SEPTEMBER 27, 2017

By G Mohana Rao , Assistant Commissioner (Retd.)

IN my earlier article, while welcoming the new factory stuffing procedures involving usage of Electronic Seal, I had suggested that the date of implementation be deferred till the eco-system is readied.

Thankfully, the CBEC has paid heed to the representations received from various associations and field formations.

The CBEC has rightly deferred the mandatory electronic sealing of export containers vide its Circular No. 37-Customs dated 20 th September, 2017. However, the scheme is optional and exporters are free to adopt the new self-sealing procedure based upon RFID sealing, provided RFID readers are in place at the customs station of export from 1.10.2017(although procedure is deferred till 01.11.2017). As on date, no customs station appears to have installed the RFID readers. So, any RFID seals by exporters, as of now, may not serve purpose as the eco-system required for the same is still not ready.

I tried to find whether such electronic seals are readily available in the market. On search over the internet, a few vendors are, indeed, offering RFID seals. The usual traditional bottle seals are available at Rs. 8/- to Rs.12/- per pc. The electronic seals are available at around Rs. 300/- per pc. No ready data on the number of factory stuffed containers is available. Further, it is not clear whether such seals shall also be used for movement of containers from CFSs/ ICDs to Ports. Still it appears that the market for such RFID seals may be in the region of Rs.600 crore to Rs.1000 crores. (considering exports containers to be 3 to 5 crore in number).

The circular mandates all the vendors to submit their self-attested certifications to Director (Customs), CBEC, North Block, New Delhi before commencing RFID sales. The names of the vendors shall be displayed in the CBEC website. Thus, it appears that vendors cannot start selling the seals,as of now since they have to send their certifications to Director (Customs). They further need to send the details of RFID seals numbers to RMD.

It appears that the seals will not be available over the counter and will be sold in a controlled environment wherein exporter will have to procure the seals only from a vendor. At the time of sale of RFID seals, the vendor will have to link the IEC code of the exporter to their data base. All this procedure wouldcause difficultiesto small exporters. Comparatively, the compliance costs do increase many-fold. However, if there are sufficient vendors, export market forces may compel the prices of RFID seals to come down and systems for tracking the seals shall also be available in places.

Is all this likely to reduce impersonation to a large extent? Would it be possible to nail the person involved in smuggling of contrabands like sanders wood etc where the profit margins are exorbitantly high? May be, to some extent, possible. However, poverty is a fertile ground for impersonation in India and any such controls will have limited results. The ingenuous operators will find new ways to…

However, the impersonation in the name of big &genuine companies may stop wherein the officers as well as good and compliant companies are be-fooled by such operators for easy and faster clearance. There have been cases of export of drugs in the name of big companies as their cargos are facilitated by the department and possibility of intervention is remote.

Nonetheless, the concern of CBEC as of now should be putting in place the proper eco-system for implementing the scheme through selection of vendors, placing their names on the CBEC website, preparation of risk based controls by RMD, establishment of readers at the port of exports, hosting of web/mobile applications by the vendors and their integration with the ICES systems of Customs. But it appears that this new system of RFID sealing (along with GST) has added to the woes of exporters. The GST glitches on the software side may take a little longer for the GSTN, Infosys and GSPs to come up with fully integrated and bug free system. The process is a long drawn one and painful to the merchant exporters especially who have been forced to pay integrated tax with no refunds in sight.

Let us wish that all the problems of exporters including the issues in self sealing with RFID seals and Drawback would soon be resolved giving relief to the exporters.

(The author is Partner, Elysian Tax Advisors, Mumbai and the views expressed above are strictly personal.)