Around 600 imported cotton containers that had been stranded at Karachi ports for more than a week are now being cleared, after Pakistan’s customs authorities set aside an 18 percent sales tax on methyl bromide, the chemical used to fumigate incoming cotton shipments. A textile industry official told Arab News on Friday that the decision had removed a bottleneck that had halted fumigation operations and, in turn, held up the release of cotton needed by the country’s mills.
Imported cotton cannot be cleared from port until it undergoes fumigation, a mandatory biosecurity step designed to prevent pests and contaminants from entering the domestic supply chain. However, a customs classification decision in May made methyl bromide, the fumigant used for this process, subject to an 18 percent sales tax after it had previously been exempt. The change disrupted supplies of the chemical almost immediately, leaving fumigation operations unable to proceed and cotton shipments piling up at the port.
Federal Board of Revenue Customs Wing Reverses May Classification
The Federal Board of Revenue’s Customs Wing issued an order on September 3 setting aside the May 19 notice that had triggered the dispute, doing so on an ab-initio basis, meaning the classification was treated as void from the outset. The order directed the relevant classification committee to reconsider the matter within 30 days, effectively restoring the previous tax treatment of methyl bromide while a fresh decision is prepared.
“They [the customs] are withdrawing 18 percent tax,” All Pakistan Textile Mills Association Chairman Kamran Arshad said, confirming that the reversal would allow the stalled methyl bromide consignment to be cleared and fumigation work to resume. According to APTMA Secretary General Raza Baqir, the dispute originated when a classification committee altered the customs treatment of the fumigant in May, a change that made imports liable to the 18 percent levy for the first time.
Methyl Bromide Sales Tax Dispute Strained Textile Supply Chains
The methyl bromide sales tax dispute quickly escalated beyond a narrow customs technicality into a broader supply chain crisis for Pakistan’s textile sector. Arshad, in a letter sent to Minister of State for Finance Bilal Azhar Kayani before the issue was resolved, said the classification dispute had not only halted clearance of methyl bromide itself but had also stopped the clearance of imported cotton altogether, creating what he described as an extremely critical situation for the textile industry and for the country’s textile exports.
The backlog began with an estimated 400 to 500 containers stranded at port before the number climbed further as the dispute dragged on, eventually reaching around 600 containers. Arshad said the industry was incurring demurrage and related losses exceeding Rs10 million, or approximately $36,000, per day for as long as the shipments remained held up. He warned that prolonged delays risked triggering raw material shortages at mills, disrupting export orders and ultimately hurting Pakistan’s broader export earnings.
Former APTMA chairman Asif Inam confirmed that clearance of the stranded cotton containers had resumed following the customs reversal. He added that ports would remain open on Sunday specifically to accelerate processing of the accumulated backlog, an unusual step intended to help mills catch up on lost time as quickly as possible.
Pakistan Textile Industry Exports Depend Heavily on Timely Cotton Supply
Pakistan textile industry exports remain the country’s single largest source of export earnings, accounting for more than half of Pakistan’s total exports. The sector recorded textile exports of approximately $17.9 billion in the last fiscal year, underscoring how disruptions to raw material supply, even those lasting only a matter of weeks, can carry significant consequences for the wider economy. Because mills rely heavily on imported cotton to meet international export orders, delays at the point of customs clearance translate quickly into production slowdowns and potential contract shortfalls with overseas buyers.
The episode illustrates the sensitivity of Pakistan’s textile supply chain to even narrow regulatory or classification changes. A single decision altering the tax treatment of an essential fumigation chemical was sufficient to halt the movement of hundreds of containers of raw cotton, with knock-on effects for mills, exporters and, ultimately, the government’s own export revenue targets.
Officials Respond as Clearance Resumes
The Ministry of Maritime Affairs referred questions about the backlog to port authorities, while a spokesperson for Karachi Port said customs officials were better positioned to address questions specific to the clearance dispute. With the classification committee now required to reconsider the tax treatment of methyl bromide within 30 days, the industry will be watching closely to see whether the underlying dispute is resolved permanently or whether similar disruptions could recur once the reconsideration period concludes.
For now, the immediate priority for mills and port operators alike is working through the accumulated backlog of imported cotton containers, with extended Sunday port operations expected to help clear the remaining shipments in the coming days.
Published in SouthAsianDesk, September 5th, 2026
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