When it's paper versus process, process matters!

It's not the count of documents for exports-imports that matters. The process matters. And it's the process that needs trimming... Will DGFT's good intention find purpose in the eyes of other guardians of India's foreign trade? Steven Philip Warner | The Dollar Business

There are some things that don't mix. On-time flights and winter fog, religion and politics, ISIS and peace, LGBT rights and IPC Section 377, etc., are just a few. Then there are things that don't mix, but co-exist. Like the mix of class-laden iPhones and Gucci bags and mass-laden China. [Just like an American would have rubbished any claim that Steve Jobs resembled the Chinese Premier when the iPhone first made its way into China ten years ago, (s)he would have laughed at the dual forecast of China becoming the factory of iPhones and its largest consumer market in 2015! For the first time on record, iPhone sales in China overtook that in US last quarter – 36% compared to 24% of iPhone's volume shipments.] Another such instance of such a strange co-existence is India's perception in the minds of the World Bank and its performance on the multilateral trade track. In its 'Doing Business' report published way back in 2006, the World Bank ranked India 116^th amongst 155 nations on the parameter of 'Ease of doing business' and 'Trading across borders'. That was understandable. Between 2005 and 2014, however, there was much progress made by India on the foreign trade front. The number of exporters and importers rose dramatically! Over the recent years, India has emerged as a market with a promise for bigger trade engagement with the world in the future. From just about making it to the top 30 nations in exports to becoming the #16, from being the world's 22^nd largest importer to #12, India's engagement in foreign trade has clearly moved northwards – compare a total trade of $241.21 billion in 2005 to $781.10 in 2014 and you get the drift. Regulatory alterations were also incorporated over the span of the last decade with the number of documents for exports-imports being reduced in remarkable proportions. But here comes the strange mix that is spoken of in the same breath – despite the forward march, the World Bank assumes India's business enthusiasm to have subsided. India's rank in 'Ease of doing business in 2015' has moved against our expectations from 116 to 142! While we can continue to sit back and debate with theorists whether such a heterogeneous admixture – real performance vis-à-vis classified rankings – should make us feel deprived or apologetic, the real trick is to discover the therapy. Actually, the DGFT is out with an answer already to ensure India's trade competence isn't undervalued in near future. On March 12, it notified the Indian foreign trade community that through a 'new' para being introduced in the 'old' Foreign Trade Policy, the count of mandatory documents for cross-border trade will stand reduced effective April 1 this year: from 7 to 3 in the case of exports, 10 to 3 for imports. A Ministry of Commerce & Industry (GoI) release on the same day claimed thus: "India took a leap forward in improving 'Ease of Doing Business' today by reducing the mandatory documents required for import and export of goods to three documents each. DGFT issued a Notification to this effect today." Allow us to note down certain observations on the move. First and foremost, despite many issues that need to be catered to in helping India's foreign trade grow, this is a honest, genuine and worthwhile declaration of intent on the part of DGFT. Second, it is of vital importance to note however that this is not the first time that a reduction in count of mandatory documents for export-import has been introduced. Wasn't reduction of 3 documents (from 10 to 7) for export and 5 (from 15 to 10) for import between 2006 and 2014 a forward leap? And contrary to expectations, the move didn't help improve India's position on the 'Doing Business' scorecard! As mentioned earlier, India's rank in 'Ease of doing business in 2015' has moved against our expectations from 116 to 142. Third, the count of documents is just a number – at least that's how India's foreign trade guardians have treated it. If you take a count of mandatory documents required for both exports and imports in total, you will realise that in the past 10 years, 10 different figures appear! And strangely, despite globalisation implying convenience on both fronts – inflow of foreign products and outflow of Made in India – the count of documents required for exports were higher in 2012 and 2013 as compared to the five years leading to 2011, and for imports were higher in 2012, 2013 and 2014 as compared to the five years leading to 2011. There is no reason to summarily dismiss any possibility of a raise in mandatory count of documents required in future. The most important point of scrutiny is however that this is a positive move on the part of DGFT to ensure India's foreign trade community gets the due supportive policy action. But without processes being catalysed, there is little practical impact that this notification will have in the long run. Take for instance the announcement of doing away of the Cargo Release Order as a mandatory document in the import process. Considered that the order is only a commercial document, but what has been done or announced to ensure that this entire process leading to the final assessment of the Bill of Entry by the shed appraiser and the issuance of out of charge order by the dock appraiser is trimmed? As per the World Bank report 2015, the average time taken for import of goods at an Indian port is over 21 days – which involves various steps from the time the goods land at the port to the importer getting the Bill of Entry noted in the concerned Noting Section, to generation of the Bill of Entry number, to the assessment of the bill in the Appraising Wing of the Custom House (which includes time-consuming process that begins with the examination of the bill of entry by the Appraising officer to final clearance by the Assistant Commissioner/Deputy Commissioner), to the release of goods [assuming there is no further intervention or additional document-related permission required from any other department such as ADC (Ministry of Health and Family Welfare), FSSAI (Ministry of Consumer Affairs), Textiles Committee (Ministry of Textiles), WLRO (Ministry of Environment and Forests), Plant Quarantine (Ministry of Agriculture), etc.]. Talk to any importer worth his salt and you'll realise that the making of the document as such (Cargo RO, in this case) is never an issue. The question mark has always been on the time-consuming procedure adopted for the order to be released. Even if the document is done away with, if the tedious system of cargo inspection and clearance continues to bite the hand that feeds, there is really nothing substantial for the importer from DGFT's honest move. Inspection of every piece of cargo should necessarily give way to clearance on self-declaration on 'a strict condition of responsibility' basis. If the importer is trusted on Bill of Entry filing, he needs to be trusted on what he imports. That's the global practice! Inspection of just samples (instead of the entire lock-stock-and-barrel) is a good start and that itself will help expedite the process. The decision on DGFT's part – after conduction of a five month-long due diligence process, that included a visit to JNPT (Mumbai Port) and lengthy discussions with various stakeholders, departments related to foreign trade – to reduce the count of documents that should in future reduce both transaction costs and time, is indeed a step worthy of more than a page of praise. If the prime authority on foreign trade is vigilant about woes and concerns of India's foreign traders, there can be no better a situation for India's exports-imports business. However, having formulated a plan, the appropriate next step will be to execute it. Important to note here is the fact that DGFT has now thrown the ball into the Customs' court. If the Customs department can implement what DGFT recommends in spirit and soul, by actually doing away with undesired procedures, India's foreign trade will be the victor. Only then will all the talk about saving 10 to 12 days in time and $500-600 involved in document preparation and Customs clearance and inspections for exports and imports mean anything to India's foreign trade community. More than the notification leading to reduction in the number of mandatory documents to 3 in the case of both exports and imports (which it will, and will put India in the top 3 nations amongst 212 nations included in the World Bank Doing Business study in terms of least number of documents required for imports-exports) , it is important that it reduces the average times taken for exports (17.1 days) and imports (21.1 days) to under 6 and 4 days respectively (as is currently prevalent in Singapore, Denmark, Hong Kong, Estonia and USA), in the near times. That will mean real outcomes. An analogy can be drawn between the DGFT notification and the situation at India's international arrival terminals. Indian passport holders are not required to fill Arrival Cards at the Immigration Counters. So the document has been done away with. However, they have to queue alongside foreigners for whom the Arrival Cards filling is a mandatory requirement. Given that no change in process has been incorporated despite a change in documentation, passengers of Indian Origin do not actually gain on time. Exporters and importers don't quibble about filing twenty additional documents if need be; they however hate to wait even a day extra at the port due to long-drawn-out, archaic processes. If the Customs department doesn't practice what the DGFT is preaching, all that the DGFT sweat over the past months will prove a game not worth the candle!