Is Indian Customs going global?

October 10, 2011

(The views expressed in this column are the author’s own and do not represent those of Reuters)

India’s Central Board of Excise and Customs has ushered in a slew of measures to facilitate trade in recent times.

Till not so long ago, customs duty was assessed physically, transaction by transaction. The Risk Management System (RMS) of assessment was introduced in 2005. This meant that from the importer’s point, bills are practically assessed based on the importer’s declaration, unless there are interdictions. Of course, customs retained the powers to assess. Alongside RMS, the concurrent audit also gave way to Post Clearance Audit (PCA).

However, experience showed that under PCA, detection and recoveries were negligible. Practically, this audit remained a transaction-based audit based on documents submitted. In parallel, there was also an Accredited Client Programme (ACP) which was put in place. The key features of ACP are:

— ACP is intended for importers having clean track record and a history of compliance with Customs laws.

— ACP status will be conferred to companies who satisfy certain conditions like certain threshold value of imports, number of bills of entries in a given period, no track record of litigations, etc.

The key benefits enjoyed by ACP holders are-

— Special Customs clearance procedures

— No inspection on imported consignments

— ACP self declaration is accepted by Customs for classification and valuation

— Refunds of Special Additional Customs duty at a faster pace for traders.

This year’s Union Budget aligned the legal provisions also for paving way for “Self–assessment” in the true sense. This would mean a fundamental shift in the way assessment was taking place in Customs.

Certainly, on the one hand this is most welcome and has formalised the intent and practice of trust-based clearances, however, this would put the onus on the importer/exporter to be more responsible.  Consequential amendments to Provisional Assessment and reassessment were also made.

As a result, Indian Customs has moved towards some of the global best practices mandated as part of WTO agreement.

With Authorised Economic Operator programme being unveiled, this would be one of the key Trade Facilitation measures set to be implemented. AEO is a concept whereby a party engaged in the international movement of goods is approved by customs as compliant with the supply chain security standards as part of SAFE Framework of Standards to secure and facilitate global trade under the aegis of World Customs Organisation (WCO). In terms of its structure and content it almost mirrors the ACP programme, except that it looks more holistic and detailed in its approach. It evaluates the applicant on 7-8 parameters, such as compliance record, managing commercial and transport records, financial solvency, safety and security.

With the Indirect Tax Ombudsman proposal also on the anvil (draft is put for public comments), it is expected the tax payer will have avenues to vent his grievance in instances like:

— Delay in the issue of refunds

— Delay in registration/adjudication of tax payers

— Non-adherence to the rules prescribed for disbursement of drawback.

Another recent development has brought cheer to the domestic resident company involved in imports and exports. The advance ruling — a mechanism to get formal clarification on classification, valuation and availability, which was till now available only to wholly owned subsidiary of foreign company or JV company with one party being a non-resident, is now allowed access to even domestic resident companies. This will also go a long way in creating an atmosphere of certainty on customs matters for importer/exporter of domestic companies.

The above are some of the trade facilitation measures getting adopted in Indian Customs. Certainly a good reason for trade to rejoice but as the saying goes “freedom comes with responsibility”. Trade should also get their acts together by overhauling competency levels of customs functioning and shifting towards better disclosure standards to reap the benefits of this freedom without facing the risk of non- compliance.

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