JUNE 09,2020

By Shailesh Sheth, Advocate & Founder, M/s. SPS LEGAL

The law must be stable, but it must not stand still - Roscoe Pound

A Prelude:

ON June 5, 2020, the Central Board of Indirect Taxes & Customs ('the Board') issued a Circular no. 28/2020-Customs announcing the launching of the 1 st Phase of 'Faceless Assessment' from June 8, 2020 at Bengaluru and Chennai for items of imports primarily covered by Chapter 84 and 85 of the Customs Tariff Act, 1975 ('the CTA'). As stated by the Board, the phased rollout plan envisaged faceless assessment to be the norm pan India by December 31, 2020. The Board, in this regard, has also simultaneously issued detailed Instruction no. 09/2020-Customs dt. 05.06.2020.

The Board has, without mincing words, called 'Faceless Assessment' as the most crucial reform under its grand initiative called 'Turant Customs', one of the objectives of which is to increase the 'ease of doing business'. It may, therefore, be advantageous to have a look at the various reforms undertaken by the Board in the recent past in the arena of Customs to achieve this avowed objective.

World Bank's 'ease of doing business' ranking - India makes a quantum leap…!

'Doing Business' is an ambitious project launched by the World Bank in the year 2002 with an aim to provide 'objective measures' of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level.

'By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and or time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy [World Bank] '.

The Report is generally published during the month of October or November of the year and the data therein relates to 12 months' period ending 'May' of the preceding year. The name of the 'Doing Business' distance to frontier score was changed to 'ease of doing business score' in the 2019 Report so as 'to reflect the main idea of the measure - a score indicating an economy's position to the best regulatory practice'.

The 'Ease of doing business Index' ranks all 190 countries across the following indicators or parameters:

- Starting a business

- Dealing with construction permits

- Getting electricity

- Registering property

- Getting credit

- Protecting minority investors

- Paying taxes

- Trading across borders

- Enforcing contracts

- Resolving insolvency

India ranked at 142 among 190 countries on 'Doing Business Index' in 2014. However, taking a quantum leap, India has jumped to 63 rd rank in 2019 as per the World Bank's 'Ease of Doing Business, 2020 Flagship Report' released in October, 2019. What is also noteworthy is the fact that for the third consecutive year, India earned a place in among the world's top 10 (ten) improvers, as the study noted.

One of the important parameters on which the ranking is based is 'Trading Across Borders', that is, engaging in international trade or, to put it plainly, transactions in imports and exports. India has shown a remarkable improvement in the score on this parameter, moving up from a dismal 146th position in 2017 to the 68th in 2019!

Reforms in Customs - Finally bearing fruit…!

Much of the credit for India's eye-catching jump by 79 ranks in the 'Trading across borders' parameter goes to the Board. This achievement reflects the Herculean tasks undertaken by the Board, one, of conceptualizing, making and implementing grassroots level policy changes aiming to be 'trade facilitation measures' for those involved in international trade and two, ensuring that the measures undertaken actually deliver concrete results.

Let us have a bird's eye view of certain major reforms undertaken by the Board in the arena of Customs in the last few years. These are briefly chronicled here for ease of understanding:

a. Use of digital signatures for submission of documents:

- The submission of Customs documents under digitally signed certificates was made mandatory w.e.f. 01.01.2016 for all importers and exporters using the services of Customs brokers for formalities under the Customs Act, 1962 ('the CA'), shipping lines and airlines. Hitherto, this facility had been provided as 'optional' to users as specified in the Board's Circular no. 10/2015-Customs dt.31.03.2015.

- It was clarified that the Customs would not insist on the user to physically sign the digitally signed documents submitted by him.

- The importers/exporters desirous of filing Bill of Entry (BoE) or Shipping Bill (SB) individually were provided an option of filing the documents without using the digital signature. [Circular no. 26/2015-Customs dt. 23.10.2015 refers]

b. Introduction of Paperless Processing under SWIFT:

- The ' Single Window Interface for Facilitation of Trade'('SWIFT') was initiated and implemented as a part of the "Ease of Doing Business" so as to facilitate 'Trading Across Borders' in the country. The objective of the SWIFT project is to allow importers and exporters a facility to lodge their clearance documents online at a single point without/with minimal interface with regulatory authorities.

[Circular nos. 09/2015-Cus dt. 31.05.2015; 03/2016-Cus dt.03.02.2016 and 10/2016-Cus dated 15.03.2016 refers]

c. Promotion of Direct Port Delivery for Importers :

- A unique initiative called 'Direct Port Delivery' ('DPD'), a flagship scheme of Customs was introduced in a phased manner starting from JNPT in February, 2016.

- The objective of the Scheme is to reduce time and cost, allowing the registered importers to complete customs clearances at the terminal itself and take the container directly to the factory [without proceeding to the Customs Freight Station (CFS)]

- Later, all the ports were covered within the scope of the Scheme.

d. Introduction of 'Direct Port Entry' Scheme for the Exporters:

- A scheme called 'Direct Port Entry' ('DPE'), similar to DPD for the importers, was introduced for exporters. The scheme allows direct entry of the export containers into the port terminal prior to granting to "Let Export Order' ('LEO')

- Initially, the scheme was restricted to Refrigerated Containers, Over Dimensional Cargo (ODC), Motor Vehicles and perishable non-refrigerated cargo and Authorised Economic Operators (AEO) status holders. But later on, it has been extended to all factory stuffed export containers.

e. Promotion of 'Authorised Economic Operators' Scheme:

- The 'Authorised Economic Operators' ('AEO') programme seeks to provide tangible benefits in the form of faster customs clearances and simplified customs procedure to those business entities who offer a high degree of security guarantees in respect of their role in the supply chain.

- The combination of AEO, DPD and advance filing of import declaration have significantly reduced the overall cargo release time in imports.

[Circular no. 33/2016-Cus dt. 22.07.2016 and 03/2018-Cus dt. 17.01.2018 refers]

f . Introduction of e-SANCHIT:

- To facilitate online clearance at a single point, a 'paperless processing application' i.e. e-SANCHIT was introduced w.e.f. 20.10.2017 on pilot basis for imports at Air Cargo Complex, New Delhi and the Chennai Customs House.

- e-SANCHIT was subsequently extended and made mandatory on for imports from 01.04.2018 at all the Customs EDI locations in the country.

- For exports, e-SANCHIT was extended, on a pilot basis at the Air Cargo Complex, New Delhi and the Chennai Customs House w.e.f. 01.09.2018. The use of the facility was, however, made voluntary.

- e-SANCHIT facility was extended to all ICES locations on a pan-India basis for all types of exports w.e.f. 08.11.2018. However, the use of the facility was made voluntary.

- The facility to upload digitally signed Licences/Permits/Certificates/ other Authorisations (LPCOs) by participating Government Agencies (PGAS) on e-SANCHIT at all ICES locations across India was introduced w.e.f. 16.11.2018 covering initially the specified PGAs.

- The list was expanded from time to time to cover additional PGAs.

- To date, a total of 50 PGAs are covered under this initiative.

[Circular nos. 40/2017-Cus dt. 13.10.2017; Instruction no. 02/2018-Cus dt. 07.02.2018; No. 29/2018-Cus dt. 30.08.2018; 43/2018-Cus dt. 08.11.2018; 44/2018-Cus dt. 13.11.2018; 13/2019-Cus dt. 03.06.2019; 19/2019-Cus dt. 16.07.2019; 03/2020-Cus dt.15.01.2020 and 11/2020-Cus dt. 10.02.2020 refers]

g. Introduction of 'Turant Customs' - A next generation reform for 'ease of doing business':

- The 'Next Generation Reforms' called "Turant Customs" have been introduced in a phased manner.

- The objectives of "Turant Customs" are speedy clearance, transparency in decision making and ease of doing business.

- The initiatives under the umbrella of "Turant Customs" implemented till date include the self-registration of goods by importers, automated clearance of BoE, digitization of customs documents, paperless clearances, etc.

[Circular nos. 09/2019-Cus dt. 28.02.2019, 05/2020-Cus dt.07.01.2020; 15/2020-Cus dt. 26.02.2020]

h. Implementation of Electronic Sealing (e-Seal) of the export containers:

- An RFID tamper-proof 'electronic sealing' (e-Seals), in place of physical seals used earlier, was introduced which has substantially reduced the clearance time and costs for the exporters.

The above are some of the major reforms implemented by the Board in the Customs' arena, smoothening the path - hitherto full of potholes and roadblocks - for importers and exporters. Simultaneously, the Board also took many steps complementing or facilitating the aforesaid major initiatives. Here, it is also worth noting that the Directorate General of Foreign Trade ('DGFT'), working under the aegis of the Ministry of Commerce did not lag behind and matched the efforts of the Board in facilitating and easing the engaging in international trade by Indian businesses, by implementing various measures in the last few years. It is, therefore, not surprising that India scored a significant jump in its ranking on the 'Trading Across Borders' parameter which, in turn, also helped the impressive jump in her overall ranking in the 'Ease of Doing Business Index' in last 3 (three) years.

The World Bank's Study has taken due note of these initiatives and says: "India made trading across borders easier by enabling post clearance audits, integrating trade stakeholders in a single electronic platform, upgrading port infrastructures and enhancing the electronic submission of documents. This reform applies to both Delhi and Mumbai."

A careful look at the above major reforms undertaken by the Board would reveal that they were not undertaken haphazardly or randomly or in an ad-hoc manner. Instead the implementation of the reforms reflects cohesion, co-ordination and consistency, aimed at achieving the above objectives. The launching of the 1 st phase of All India roll-out of 'Faceless Assessment' announced by the Board has to be seen as a logical and crucial step in the journey towards achieving the stated objectives and securing a place for India amongst the top 50 best places in which to do business in terms of the World Bank's ranking.

Against the above backdrop, the salient aspects of 'Faceless Assessment' as explained in the Board's captioned Circular and the Instructions are briefly summarized and discussed in the ensuing paragraphs.

[ To be continued…]

[The views expressed are strictly personal.]