Indian Customs needs to redefine its role by reorienting its strategies and altering the traditional control process

Manish K. Pandey | The Dollar Business

Ever since the NDA Government came to power in New Delhi, all it has been talking about is “ease of doing business” in India. In fact, its every policy statement seems to be in sync with its idea of making India a global hub for manufacturing and sourcing world-class products. But then, announcement and its implementation are two different aspects of a policy and for an announcement to become a reality the two must go hand-in-hand. That’s exactly what is not happening. And the biggest hurdle when it comes to implementing a policy is the lack of coordination among various government departments, a problem India has been grappling with since ages.

Although, continuing with the diktat, the Central Board of Excise and Customs (CBEC) has recently announced (Circular No.13/2015, dated April 13, 2015) to set up a Customs Clearance Facilitation Committee (CCFC) – comprising senior-most functionary of various departments involved in customs clearance – at every major seaport and airport across India to ensure expeditious customs clearance of imported and exported goods, its success seems doubtful. The reason, again, is simple – lack of coordination among various agencies involved in customs clearance!

A few weeks before the government announced the setting up of CCFC, Steven Philip Warner, Editor-in-Chief, The Dollar Business, in his editorial (“A game worth the candle!”; published in April 2015 issue of The Dollar Business), had raised the issue of lack of coordination between DGFT and the Customs department. “DGFT has now thrown the ball into the Customs’ court. If the Customs department can do away with undesired procedures, India’s foreign trade will be the victor,” he wrote. His argument was – it’s not the count of documents for exports-imports that matters. It’s the process and the coordination amongst various departments to complete that process that matters.

Interestingly, the magazine was just one week on the stands, and a Customs notification (No.25/2015; dated April 8, 2015) once again made known the obvious. The notification “exempted goods when imported into India against a Service Exports from India Scheme (SEIS) duty credit scrip from the whole of the duty of customs leviable” only if “the imports and exports are undertaken through the seaports, airports or through the inland container depots or through the land customs stations.” Exports of services through a seaport, airport or an ICD?!? Hilarious!!!

This is just one of the several examples that expose the flaw in the customs clearance process. Recently, we did a cover story (FSSAI – Low Standards of Standardising) in the March 2015 of The Dollar Business that revealed how Food Safety and Standards Authority of India (FSSAI), another major agency involved in customs clearance process, is playing the spoilsport for Indian importers. Consignments worth thousands of crores are stuck with customs, all because of an agency that is today far removed from its core objectives and has ended up being just a penal authority.

In fact, several importers and exporters, whom I have conversed with, are unanimous in their demand that authorities should work towards harmonising standards, and across departments. They feel the decision to bring multiple regulators under one roof is a welcome move, but, the real challenge lies in executing the process in a timely manner. You can’t agree more!

The world’s merchandise and commercial services trade has been increasing at a CAGR of 7% over the last three decades, and with that, the complexities involved in customs administration.

Customs, which till date has had fulfilled its traditional role of clearing the export-import consignments and administering export incentives, is now confronted with areas such as administering a complex web of rules of origin, pre-arrival risk assessment, inter-linked supply chains, etc. And to respond to these challenges the Customs definitely needs to redefine its role by reorienting its strategies and altering the traditional control process that has served it well in the old, uncomplicated times. Above all, it’s time that requires better coordination across various functions. A report from Tax Administration Reform Commission (TARC) too points out such gaps and recommends that its time India moves towards a new era of “Smart” Customs. “Customs needs to shed the overwhelmingly transactional and administrative mindset that dominates the present thinking,” states the report.

Is expecting a “Smart Customs”, asking for too much?