Internal review describes FCA system as ‘a complete failure'

Business Recorder

a day ago

KARACHI: Pakistan's much-touted Faceless Customs Assessment (FCA) system has been branded 'a complete failure to achieve objectives' by an internal review committee, revealing the anti-corruption initiative has worsened clearance efficiency and reduced revenue collection.
The final report of the review committee on FCA, obtained exclusively by the Business Recorder, revealed how the FBR's flagship digital transformation project has increased cargo clearance times and failed to deliver the promised revenue gains since its launch in December at Karachi port.
The committee has prepared this report based on Customs data from July 2024 to April 2025, comparing the FCA performance with the period of five and a half months before its implementation.
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Contrary to expectations, the FCA system has increased clearance times despite reducing documentation requirements. The committee found that while document calling decreased significantly since launch and continued through April 2025, overall dwell times increased due to more examinations, referrals to higher officers, lab test calls, and most importantly, increased reviews before Principal Appraisers and Assistant Collectors.
'This reduction could have resulted in overall dwell time reduction in FCA Collectorates but other factors like increase examinations, referrals to next level officers, calling Lab tests and, more importantly, increased Reviews before PA/AC, has not only negated the impact of decreased document calling but has increased the overall dwell time under FCA clearances,' the report said.
The report highlighted that 'a significant increase in the filing of first and second reviews also indicates that the quality of assessments at AO level has deteriorated' under the faceless system, showing officers are making substantially more errors.
The system has catastrophically failed its primary test of boosting government revenues. Additional revenue from Customs assessments dropped from 16% to 13% after FCA implementation, dealing a severe blow to Pakistan's cash-strapped treasury, struggling to meet IMF targets.
'The present data does not support any positive impact of FCA in terms of improved assessments, which is primarily indicated through the quantum of additional revenues generated through assessments,' the report said.
While acknowledging that multiple factors affect revenue collection including import volumes and values, variation in composition of dutiable and revenue-free values, seasonal effects, and composition of imported commodities such as vehicles and edible oil, the review committee found 'no exceptional behavior in aggregate terms for revenue collection against the corresponding import value under FCA,' the report said.
The report also disclosed that FCA's two fundamental design concepts - hiding trader information from Assessing Officers and discontinuing specialized assessment groups - were already 'tried, tested and then discontinued 20 years ago' when Pakistan Customs first introduced its automated Customs clearance system, PACCS.
'In the context of FCA's present design, it may be pointed out that two its basic design concepts i.e. hiding of trader information from AOs and discontinuation of specialized assessment groups had been tried, tested and then discontinued 20 years ago when Pakistan Customs' first automated Customs clearance system 'PACCS' was introduced,' the report said.
'The reasons for such discontinuation, which were true 20 years ago, are also true today, i.e., limiting the maximum available information to the assessing officer limits his ability to correctly examine and assess the declaration with a 360-degree view of that declaration. Similarly, the existence of specialised assessment groups not only creates a sector-based institutional memory and consequent strong Customs controls, but also reduces dwell times due to repetitive handling of similar, and a limited group of products.'
Based on these findings, the review committee took the extraordinary step of recommending against further FCA expansion. 'In light of the above analysis, findings, and conclusion, this Committee does not recommend implementation of further phases/rollout of FCA unless its efficacy is confirmed through any other means or additional/bigger data set(s), and/or its basic design constituents are reviewed.'
The committee specifically called for detailed audits by the Pakistan Customs Authority of sample cases from revenue-loss prone sectors, including vehicles, miscellaneous goods declarations, commercial fabric imports, and commercial imports of chemicals to verify any negative revenue impacts that may have been overlooked.
The FCA was introduced as part of the broader FBR Transformation Plan with the primary objective of addressing collusion between importers and Customs assessing officers.
'Apparent implication of this collusion is assumed to be the consequent revenue loss, which implies that the objective of the FCA concept was to stop such loss,' the report said.
However, it has been revealed that two probable reasons for failure: 'either the FCA in its present design is unable to stop the said collusion OR the impact of said collusion on revenues is otherwise so miniscule that FCA, despite being effective in sanitizing the assessment halls and almost restricting any contact (collusion) between importers and assessing officers, failed to reflect any corresponding growth in the revenues collected through these formations.'
Senior Customs sources, on condition of anonymity, slammed the 'haphazard' implementation and expressed strong criticism of the rushed rollout.
'FCA, which was implemented haphazardly, could deliver the results if it were enforced wisely,' sources close to the matter said.
'It was not humanly possible that an appraiser or principal appraiser has that expertise to process every single goods declaration from any sector in a stipulated time,' sources explained.
'The system has no integration with the IRS and other important databases, but it was rolled out in Karachi, which was not a wise decision. It should have been implemented in Lahore or Rawalpindi first to remove all bugs and then rolled out to Karachi.'
The sources revealed that 'FCA has weakened pre-clearance control that made this system ineffective to achieve its desired objectives' and emphasized to follow best international practice, saying that the 'system must be integrated with advanced IT solutions along with fresh trained staff to eliminate bad-reputed staff and allow maximum clearance through green channels and strengthen post clearance audit.'
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