JULY 23, 2018

By V Sivasubramanian

AS per the World Bank's Doing Business (DB) 2018 rankings, India ranked 146 out of 190 economies (4 out of 8 in South Asia) under the indicator ‘Trading Across Borders'. This indicator measures the time and cost (excluding tariffs) associated with three sets of procedures – documentary compliance, border compliance and domestic transport – within the overall process of exporting or importing a shipment of goods.

As per the DB 2018 Report for India, the time to export/import from/through Mumbai, along with comparative figures for June 2017, were as follows:

* Figures in ( ) indicate number of economies.

Bhutan, United states, Singapore, Sri Lanka and China respectively rank 26, 36, 42, 86 and 97 on this indicator. As per DB 2018, importation into India (total of 332 hours) takes about twice the time as for China, 3 times as for Sri Lanka, 9 times as for Singapore, 25 times as for Bhutan, and 37 times as for the United States!

The cargo release or dwell time, which is average time taken between the grant of entry inwards to Out of Customs Charge (OCC), is usually the measure of trade facilitation used by Customs Administrations for review of their clearance procedures and to identify both the problem areas and potential corrective actions. India has set for itself a target to bring down the cargo release time for imports to below 48 hours for sea cargo and 24 hours for air cargo and for exports to below 24 hours for sea cargo and 12 hours for air cargo. Before we proceed further, let us understand the significance of this target - this may place India above Sri Lanka but still short of Singapore!

As per the last Time Release Study (TRS) released by Jawaharlal Nehru Custom House (JNCH), India's biggest containerised port accounting also for about 21% of India's Customs revenue and handling around 55% of total container handled by all Major Ports in India , the released times for imported cargo (in Jan-Feb 2018) ranged from 91.06 hours to 221.24 hours depending on the category of the bill of entry, with the weighted average working out to about 144 hours.

But we must note that an Inter-Ministerial Group (IMG) on Customs Procedures and Functioning of Container Freight Stations and Ports constituted in 2005 had worked out the Average Dwell Time (Entry Inwards to OCC) for Imports for Nava Sheva Custom House (now JNCH)in June 2005 at 370.32 hours.

So it has taken over 12 years for the biggest containerised port in India to reduce the Dwell Time by 61% from 370 to 144 hours! So it is anyone's guess how many more years it may take for the Dwell Time to go further down to the targeted 48 hours. At least it can safely be said that no business as usual approach can bring out such drastic reduction!And, if so, is there a real way out for India at all?

India ratified the Trade Facilitation Agreement (TFA) of the World Trade Organisation (WTO) in April 2016. Thereafter India merged and enhanced the scope of the two earlier trade facilitation programmes namely Accredited Client Programme (ACP) and the Authorised Economic Operator (AEO) into a combined three-tier AEO programme so as to provide greater benefits to the entities who have demonstrated strong internal control system and willingness for legal compliance. A National Committee on Trade Facilitation set up effective October 2016 has also developed a National Trade Facilitation Action Plan.

Depending on the category, level of security and compliance, the new AEO program seeks to provide several additional benefits including -

- Direct Port Delivery (DPD) of import Containers and/ or Direct Port Entry (DPE) of Export Containers

- Separate space earmarked in Custodian's premises

- ID cards to authorized personnel for easy entry to Custom Houses, CFSs and ICDs

- Exemption / reduction in Bank guarantee requirements

- Time bound completion of investigations

- On site Post Clearance Audit in place of transactional level Clearance Audit

- No Merchant Overtime Charges

- Deferred payment of duty

- Priority in selection of containers for scanning

- Facility of self-sealing of export goods

- Faster completion of Special Valuation Branch ('SVB') proceedings

- Facility to paste MRP stickers in own premises

- Appointment of a "Client Relationship Manager" (CRM) at the level of Deputy / Assistant Commissioner as a single point of interaction.

These benefits could enable lower compliance costs, lower IT costs, cash flow gains and lower staff costs and overall improvement of goodwill and ease of doing business for the trade. Together with a significant drive also initiated by the Customs Administration, the number of AEOs has grown substantially from only 168 as on 1/4/2017 to 940 as on 22/6/2018. But will these do?

Let us note that the IMG above clearly pointed out that the time actually attributable to Customs constituted only 11.02% of the Dwell Time for Nava Sheva(11.31% for Mumbai Custom House and 28.9% for Chennai Customs).

So the real problem appears to lie with the lack of sufficient push by agencies other than Customs. It is here that the real action to be taken may lie for the Government.

(The author is Advocate and Executive Partner, Lakshmikumaran & Sridharan and the views are expressed are strictly personal.)