The WTO ministerial Summit at Bali ended on a positive note for India. The strong and clear message on food subsidy made India the undisputed leader of developing and least-developed nations. However, trade facilitation is an equally important area.

With tariff rates having fallen after the Uruguay Round, trade facilitation has become important in the context of dealing with non-tariff barriers. With more countries becoming part of the global supply chain, goods manufactured in a country are made of components assembled in many countries.

TRANSACTION COSTS Slow and complex procedures complicate supply chain dynamics. The sheer volume of Exim transactions forced countries to look at new measures to steer trade (Exim trade in India soared from $123 billion in 2002-03 to $792 billion in 2012-13). With “Just in time” becoming the norm in product delivery, the focus has shifted to facilitating efficiency in transactions.

Transaction cost hurts small and medium Indian companies, which dominate Exim transactions in volume terms. Government data show the transaction cost varies between 8-10 per cent of free on board value, which translates into a cost of $63-79 billion for 2012-13 alone. Globally, the cost is $1.3 trillion a year.

Exporters/importers from both developing and developed countries have long pointed to the bottlenecks in moving goods across borders. Documentation requirements often lack transparency and are repetitive in many countries, including ours.

Despite advancements in information technology, data flows are a problem, barring to some extent between the Directorate General of Foreign Trade (DGFT) and Customs, and DGFT and banks. Other agencies are still asking for the same information, mostly in paper form.

As per the draft text of the agreement on Trade Facilitation at Bali, each member would be required to (a) promptly publish information on imports and exports; (b) establish or maintain one or more enquiry points to answer reasonable enquiries of governments, traders and other interested parties; (c) and provide an appropriate time period to traders to comment on the proposed introduction or amendment of laws on movement, release and clearance of goods.

There should be a systemic approach to identifying hindrances to efficient flow of trade. We need to look at both forward and backward linkages.

For backward linkages, the complete supply chain covering production, logistics, services infrastructure and regulatory frameworks — all with an impact on speed and cost — have to be addressed.

The forward linkages cover overseas transportation, logistical and financial frameworks, restrictive procedures, mainly technical standards above international benchmarks, high charges for registration and inspection followed by advanced countries.

The backward linkages require resolve on our part while forward ones need to be flagged at multilateral/bilateral forums.

CUSTOMS HANDLING Let me touch upon a couple of issues that should be addressed during the transition time available to us to meet trade facilitation mandate.

The Revised Kyoto Convention has recognised the importance of the use of Risk Management System (RMS), which comprises a series of technical processes meant to identify and quantify individual risks. The RMS has helped in faster customs clearances in India.

But the new RMS for imports has increased the percentage of physical examination, which is a great setback for users.

Customs authorities should ensure that the intended objective of adoption of RMS is not defeated and only high risk consignments are put to physical examination.

Another facet of risk management is to do away with obsolete practices. Most cases of duty drawback are held up due to non-filing or incorrect filing of Export General Manifest (EGM) by shipping/airline companies.

DUTY DRAWBACK We all know that shipment of exports takes place after endorsement of the Let Export Order (LEO) by Customs. Less than 0.05 per cent of shipments are withdrawn after LEO, and doing so requires following a complex procedure. So, the grant of drawback at the LEO stage will result in quick disbursal, adding to exporters’ liquidity with no or negligible risk to the exchequer.

We can safely say most fees and charges appear nominal. No fee is charged for claiming benefits of promotional schemes and even duty drawback. But in the case of applications for an import authorisation, the amount of fees is based on the c.i.f value of authorisation. At times, the high fee for authorisations may breach what is prescribed as “reasonable fee” by WTO.

While Customs introduced advance ruling in 2004, its coverage is quite limited. Only foreign firms that want to invest in India through joint ventures or wholly-owned subsidiaries, or Indian firms who are getting into joint ventures with foreign firms can ask for advance ruling.

Thus the scope of the Authority for Advance Ruling is limited as the provision is not available to a solely Indian-owned company. The expansion of scope will benefit Indian entities.

The novel scheme of Authorised Economic Operator (AEO), which provides accelerated clearance both inside and outside India, has not yet taken off.

In a country where over 1,00,000 are eligible to avail of the facility, the figure of AEO has not touched even hundred. At port of Antwerp alone, there are over 600 AEOs.

The lack of publicity, stringent requirements and delay in registration contributed to its lacklustre performance. Aggressive marketing and fast clearance will go a long way in popularising the scheme.

NODAL AGENCY A consultative mechanism between trade and Government is already in place as the Government does consult the stakeholders and evaluates their inputs.

The draft circulars proposing procedural changes are put on the websites inviting suggestions. However, there is a need to institutionalise the process so that the same is invariably followed by all agencies.

The electronic media is already being used widely for dissemination of all trade-related information. DGFT should be made the single inquiry point to address all queries of the trade.

A backup office consisting of nodal officers in Customs, regulatory agencies, FIEO and other export promotion bodies can be set up to assist the single enquiry point.

A country that is unable to adopt effective and appropriate trade facilitation measures would be uncompetitive in the global trading environment on account of high transaction costs. Therefore, whether it is the requirement of the WTO or our own willingness, we have to take this agenda forward.

( The author is President, FIEO .)

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