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A tea house in Chaghcharan in Ghor Province, central Afghanistan. Tea houses are local gathering places where travelers can eat, drink tea and sleep in the room upstairs. Photo by © Jonathan Wilson | Dreamstime.com
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An older man sells tea at a marketplace in the Old Town District, Kabul, Afghanistan Photo by © Michal Knitl | Dreamstime.com
KARACHI, Pakistan
Afghanistan is a major tea-consuming nation and a smuggler's paradise for tea. The country became a profitable middleman by clever manipulation of border regulations only recently reined in after decades of openly flaunting Pakistani Customs enforcement.
Bidding on tea at the Mombasa auction slowed this week as the Taliban occupied Kabul, according to the East African Tea Trade Association (EATTA). EATTA reports that Afghanistan gets most of its African tea via Pakistan, where there have been no disruptions at all, according to The East African. India halted tea shipments to Afghanistan (and does not ship to Pakistan).
Last year Pakistan imported $589.8 million worth of tea (approximately 8.9% of global imports), making it the highest valued tea import market, according to World’s Top Exports. Imports increased 18.7% in value compared to 2019 on volumes that exceed 120,000 metric tons a year.
Afghanistan purchased about $18 million (Ksh2 billion) worth of Kenyan tea in 2020. However, direct shipments declined steadily from a $127 million high in 2012.
Illicit trade is two-way
Afghans prefer green tea to black, yet land hundreds of thousands of kilos of black tea annually at the Port of Karachi, Pakistan. Until recently, Pakistan charged a combined 38% duty and tax on tea. The combination made the cost of tea 32% higher than tea imported into neighboring Afghanistan.
Afghanistan is landlocked, so larger quantities of African tea, shipped mainly from Kenya, are delivered to the Pakistani port tax-free, taxed at a low rate at the Afghan border, and then transported to large warehouses. The bulk tea is then broken down into retail packets and smuggled into Pakistan. Smugglers pay a 12-15% bribe and transportation cost, pocketing the difference according to reports in the Express Tribune.
The tea travels via bicycle and small motor vehicles to Quetta and Peshawar through what is known as the "tribal lands" in the Khyber region of Pakistan, territory that has shifted jurisdictions so often that allegiance is fluid and enforcement is infrequent. No visa is required as crossings are regulated by tribes that straddle the border.
Pakistan Customs lists black tea and green tea as two of the five most smuggled commodities. In 2012 the Pakistan government reduced its sales tax on tea from 16% to 5%, but a shortfall of funds led to a reversal within eight months. Smuggling continued unfazed.
The Competition Commission of Pakistan (CCP) strongly urged the government to resolve the issue. After several years of negotiations with the Afghanistan Pakistan Transit Trade Coordination Authority (APTTCA), progress is evident based on a compromise of stepped-up enforcement and eased regulations.
A crackdown on violators in late 2020 led to a 55% increase in customs duties collected (a proxy for illegal trade). In January in Chaman, customs officers seized a 28,500-kilo shipment of tea disguised as agricultural herbs that revealed bags of black tea valued at 14.8 million rupees and marked “In Transit to Afghanistan." The consignment was seized, duty and taxes of 5.5 million rupees were levied, and the clearing agent was arrested.
CCP considers smuggling to be “the biggest threat faced by the domestic tea industry, causing loss of millions of rupees to the government and forcing legal importers out of business,” according to a 2019 report in the Business Recorder in Islamabad.
The Recorder reported that “by decreasing the cost of legal imports, the smuggling trade can be made unprofitable.”
The Afghan Transit Trade Agreement and the border's porous nature is an arrangement that creates the opportunity for corruption that is hard to control. It is too soon to know how the collapse of the Afghan government and the return of the Taliban will alter the tea market, but smuggling was rampant during the 1996-2001 Taliban regime. In Helmand province, traders said that “if we smuggle 40kg (heroin), we give the Taliban 4kg.”
Comments (1)
Comment FeedSupplanting Iran as the conduit
Jem McDowall more than 3 years ago