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India-China faceoff escalates, causing mayhem

The sudden move of the customs authorities to carry out 100 per cent checks of import consignments coming from China at the ports has thrown the domestic industry into a tizzy at a time when it’s still far from full recovery from the impact of lockdown.

Currently, 70 per cent of total imports pass through the green channel once the bill of entry is filed. This happens online with little or no difficulty; only 30 per cent is examined. Physical examination includes matching description to bill of entry, whether the goods are correctly valued — as these could be undervalued — and whether they are eligible for exemption of duty. Doing 100 per cent physical examination may not only delay the process but will put a lot of strain on officials battling staff crunch amid the COVID-19 crisis.

Checks are being carried out on the consignments of even the AEOs (authorised economic operators) – green channel importers – who under normal circumstances get clearance automatically without any examination based on their size and past track record.

The current decision has baffled many industries, especially those dealing with Chinese telecom equipment as they are fearing big delay in clearance. Many of these parts are also needed to export items out of India. Right now, around 500 bills originating from China are cleared at the Chennai port alone, which is a key gateway for telecom parts and equipment for many Chinese companies operating in the country. Stakeholders believe if the authorities keep on holding consignments from China, it could choke ports and result in a major delay in delivery.

The electronics sector – manufacturers of smartphones, tablets and laptops – source a bulk of components from China and generally work on very thin stocks, barely of a few days and hence any delays in clearing consignments throws their entire production schedule out of gear.

India’s trade deficit with China in the first 11 months of FY20 stood at a massive $47 billion. India-China bilateral trade in FY19 was $87.1 billion in FY19, India exported goods worth $16.8 billion while imports added up to $70.3 billion, for a trade deficit of $53.6 billion.

In letters to DPIIT Secretary Guruprasad Mohapatra and Revenue Secretary Ajay Bhushan Pandey, the US-India Strategic Partnership Forum said a sudden embargo on imports will adversely affect the supply chain of most products and ultimately India’s manufacturing. This will also send a chilling signal to foreign investors who look for predictability and transparency, USISPF said in the letters reviewed by Business Standard.

“While we support India’s ambition to expand its manufacturing capability, we are concerned about the repercussions an unanticipated embargo on the import of goods from neighbouring countries will have on the supply chain and manufacturing,” USISPF President and Chief Executive Officer Mukesh Aghi wrote.

RESPONSES

Chennai Customs Brokers Association.

“There is an internal instruction from customs to all custodians of cargo including port terminal, airport, all customs freight stations to hold all consignments which have originated from China. It prevails at all the locations across India.”

Pankaj Mohindroo, chairman, ICEA (India Cellular and Electronics Association).

“The industry is already in very deep distress having lost production of over Rs 40,000 crore and has only recovered to less than 40% of normalcy. We have just begun to limp back to normal after a massive set of losses for three months – and now this. India is at a very crucial moment with the launch of PLI and two other schemes which require a high level of motivation in the headquarters of global and local companies. They need to move large amount of plant and machinery, components, sub-assemblies, and in some cases, finished products, to India. Regardless of the reasons, such a move, especially without any prior notice, can be counterproductive.”

George Paul, CEO, MAIT

“We understand that a step is being taken to do a thorough inspection of containers to safeguard India’s interests. If such a measure is being taken, as industry we suggest that importers with AEO status, also called green channel importers, be excluded from the same as they are entities validated by the government. We wish to emphasise that as citizens of India we will stand by decisions that the government may deem fit to take”.

Bipin Sapra, Partner, EY

The importers need to be aware of the policy decision, if any, on possible port of import and clearance procedures since a number of these products are being imported from China in Chennai port which caters to a large catchment of manufacturing hubs.”

COAI in a letter to Revenue Secretary

“Merchandise already cleared by Customs and loaded onto trucks are also being recalled for examination, potentially leading to soiling, spoilage and even pilferage. With the resulting losses being borne by industry, the government could lose out on goods and services tax and basic Customs duties.

COAI suggested that the government allow smooth movement of goods under the Authorised Economic Operator (AEO) programme, else the “trusted partner” tag earned by countries would be meaningless.”

-CT Bureau

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