysis of the fields in the Goods Declarations as initially declared at the time of filing the TP GD at the port of origin (Karachi ports) and any subsequent modifications made by the importer or agent at the time of filing the GD at the port of destination (dry ports)."
This is the second major scam that has rocked the Customs Department, again involving the PSW. Earlier, a premier intelligence agency uncovered a nexus between 78 corrupt FBR officials and smugglers.
Following an Express Tribune story, Prime Minister Shehbaz Sharif ordered the Prime Minister Inspection Commission (PMIC) to launch an inquiry. One of the accused individuals named in the intelligence agency's report currently holds a key position in the Ministry of Finance and has also been summoned by the PMIC.
Modus operandi
Details show that the importer-PSW officer nexus targeted GD forms originally declared at Karachi port but destined for inland dry ports such as Peshawar, Multan, Lahore, or Faisalabad. The common method of tampering involved declaring at least two types of goods in a GD—one subject to a high customs duty and another with a lower duty rate. At the final stage, the quantity of the high-duty item was drastically reduced, while the low-duty item's quantity was increased proportionally to maintain the total weight of the consignment.
For instance, a transshipment GD was filed in Karachi on November 26 last year, ending in digits 173, and its home consumption transshipment was filed in Azakhel, Peshawar. The estimated tax evasion in this single case is Rs13.9 million. Similarly, another GD, ending in digits 123, was filed on the same date in Karachi with two declared items. The estimated revenue loss in this case is Rs14.2 million.
Sources revealed that thousands of such cases exist, and a deeper investigation could expose the full extent of the fraud.
On August 7, a GD ending in digits 026 was filed in Karachi. The TP declaration was manipulated, reducing the actual weight of a heavy-duty item from 10,000 kilograms to just 100 kilograms. This manipulation resulted in an estimated duty and tax evasion of approximately Rs12 million under HS Code 5804.1000.
Sources disclosed that, a few years ago, the data source code was transferred from Pakistan Revenue Automation Limited (PRAL)—an FBR data subsidiary—to the PSW. They explained that such tampering would not have been possible without the active involvement of individuals with system controls at PSW.
The government had set up the Single Window company to handle tasks previously managed by Pakistan Customs. Employees in this company receive hefty salaries, and many were hired from Pakistan Customs.
FBR's response
An FBR spokesperson stated that importers exploited a system glitch to evade duties and taxes. However, after customs assessment at destination dry ports, the collected duties and taxes were found to be higher than the declared amounts.
To ensure no revenue loss, the Customs Wing has directed the Post Clearance Audit wing to review all affected GDs. The spokesperson confirmed that HS codes and quantities were altered in declarations at dry ports, but the consignments still underwent physical and documentary scrutiny by Customs.
Under the standard transshipment GD process, the initial declaration's contents cannot be changed when converting a TP GD to a home consumption GD at dry ports. Each dry port's customs administration is legally bound to verify declarations against actual imported goods. Customs officers have access to the original TP declaration, but scrutiny only intensified after The Express Tribune exposed the scam.
A review of data found that fewer than 2% of total TPs filed over the past five years showed discrepancies. However, changes were made by importers before customs assessment, meaning GDs were verified before clearance.
The FBR claims to have fixed the glitch and has ordered an audit. If adverse findings emerge, the audit scope may extend back to 2015.