How do I claim a lower customs duty rate on goods from a free trade agreement country such as China?

What does the law say?

Section 18C of the Customs Act, 1969, amended to 30 June 2025, is the provision that connects trade agreements to the duty you pay.

• Section 18C(1) covers the case where a trade agreement between Pakistan and another country says duty lower than the First Schedule rate is to be charged on goods that are the produce or manufacture of that country. The Federal Government may make rules for deciding whether goods qualify, and for “requiring the owner to make a claim at the time of importation, supported by such evidence as may be prescribed in the said rules”.
• Section 18C(2) sets the default. Where a preferential rate exists, duty is collected “at the standard rate unless the owner of the article claims at the time of importation” that the preferential rate applies, and the goods are determined under the rules to be produce or manufacture of the preferential or free trade area.
• Section 18C(3) says a “preferential area or free trade area” is any country or territory the Federal Government declares to be one by notification.
• Section 18C(4) lets the Federal Government discontinue, raise (up to the standard rate) or lower a preferential rate by notification when it considers immediate action necessary in the interests of trade.

How does it work in practice?

Three things have to line up for the lower rate:

1. The country must be notified. Section 18C(3) makes the notification, not the agreement alone, the trigger. The Act does not name any country. Whether China or any other country is currently a notified area is a matter of notifications this site does not hold.
2. You must claim at importation. The claim is made when the goods are imported, in practice on the goods declaration. Section 18C(2) is written so that the standard rate is the fallback whenever no claim is made.
3. The goods must meet the origin rules. Qualification is decided “in accordance with the rules made under sub-section (1)”. Those rules set what counts as produce or manufacture of the partner country and what evidence supports the claim.

Can I get origin decided before I import?

Yes. Section 212B(2)(ii) allows an advance ruling on the “determination of origin of the goods under the rules of origin notified for bilateral and multilateral agreements”. Section 2 defines an advance ruling as a written decision made on an applicant’s request “prior to their importation or exportation”. Section 212B(3) says proceedings are to be completed within ninety days, and section 212B(5) makes the ruling binding on Customs for three years unless the law, facts or circumstances change.

The Customs (Advance Ruling) Rules, 2020, which form part of the Customs Rules, 2001, list origin as one of the matters for an advance ruling in rule 791(b), and the application form annexed to those rules (Annex-B) asks for the legal framework (preferential or non-preferential), the materials used, the rule of origin considered satisfied and the country of origin envisaged.

Worked example (illustrative figures)

Sana, who runs a trading business in Lahore, imports a consignment with a customs value of Rs. 1,500,000. The rates below are hypothetical: actual standard and preferential rates are in the First Schedule and the notifications, which are not reproduced in the Act text held here.

1. Standard rate, hypothetical 20%. 20% of Rs. 1,500,000 = Rs. 300,000.
2. Preferential rate, hypothetical 5%. 5% of Rs. 1,500,000 = Rs. 75,000.
3. Difference at stake. Rs. 300,000 - Rs. 75,000 = Rs. 225,000.

If Sana files the goods declaration without claiming the preferential rate, section 18C(2) means Rs. 300,000 is charged. If she claims it and the goods are found to meet the origin rules, the lower rate applies.

What if my goods were only shipped through the FTA country?

Section 18C refers to articles that are “the produce or manufacture” of the preferential or free trade area. Where goods come from is decided by the origin rules, not by the port of shipment. The detailed tests are in rules that are not in this corpus.

What if the preferential rate is cut or withdrawn?

Section 18C(4) allows immediate change by notification. The rate that applies to a consignment follows section 30: the rate in force when the goods declaration is manifested.

Common mistakes

• Assuming the lower rate applies automatically. Section 18C(2) makes the standard rate the default.
• Relying on the invoice or bill of lading country. Qualification depends on the origin rules, not on where the seller or the ship is based.
• Reading an advance ruling as permanent. Section 212B(5) binds Customs for three years and only while law, facts and circumstances are unchanged. Rule 795 in our copy of the Customs Rules (updated to 30 June 2023) still says one year; the Act, as amended by the Finance Act, 2021, says three years.

What to check in the official text

Read section 18C and section 212B of the Customs Act, 1969, and rules 789 to 798 of the Customs Rules, 2001. The agreement texts, the notifications declaring free trade areas, the preferential rates and the rules of origin under section 18C(1) are not part of this corpus. Check them in the official notifications before relying on a particular rate or origin test.