GOVERNMENT OF PAKISTAN

Model Customs Collectorate (Appraisement-East)

Custom House, Karachi

File No. 1(06)MCC/Tender-01/2018-19                                     Dated: 29.08.2018

PUBLIC NOTICE NO. 04/2014

SUB: CLASSIFICATION RULING OF ARTIFICIAL LEATHER–CASES OF M/S A.T.S SYNTHETIC (PVT) LTD & M/S  A.H.N SYNTHETIC (PVT) LTD.

            The tariff classification of various types of PVC/PU materials (Artificial Leather) manufactured by M/s. A.T.S. Synthetics (Pvt) Ltd. and M/s. A.H.N. Synthetic (Pvt.) Ltd. Lahore was determined under PCT Code 39.21 by Classification Committee vide Public Notice No. 5/2013 dated 21-05-2013. On a representation made by the said manufacturers, the Federal Board of Revenue, vide letter C. No. 3(2) Tar-1/91 dated 11-06-2013, directed the Classification to re-examine its findings after giving proper opportunity of hearing of the applications and laboratory testing of the goods.

 02.       In pursuance of the directives of the Federal Board of Revenue, the matter was taken up afresh by the Classification Committee and hearings were conducted on 24-10-2013, 18-04-2014 and 14-06-2014. The representation of M/s. A.T.S. Synthetics (Pvt) Ltd. and M/s. A.H.N Synthetic (Pvt) Ltd. Lahore, officers of Large Taxpayers Unit, Lahore were got tested by the Classification Committee from Leather Research Centre, P.C.S.I.R, Karachi.

 03.       M/s. Akhtar Ali & Associates, the representatives of manufactures, assailed the previous findings of Classification Committee regarding the classification of the subject goods under HS Code 39.21 and pleaded that the same may be classified under HS Code 59.03, mainly on the following grounds:

 PVC coated fabric having both compact and cellular plastic layers, especially when the compact layer is the top layer, is classifiable in PCT heading 59.03 US Customs have classified the subject goods under HS code 59.03.Identical/similar products are routinely cleared by Pakistan Customs under heading 59.033.

 04.       The representatives of Large Taxpayers Unit, Lahore argued that the applicant’s goods were classifiable under PCT Code 39.21. The main arguments put forth by LTU in this regard are as under:-

 By virtue of Explanatory notes to HS code 59.03 and Note 2(a)(5) of Chapter 59, the goods in question are excluded from the purview of Chapter 59 and are classifiable under Chapter 39.

The essential character of the goods as per Rule 3(b) of GIR is also of plastics and various international manufacturers of PVC/PU Leather and Artificial Leather declare the HS Code of their goods in 9.21 on their websites.

 05.       The arguments put forth by the stakeholders, test reports of Leather Research Centre, P.C.S.I.R, Karachi and relevant explanatory/section/chapter notes of tariff were examined by the committee. The results of test reports pertaining to different samples forwarded to P.C.S.I.R are summarized below:- 

With regard to the above findings of laboratory, the main contention of the manufactures was that since the test reports indicate the presence layer along with cellular plastic layer therefore the following exclusion of Chapter 59 does not apply to the goods in question:

            “(5) Plastic, sheets or strip of cellular plastic, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 39).”

 06.       The Committee has given careful consideration to the above mentioned explanatory notes and the stakeholders’ arguments. It is observed that as per the test results, item no 1 and 4 mentioned in the above table straightway fall out of the ambit of HS code 59.03 because they do not contain textile fabric. As regards the remaining items, it is evident from the lab test reports that these contain both cellular and compact plastic layers and since the committee is satisfied that textile fabric has been used in the goods as merely for reinforcing purposes, therefore, the same qualify for classification under PCT Code 39.21 by virtue of the exclusion given under Note 2(a)(5) to Chapter 59. Moreover, this Committee is of the view that the essential charater of the goods is that of Plastics and not of Fabrics and thus the same merits classification under Chapter 39 in the light of GIR 3(b) reproduced below:

 “(b)      Moreover composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to essential character, insofar as this criterion is applicable.”

 07.       The subject PVC/PU materials (Artificial Leather) manufactured by M/s. A.T.S. Synthetics (Pvt) Ltd. and M/s. A.H.N. Synthetic (Pvt) Ltd. Lahore are, therefore, classifiable under PCT Code 39.21 in terms of rule 1 & 3(b) of General Rules for Interpretation read with rule 1 of Pakistan Rules for Interpretation. This classification ruling is strictly in respect of the goods presented before the Classification Committee.

Signed by

(Wajid Ali)

Additional Collector-I

Chairman Classification Committee

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