Commentary: Not Yet Custom-Made

29 November 2017

Trading across borders, a key component of a country's ease of doing business, can be quantified through a time release study (TRS). This commentary by Mr. Vijay Singh Chauhan, Commissioner of Customs, Jawaharlal Nehru Custom House (JNCH), and Mr. Aditya Fotedar, Deputy Commissioner, JNCH, discusses the outcomes of a TRS conducted in JNCH in January and July 2017, which identified practices that will enable India to achieve the average release time of 72 hours—its commitment to the World Trade Organization Trade Facilitation Agreement—and proposed recommendations that the Customs department can lead going forward.

This post first appeared on the Indian Express.

 

Not yet custom-made

By Mr. Vijay Singh Chauhan, Mr. Aditya Fotedar

 

India’s position in the World Bank’s Ease of Doing Business ranking has jumped from 130 to 100. This is a commendable improvement and should be seen as a result of various ongoing efforts to improve business processes in the country. Trading across borders is one of the areas that is taken into account in assessing the ease of doing business. India’s performance in this respect can also be quantified by measuring the average “release time” of cargo at Customs ports. This performance can be effectively gauged by conducting a time release study carried out as per the guidelines of the World Customs Organization (WCO).

“Release time” refers to the time taken from the arrival of the cargo at a port to its final clearance by the Customs authorities. It is an aggregate of the time taken in the processes required to be completed by all stakeholders including port terminals, Customs, other government departments such as FFSAI, textiles committee, besides the importers or their agents.

Jawaharlal Nehru Custom House (JNCH) at Nhava Sheva, the largest container port in the country, has recently completely a time release study for January and July 2017. It tried to assess and identify practices that will enable JNCH to achieve the average release time of three days or 72 hours, which is India’s national commitment as per the Trade Facilitation Agreement signed under the aegis of the World Trade Organization.

The study assessed the effectiveness of legislative changes made to the Customs Act of 1962. It also evaluated the administrative measures introduced at the port to facilitate legitimate trade. The Customs Act provides for filing of import documents up to 30 days before the arrival of the goods. The timing of the filing of documents is critical for the initiation of its scrutiny by Customs and other government agencies. The study found that in July, only about 37% of the bills of entry were filed in advance. In such cases, the release time is 40% less than the time taken in cases where normal bills of entry are filed after the cargo’s arrival.

At JNCH, Customs processes pertaining to the cargo are undertaken at the Customs freight station rather than at the terminal premises. With the adoption of risk-based assessment and examination by Indian Customs, self-assessment by importers is the norm and need for assessment and/or examination by Customs or other government departments is being continuously minimized. These developments have enabled the introduction of the Direct Port Delivery system (DPD) at JNCH. Under the DPD scheme, eligible importers can take their cargo directly from the port premises, significantly reducing the release time. The study shows that in July, the release time for DPD cargo was 110 hours, which is 33% faster than other consignments, which entailed about 165 hours of release time. More importantly, if the benefits of DPD were combined with the facility of advance bills of entry, the release time was about 75 hours. That is in line with the TFA commitment of three days.

In order to impress upon the need to file the documents expeditiously, the government inserted a provision in the Customs Act that requires importers to file the bill of entry within 24 hours of the arrival of the cargo. The law also provides for imposing a fine in case the importer does not file the bill within this deadline, without valid reasons. The study shows that while the legal requirement has increased the share of importers filing the documents promptly, 43 per cent importers filed normal bills of entry after 48 hours of the arrival of the goods.

The second statutory change in the Customs Act relates to the reduction of the interest-free period for payment of duty from two working days to one day. The study finds that though the average time taken in payment of duties has come down, 47% of the importers paid duty 48 hours after assessment, attracting a possible interest liability as well as adversely impacting the release time.

The study also showed that the release time for bills filed in the first week of July, immediately after the roll out of GST, does not show any evidence of disruption due to the change in the tax regime. A comparison with the January 2017 data is behind this conclusion.

Further reduction in release time is essential for improving India’s ranking in trading across borders. The task of achieving the three days release time calls for a concerted action from all stakeholders. This effort is best led and coordinated by the Customs department.

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