Farooq Awan

The federal government has proposed the introduction of minimum export price benchmarks for gemstones under the National Policy to Realize Pakistan’s Gemstone Potential as a key measure to curb widespread under-invoicing, strengthen customs valuation, and improve export realization.

According to the policy document prepared by the Ministry of Industries and Production, gemstone pricing is inherently complex and subjective, varying significantly based on characteristics such as colour, clarity, cut, carat weight, rarity, origin and certification. In the absence of a structured pricing framework, Pakistan’s gemstone exports have exhibited abnormally wide variations in declared prices, with limited correlation to actual gemstone quality.

The document notes that analysis of historical customs data reveals unusually large gaps between the lowest, average, and highest declared export values for similar gemstone consignments. These discrepancies, the policy states, are indicative of weak price discovery mechanisms and have created substantial scope for under-invoicing, resulting in loss of foreign exchange earnings, reduced tax collection, and distortion of official trade statistics.

The policy further highlights that precious and semi-precious gemstones are currently classified under a single eight-digit Harmonized System (HS) code (7103), which severely limits the ability of authorities to capture granular data on gemstone exports. This lack of disaggregation undermines compelling valuation, monitoring and policymaking, while also weakening traceability across the gemstone value chain.

To address these weaknesses, the policy provides for the establishment of a minimum export price benchmark framework to be developed and implemented by the proposed statutory gemstone authority in collaboration with Pakistan Customs. Under this framework, minimum price benchmarks will be determined for different categories of gemstones based on type, size, and quality.

According to the document, the benchmarks will be derived from a combination of historical export data, verified transaction records, and international market price references. These benchmarks will be reviewed and updated periodically to reflect market developments. For customs valuation purposes, the higher of the declared invoice value or the applicable minimum export price benchmark will be taken as the appraised export value.

The policy states that a collegial mechanism comprising representatives from the statutory authority, Pakistan Customs, industry stakeholders and trade associations will be constituted to recommend benchmark prices. This mechanism is intended to ensure that benchmark values remain evidence-based, transparent and workable for exporters, while effectively discouraging under-invoicing.

In parallel, the policy proposes introducing Pakistan-specific HS codes at the ten- or twelve-digit level for gemstones to improve classification accuracy and trade reporting. The refined coding structure is expected to enable better tracking of gemstone varieties, quality segments, and export trends, thereby strengthening valuation, traceability, and data integrity.

The document refers to international practices, noting that several gemstone-producing countries employ reference or minimum price systems to support transparent valuation and formal trade. Such frameworks, the policy notes, help reduce disputes, improve compliance and enhance confidence among regulators, banks and international buyers.

According to the policy, the adoption of minimum export price benchmarks will reduce incentives for informal trade, improve export realization and strengthen Pakistan’s credibility in global gemstone markets. By providing more transparent and more predictable pricing parameters, the framework is also expected to encourage investment in quality enhancement, certification and branding.

The policy emphasizes that the price benchmark framework will be integrated with the proposed National Warranty Office to ensure consistency across inspection, valuation and customs clearance. Through these coordinated measures, the government aims to improve export transparency, strengthen foreign exchange inflows and support the broader formalization of the gemstone sector.

Credit: INP-WealthPk