APRIL 23, 2018

By Debasish Bandyopadhyay

THE World Bank, last October, released the Doing Business (DB) Report, 2018. In a press release, the Department of Industrial Policy and Promotion (DIPP) was pleased to announce that India ranks 100 among 190 countries assessed by the Doing Business Team; India has leapt 30 ranks over its rank of 130 in the Doing Business Report 2017.

The said outcome is a true reflection of the continuous efforts of the government towards making tax administration in the country free of regulatory bottlenecks. It is also significant to note that one of the most significant identified areas for improvement is the cross-border transaction. Therefore, with the implementation of GST, rationalization of existing provisions have been made in the export procedures. Accordingly, revamped self-sealing process and new electronic sealing (E-sealing) of export containers have been introduced in customs procedure as a reforms measure. This write up is to discuss about the challenges and difficulties that are troubling the Indian exports due to newly introduced self-sealing procedures and related anomalies therein.

Self-sealing procedure:

Central Board of Indirect Taxes and Customs, CBIC (earlier CBEC) has introduced extensive reforms in the export procedures relating to factory stuffing vide circulars no. 26/2017-Customs dated 1st July, 2017 and 36/2017-Customs dated 28th August, 2017. In terms of the said circulars, sealing process of export container has completely been overhauled. It has been clarified that the exporters who were earlier availing sealing at the factory premises under the supervision of central excise, will automatically be entitled for self-sealing. Further, it is mandated that exporters who are already operating under the self-sealing procedure need not approach the jurisdictional customs authorities for self-sealing permission. All AEOs will also be eligible for self-sealing. Thus, the Board has simplified the procedure for stuffing and sealing of export containers by doing away with the sealing of containers by CBIC Officials. As a matter of fact, self-sealing procedure has been made operational for all and sundry.

In respect of prescribed procedures to be followed by the exporters desirous of availing the said facility, they will have to inform the jurisdictional customs authorities about the intention to follow self- sealing procedure to export goods from their factory premises or warehouse. Thereafter, the jurisdictional officers of customs shall inspect the premises with regard to feasibility of stuffing of container in the said premises. Based on report of such customs officers, Principal Commissioner/Commissioner of Customs would grant permission for self-sealing at the approved premises. Once the permission is granted, the exporter shall furnish only intimation to the jurisdictional customs authorities each time self-sealing is carried out at the approved premises. The said newly introduced self-sealing procedures have finally come into effect from 1st March, 2018 mandatorily.

Procedural ambiguity and unease in the trade:

In spite of the Board's circular clearly exempting certain class of exporters from approaching the jurisdictional customs authorities for self-sealing permission, customs authorities across the country are not on the same page with the Board on the aforesaid issue. It is given to understand that without populating the self-sealing permission number of the related exporter into the IT system of the port authority, no container shall be allowed to be entered into the premises of the port concerned. Therefore, customs department has been directing all exporters for taking necessary self-sealing permission paying no heed to the exceptions as mandated under the Board's circulars. Accordingly, there have been enormous ambiguity and confusion in the trade in respect of who should approach the jurisdictional customs authorities for self-sealing permission.

Now, let us have look at the process and formalities for seeking self-sealing permission from jurisdictional customs authorities. It is pertinent to note that there are no specific documents prescribed under the said circulars while seeking permission for self-sealing but generally customs authorities are insisting on the following documents from the exporter -

++ Cover letter seeking self-sealing permission,

++ Copy of IEC,

++ Copy of PAN,

++ Copy of GST certificate,

++ Copy of ground plan of the premises,

++ Copy of Trade License,

++ Copy of Lease Agreement, if applicable,

++ Receipt of Municipality Tax for relevant factory and

++ ROC papers, if applicable etc.

It is not understandable as to why the department needs so many documents for manual submission towards issuing such self-sealing permission? Physical verification of the export premises must be sufficient to substantiate the necessary compliance requirement. Where is the priority to simplify the procedural regulation based on the emerging technology driven measures? Is this the professional manner to handhold and assist the exporters as promised by the government while releasing mid-term-review of Foreign Trade Policy?

Confusing stuff:

Another interesting aspect in respect of self-sealing permission that has come to the forefront is with regard to viability of stuffing of container in the factory premises. As per the inspecting customs officials or field formations, the container must enter into the exporter's premises as mandated in the relevant circular. For the ease of understanding relevant part of the Circular No. 26/2017-Customs dated 1st July, 2017 extracted below;

"……………The jurisdictional Superintendent or Inspector of Customs shall inspect the premises with regard to viability of stuffing of container in the premises and submit a report to the jurisdictional Deputy Commissioner of Customs or as the case may be the Assistant Commissioner of Customs within 48 hours………………………."

At this point it is important to note that there are many export units operating in the buildings situated in Industrial Estates/complexes but having no such space of their own for receiving container inside their own premises for stuffing . The said exporters load/stuff their container on the road at their factory gate but not in the premises as mandated under the circular resulting into denial of such self-sealing permission from the customs authorities.

Will CBIC step in to help the exporters out !

Conclusion:

Several rationalization measures and promotional initiatives have been put into effect by the government to boost the troubled Indian exports. However, due to the procedural bottlenecks as well ambiguities as explained above, the growth of exports in the country has been uninspiring. The said Circular No. 26/2017 also talks about the endeavour of the Board to create a trust based environment in the trade, but the scourge of trust-deficit has been looming all over the trade impacting the prospect of cross-border transactions.

Hopefully, the CBIC would intervene and resolve the issues quickly.

(The views expressed in the article are strictly personal.)