India: India and the WTO's Trade Facilitation Agreement

Last Updated: 1 October 2018
Article by RV Anuradha and Trishna Menon

By R.V. Anuradha and Trishna Menon*

The 2015 World Trade Report estimates that full implementation of trade facilitation efforts, such as simplifying paperwork, modernizing procedures and harmonizing customs requirements, can slash trade costs equivalent to a 134% ad valorem tariff on a product in high-income countries and a 219% tariff equivalent in developing countries, by an average of 14.3%. Therefore, trade facilitation has emerged as an important issue for the world trading system.

The Trade Facilitation Agreement ('TFA'), concluded at the WTO's Bali Ministerial Conference in 2013, and in force since 2017, was the first agreement to be concluded since the commencement of the WTO in 1995. The TFA focuses on the simplification, modernization and harmonization of export and import processes. It clarifies and improves relevant aspects of certain articles of the General Agreement on Tariffs and Trade, 1994 ('GATT') pertaining to Freedom of Transit, Fees and Formalities and Administration of Trade Regulations.

The TFA allows developing and least-developed countries to categorise its provisions into three categories: Category A provisions which are to be implemented immediately upon the coming into force of the TFA, while Categories B and C are flexibilities allowed to developing and least-developed countries, whereby they can designate provisions to be implemented after a transitional period beginning from the coming into force of the relevant provisions.

India and the TFA

India ratified the TFA on April 22, 2016. It has already begun implementing the provisions it has notified as Category A provisions, such as those related to publication and availability of information, some aspects of the provisions on advance rulings, release and clearance of goods, border agency cooperation, importation and exportation formalities and freedom of transit. India has time till 2022 to implement its Category B commitments. These include streamlining of its enquiry points, notification requirements, mechanism whereby stakeholders are provided an opportunity to comment on the proposed introduction or amendment of laws and regulations, legislative changes assuring a judicial appeal or review, border agency cooperation, formalities and documentation requirements and establishing a single window for imports into the country.

Advance Rulings under Customs laws

For several Category B obligations, India has begun by streamlining measures that already existed to ease customs procedures. One such measure pertains to Advance Rulings. The Customs Act, 1962, was amended in 1999 to provide traders with a mechanism to apply for Advance Rulings to the Customs Authority for Advance Rulings. Competent authorities for "Advance Rulings" have also existed in India for income tax and various indirect taxes. The Finance Act, 2017 consolidates all the Advance Ruling authorities for various indirect taxes into the Authority for Advance Rulings (AAR) set up under the Income Tax Act, 1961. The AAR is mandated under law to provide a ruling within six months of the application.

Advance rulings enable traders to know in advance and with certainty, their customs duty liability on their proposed imports into India and proposed exports from India. They are binding on the applicant and the Commissioner of Customs and his/her subordinate officers unless there is a change in law or facts on the basis of which the Advance Ruling has been pronounced. Advance Rulings can be sought in respect of:

  1. Classification of goods under the Customs Tariff Act, 1975;
  2. Principles of valuation under the Customs Act, 1962;
  3. Applicability of notifications issued in respect of duties under the Customs Act, 1962, Customs Tariff Act, 1975 and any duty chargeable under any other law;
  4. Determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 and matters relating thereto.

ICEGATE and Single Window Interface for Facilitating Trade

The Customs Electronic Commerce/Electronic Data Interchange System (ICES), which was launched around 2009, provides the ICEGATE portal which provides electronic filing services to the trade and cargo carriers and other clients of the Customs Department. These include electronic filing of the Bill of Entry, Shipping Bills and related electronic messages between Customs and traders using internet communication protocols. All electronic documents/ messages being handled by the ICEGATE are processed at the Customs' end by the Indian Customs EDI System (ICES), which runs at 134 customs locations across India.

In addition to electronic filing, ICEGATE also provides electronic payment, online registration for intellectual property rights, document tracking status at Customs EDI, online verification of certain licences and links to various other important websites and information pertaining to the Customs business. The ICEGATE also provides a 24x7 help-desk facility for its traders. These measures are steps towards compliance with the TFA's obligations pertaining to the release and clearance of goods, as well as formalities and documentation requirements.

In April 2016, the CBEC also launched the Customs SWIFT (Single Window Interface for Facilitating Trade) initiative which enables importers/exporters to file a common electronic 'Integrated Declaration' on the ICEGATE portal. The Integrated Declaration compiles the information requirements of Customs, FSSAI, Plant Quarantine, Animal Quarantine, Drug Controller, Wild Life Control Bureau and Textile Committee and it replaces nine separate forms required by these 6 different agencies and Customs. This is towards the fulfilment of Article 10.4 of the TFA (Single Window).

The National Committee on Trade Facilitation and its Action Plan

India has also established the National Committee on Trade Facilitation ('NCTF') to act as a national level body could facilitate effective domestic coordination and implementation of TFA provisions. This is crucial to enable effective coordination between several laws and authorities that are relevant trade related matters, such as the Livestock Importation Act, 1898, the Food Safety and Standards Act, the Land Ports Authority of India Act, 2010, etc.

The NCTF, on July 20, 2017, adopted a 76-point National Trade Facilitation Action Plan ('Action Plan') which aims achieve improvements in the ease of doing business by reduction in cargo release time and cost, moving towards a paperless regulatory environment, transparent and predictable legal regime and improved investment climate through better infrastructure. Importantly, the Action Plan lists out specific activities which would be carried out by all regulatory agencies like Customs, FSSAI, Drug Controller, Plant Quarantine, DGFT and others in a time-bound manner. It also addresses activities in the areas of infrastructure augmentation, particularly, the road and rail infrastructure leading to ports and the infrastructure within ports, airports, Inland Container Depots and Land Customs stations for which various ministries like Shipping, Civil Aviation, Railways, Road Transport and Highways, Home Affairs, Finance and Commerce have been assigned specified targets.

Implementing the TFA is a significant milestone not only for easing inbound trade into India; but has a crucial role to play in enhancing India's own competitiveness as a result of greater efficiency in administering trade regulations.

* Anuradha is a Partner and Trishna is an Associate at Clarus Law Associates, New Delhi.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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