Pakistan Ends Age Cap on Used Vehicle Imports; PAMA Flags Gift Scheme Abuse and Tariff Reform

Islamabad: Pakistan has effectively scrapped the five-year age cap on commercial imports of used vehicles from 30 June 2026. An Office Memorandum issued by the Commerce Ministry on 30 October 2026 clarified the position, ending a legal grey area that had been troubling customs officials. The decision, however, has brought a sharp warning from the Pakistan Automobile Manufacturers Association (PAMA) over alleged channel arbitrage through the Gift Scheme and over proposed tariff reforms.

This is not a sports story. It deals entirely with Pakistan's automotive import policy, customs governance and the protection of the domestic manufacturing base. There are no players, tournaments, rankings or sporting rules involved.

Background to the age cap removal

The case begins with a permission that was time-boxed from the outset. The government had allowed commercial imports of old vehicles for a defined period, and the original permission itself contained a pre-agreed clause that the concession would cease to apply after 30 June 2026. Seen this way, the 30 October memorandum is not a new policy but the implementation of an existing condition. Legally, therefore, the measure carries no new ambiguity.

The ambiguity lay elsewhere. On 23 October, the Federal Board of Revenue (FBR) wrote to the Commerce Ministry seeking clarification on how such imports should be treated after 30 June. That query indicates a live operational uncertainty among customs officials before the formal memorandum. The Commerce Ministry replied on 30 October, and the sequence between the two agencies proceeded in an orderly manner. From a regulatory standpoint this is a low-risk signal, because the agencies chose consultation over dispute.

A technical dimension also exists: the government cited the relevant statutory instruments, including the Import Policy Order and SRO 61(I)/2026.

Environmental and safety conditions remain

Removing the age cap does not mean every old vehicle enters the country unchecked. The Commerce Ministry has made clear that environmental and safety standards still apply, to be enforced under Engineering Development Board (EDB) and Ministry of Industries standards.

This is where the real debate begins. With the age limit gone, the entire burden shifts to the compliance system. It must now be demonstrated that imported vehicles genuinely meet the standards claimed for them. PAMA alleges that overseas-issued certificates are being used to work around these conditions. If that allegation holds, the balance between facilitation and control is directly affected.

The Gift Scheme: the real flashpoint

Of all the evidence, the most striking relates to the Gift Scheme. According to the available figures, roughly 98 per cent of used vehicles imported into Pakistan in September 2026 came through the Gift Scheme. Another figure is equally striking: in May 2026 only 7 vehicles were recorded under the Baggage Scheme, while by September the number had reached 2,238. Within four months, almost the entire flow of used imports migrated from Baggage to Gift.

That figure is a signal in itself. When the same category of imports shifts from one scheme to another within months, it usually means the market has found the route with greater concession, lighter verification or lower risk. In policy analysis this is called channel arbitrage. PAMA describes it directly as coordinated abuse of certificates.

The Gift, Baggage and Transfer of Residence (ToR) schemes were originally designed for overseas Pakistanis to bring in a vehicle for personal use. They were never meant to subsidise commercial imports. If such schemes become vehicles for commercial trading, the cost is not only lost revenue but also a weakened competitive position for domestic manufacturing.

An important caveat attaches here: all the quantitative figures available originate from PAMA. They have not been independently cross-verified against FBR customs statistics. This is a material evidence gap that must be kept in view before drawing conclusions.

PAMA's two-front strategy

PAMA's position is clear. In a letter to the Commerce Secretary it has raised two demands. First, close or tighten verification of the Gift Scheme loophole. Second, reconsider the proposed tariff reform and depreciation measures.

To press its case, PAMA leans on figures that form its core bargaining asset: more than one trillion rupees of investment, 31 brands, 13 plants and around 60 per cent localisation. These numbers reframe a narrow customs question as national industrial policy. PAMA argues that if import concessions and tariff cuts proceed together, the entire structure of domestic investment and localisation will weaken.

It further alleges that duty cuts combined with depreciation of used vehicles could shrink the competitive space for domestic products by up to 60 per cent. It also warns of an additional burden of up to 60 billion rupees a year from auto parts imports, directly challenging the localisation goal.

Notably, the letter went to the Commerce Secretary rather than to FBR. This suggests PAMA is escalating politically, seeking a policy review rather than a technical fix.

The tariff and depreciation question

The second part of the dispute concerns the National Tariff Policy. Depreciation rates for used vehicles are said to reach up to 60 per cent. The direct effect is that the dutiable value of an old vehicle falls substantially, making the imported vehicle far cheaper in the domestic market than a new one. PAMA says this gap directly damages its competitiveness.

There has been no public government response on this point, nor any independent data that confirms or refutes PAMA's claims. That is the weakest link in the entire dispute.

Risk assessment

Overall risk should be rated high, for three reasons. First, the age cap was removed unconditionally. Second, import volumes under the Gift Scheme have risen explosively. Third, questions over certificate integrity remain unresolved. Together these create a compounding pressure on the domestic auto sector that far outweighs the modest facilitation benefit.

Breaking the risk down by category: industrial risk ranks highest, as rising used imports can hit domestic manufacturing and investment. Fiscal and tariff risk comes next, covering duty cuts and depreciation. Third is integrity and customs risk, tied to alleged coordinated certificate abuse. Fourth is environmental and safety risk, since rising volumes can erode standards enforcement. Fifth is trade and forex risk, visible as pressure on the import bill. Sixth is reputational risk, where genuine facilitation for overseas Pakistanis becomes entangled with the perception of abuse.

Base case and worst case

The base case is continued import growth under the Gift Scheme with rising friction between PAMA and the government. The worst case is a certification-abuse scandal forcing abrupt re-regulation, damaging both importers and policy credibility.

Signals to watch

The first signal is FBR's monthly import data. If official figures diverge from PAMA's 98 per cent claim, the abuse narrative weakens. The second is the Gift Scheme review; new certification rules would change both import volumes and the OEM outlook. The third is revision of the tariff policy, which directly affects domestic competitive space.

Terminology

OM means Office Memorandum, an internal government communication clarifying a decision. FBR is the Federal Board of Revenue, Pakistan's customs and tax authority. ECC is the Economic Coordination Committee of the Cabinet. SRO is a Statutory Regulatory Order, a subordinate legislative instrument. CBU means Completely Built-Up vehicle. PAMA is the Pakistan Automobile Manufacturers Association. The Gift, Baggage and Transfer of Residence schemes are import concessions for personal use by overseas Pakistanis.

Conclusion

The 30 October memorandum is legally clean, but the debate it has triggered runs far deeper. The real question is not whether the age cap was removed, but how concessionary routes such as the Gift Scheme will be monitored. Until independent and public data emerges, the dispute will hang between industry claims and government intent, with direct consequences for Pakistan's industrial base, employment and import bill.