FBR Extends Regulatory Duty on Steel Imports: Key Measures to Protect Local Industry
On January 30, 2025, the Federal Board of Revenue (FBR) issued a new notification extending the regulatory duty on the import of steel products, particularly flat steel products, in a move designed to protect the domestic steel industry. The updated notification, SRO 78(I)/2025, amends the previous notification SRO 928(I)/2025, which was issued on June 30, 2024. This extension aims to continue supporting local manufacturers by ensuring the sustainability of Pakistan’s steel sector.
Regulatory Duty Extension and its Impact on Steel Imports
Originally, a 10% regulatory duty was imposed on flat steel products under the Finance Act of 2024, with the intention of providing a competitive edge to local steel manufacturers. The duty was initially set to expire on December 31, 2024, but following consultations with the Tariff Policy Board (TPB), the FBR decided to extend the duty until March 31, 2025. However, from April 1, 2025, the duty will be revised to a reduced rate of 5%.
This move is seen as a strategic effort to stabilize the local steel industry amid global market dynamics. Local producers had raised concerns about unfair competition from steel imports, particularly during times of fluctuating global steel prices.
TPB Recommendations and Discussions
The decision to extend the regulatory duty was made based on the recommendations of the Tariff Policy Board (TPB), which convened its 61st meeting on December 26, 2024. The TPB discussed the ongoing challenges facing Pakistan’s steel manufacturers, such as increasing imports and the need for continued protection to remain competitive in the global market.
During the meeting, the TPB recommended extending regulatory duties on 36 tariff lines of flat steel products, which include a range of goods like steel coils, sheets, and other raw materials used by manufacturers. The Board also clarified that from April 1, 2025, the duty rates would return to their original levels of 0% and 5% for certain steel products.
Ministry of Commerce’s Proposal to Extend Duties
The Ministry of Commerce, in a summary presented to the Economic Coordination Committee (ECC), emphasized the government’s legal right to extend regulatory duties under the Customs Act of 1969. The Ministry’s proposal, supported by the TPB’s recommendations, involved extending duties on key flat steel products to safeguard the interests of local steel manufacturers.
International Steel Limited, a prominent player in the local steel industry, had requested an additional extension of the regulatory duties on certain steel products until June 30, 2025. The company also proposed that a 10% regulatory duty be imposed on Galvalume steel coils and sheets, arguing that this would prevent potential circumvention of existing anti-dumping duties.
However, the TPB had previously capped such extensions under a sunset clause, which set the duty changes to expire by December 31, 2024. Despite this, discussions continue on how best to balance the needs of the domestic market with international trade commitments.
Analysis of Import Trends and Potential Downstream Effects
According to reports, the value of flat steel imports increased by 4% between July and November 2024, indicating growing demand for steel products despite regulatory duties. On the other hand, imports of Galvalume steel saw a 13% decline in value and an 8% reduction in quantity over the same period, suggesting that the steel market may not be experiencing the anticipated surge in imports.
The Joint Secretary (Tariff Policy) raised concerns during the TPB discussions that maintaining or increasing regulatory duties on steel imports could have negative consequences for downstream industries. These industries, such as construction and automobile manufacturing, rely heavily on imported steel products. An increase in steel prices due to higher duties could potentially hurt these sectors, impacting the overall economy.
Moreover, there was a reminder that Pakistan is committed under its IMF program to reduce trade-weighted average tariffs rather than increasing them. This international obligation creates a delicate balance between protecting local industries and meeting global trade commitments.
Customs Duties and Anti-Dumping Measures
The overall tariff structure for steel imports into Pakistan includes a variety of duties, including customs duties ranging from 11%-20%, additional duties (2%-6%), regulatory duties (5%-10%), and anti-dumping duties (5.36%-40.47%). These layered tariffs are intended to both support local manufacturers and protect against unfair competition from countries with lower production costs.
In light of International Steel Limited’s request for further extensions, the TPB also considered how anti-dumping duties could be better enforced. Some players in the steel market argue that lower import duties could make it easier for foreign competitors to undercut local prices, thereby undermining Pakistan's steel industry.
