Chinese shipments await Customs clearance amid border standoff with India

Amid heightened tensions along the Line of Actual Control with China, stalled customs clearance of cargo from Beijing has sent importers and manufacturers into a tizzy. Though officials said the move was based on specific intelligence related to narcotics smuggling and illegal imports of undervalued items, industry saw it as a trade retaliatory measure. 

Getting shipments from China may only get tougher going forward, industry fears. 

On Monday night, customs officials in Chennai and Visakhapatnam were asked to put all shipments from China on hold until further orders.

“The Customs has been informally asked to stall clearance of all consignments from China, be it by sea or air, following intel inputs on smuggling of narcotics (worth Rs 30 crore). While this is unusual, it cannot be seen as a trade retaliation as it will only hurt our own industry that is currently heavily dependent on raw materials from China,” said a government official. The Chennai Customs Brokers’ Association confirmed the development and said it was “in touch” with the officials. 

Another official pointed out the government is also trying to discourage the influx of undervalued goods from China which is hurting the domestic small- and medium-scale industry.

The development coincided with the government making it mandatory for sellers to mention “country of origin” on products to be sold on the government’s procurement portal Government e-Marketplace (GeM).

An industry representative said while the official reason may be "intel input", the underlying reason could be the government trying to discourage Chinese imports and pressing industry to look for alternatives. “Only because of smuggling, the government will not put on hold all the shipments originating from a country. The government wants industry to look for other sources for raw materials, but it is not going to be cost-effective at the moment. This is just the beginning. Trade with China will only get tougher going forward, hurting our own industry,” he said.

With most sectors, including pharmaceuticals, electronics,  and auto, heavily dependent on raw material from China, companies are busy scouting for alternative, cost-effective sources. India’s $120-billion auto industry sources 8-20 per cent of its annual requirement from China, show industry estimates.

“We need a thorough reworking of the value chain. The logistics cost is less if you import from China, than shipping material from Chennai to Ludhiana. Import substitution will have a huge cost ramification,” said another industry leader.

The bilateral trade between China and India was worth $88 billion in FY19, with a trade deficit of $53.5 billion in China’s favour.

The government is planning to curtail imports from China on at least 300 non-essential items by way of either duty hikes and imposing non-tariff barriers by increasing compliance requirement, such as tighter quality controls and licensing.

“The aim is to protect the Indian market from cheap sub-standard imports,” said another government official.

Chennai Customs in a reply on Twitter over shipments from China said: "Prima facie allowing import of prime goods from China that are lower in price than the stock lots or the cost of production severely harms local industry, mainly MSMEs. The government is keen to ensure an Atmanirbhar Bharat by encouraging Make in India.”