1st May – Ten customs reforms that will lift our trade

Here are 10 suggestions to improve Customs’ functioning. Implementing these will have a significant impact. After all, every year, merchandise of value $840 billion (2018 figure) equal to about 30 per cent of the GDP passes through Indian Customs before it could be exported or imported.

customs reforms

Reforms –

  1. Use simple language in Notifications — Notifying import duty is a crucial task of Customs. Yet, finding correct Customs duty for a product is a pain. You need an expert to wade through the maze of hundreds of Customs notifications issued every year. Each notification should list effects of the notification, a practice followed by the DGFT. Also, create a searchable database of all notifications with a free text search. All duties on all products with every condition should be available on a single excel sheet. Such simple changes will eliminate plenty of go-betweens.
  2. Use standard codes for the Duty Drawback scheme — the government has adopted the eight-digit ITC (HS) Codes for exports-imports. But, the drawback scheme, the largest indirect tax refund scheme, uses only the first four digits of the ITC (HS) Codes. For the next digits, it uses its own product codes and description. This forces exporters to use two different codes for the same product and creates confusion.
  3. Demystify products identified as ‘Others’ — a Mobile phone is India’s top electronic import item. Yet, it is covered under the description ‘Others’ in ITC(HS) schedule. The schedule covers over 2,300 entries that together cover over 25 per cent of India’s imports as ‘Others.’ Customs must identify major items traded under the ‘Others’ categories. This will give a clear picture of the trade profile and check any misuse.
  4. Make past Tribunal decisions available online — Though tribunal orders are the public documents, these are not available in an online searchable database. Availability of earlier decisions through a searchable database would allow trade to get transparent and uniform understanding of precedence and help them in making informed decisions.
  5. Minimise customs processing at the port — All consignments which are given the green signal by Customs Risk Management System (RMS) should be allowed Direct Port Delivery or DPD facility if customs duty is paid within 24 hours of container arriving in the terminal.
  6. Allow Direct Port Entry (DPE) to all consignments — Customs could consider developing on-site inspection and e-sealing facilities in all major ICDs, transport clusters and ‘transport nagars.’ The GST officials could support the on-site sealing exercise. RFID seal is tamper proof and no further Customs checking at the port would be needed. When goods arrive at a port, customs officers would already have the required information and the Let Export Order (LEO) can be generated online. This action will bring down customs processing time at a port to near zero levels.
  7. Make RMS effective — Customs uses a sophisticated Risk Management System or RMS. But many times, Customs officers have reasons to reject RMS recommendations and go for inspection of the goods. The basis of decision making must be entered into the system, and available under RTI with adequate anonymisation of individual shipments and their consignees, along with figures indicating to what extent in percentage terms the over-ride led to an actual finding of non-compliance. Customs may use this data for developing analytics tools that will further reduce RMS over-ride by establishing guidelines for officers for making such decisions.
  8. Make inspections transparent — All physical inspection must happen under CCTV recording in designated inspection zones. And the record must be retained for adequate time and be made accessible to the consignee/consignor and their agent.
  9. Seek information, not documents — Custom’s eSanchit system allows traders to upload scanned copies of documents. But a large number of uploads make the system slow. Replace upload of documents with a digital entry of the required information. This step will also facilitate more straightforward implementation of AI-based automated processing.
  10. Improve valuation — Cases of under-invoicing of consumer and intermediate goods, especially those imported from Middle-East, East and South-East Asia is a concern. Setting a reference price for a festival and similar imports may be a good starting point.

Way forward –

The above suggested changes can be implemented with minimal investments. The resulting enhanced transparency would reduce cost and time of doing business and improve India’s export performance. Possibly, the Customs reform agenda for the new government.

SourceThe Hindu Business Line

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