Govt mulls joining global customs pact on smoother trans-shipments

Cabinet note being prepared by Commerce Ministry on joining TIR Convention

India's merchandise imports and exports may soon face minimum interference by foreign customs authorities during trans-shipments as the government mulls signing an international agreement in this regard.

The Commerce Ministry is in the process of preparing a cabinet note which proposes that India become a signatory to the Convention on International Transport of Goods Under Cover of TIR Carnets (TIR Convention).

The Convention will allow India to join an international customs transit system that allows containerised goods to reach their destinations smoothly without the need to be inspected every time it crosses an intermediate border. It also provides customs authorities with the required security and guarantees.

Currently covering 69 nations and the European Union, the convention is expected to significantly bring down the cost and time involved in international merchandise movements across land, sea and inland waterways, a senior Commerce Ministry official said.

Among others, this will significantly benefit India’s trade routes to the major markets of central Asia and Russia which crosses multiple land and sea borders, he added. The time taken is expected to be shortened in this route between 3 to 5 days while logistics costs will go down.

Most trade with the region still takes pace through the traditional route across the Mediterranean sea to St Petersburg but exporters are slowly starting to send goods through the Iranian port of Bandar Abbas where it is unloaded and heads north through Iran, Azerbaijan and other countries to Russia and Afghanistan, Anil Khaitan, Vice President, PHD Chamber of Commerce said.

Countries in the region, part of the Commonwealth of Independent States (CIS) are considered to be underserved markets as well as represent potential suppliers of oil, natural gas, metals & minerals to India.  India’s total trade with the region stood at more than $ 7.06 billion in April-November 2016-17 as compared to $ 9.46 billion in 2015-16.

The trade balance was heavily tipped against India with imports standing at $ 3.55 billion and $ 4.67 billion more than exports in April – November 2016-17 and the 2015-16 respectively. For India, pharmaceuticals, sophisticated machinery,coffee,tea and spices constitute important exports to the region.

"The government's move may pleasantly surprise the industry as a lack of awareness existed regarding the Convention."  Jasvat B Shah, Chairman of the Freight Forwarders Association of India said. Traders were more preoccupied with the difficult transit process in the domestic scenario itself, he added.

However, the government is also planning, as part of its Ease of Doing Business initiative, to enact a multi-transhipment law in the domestic sector as well. Still in the works, it will allow reloading of cargo on the same vessel, switch from larger to a smaller vessel and moving the vessel through foreign territory. The plan, part of the ease of doing business initiative, seeks to cut cost and time for exporters, while importers will have legal backing.

The Customs department, under the finance ministry, is working closely with the shipping ministry, to give shape to the initiative.

Today, even if the cargo is offloaded at Nhava Sheva port in Mumbai, the shipment has to be transported to the Kolkata or Cochin port through railways or by road — comparatively a more time-consuming process, involving higher costs. However, according to the plan, the vessel, after offloading the goods meant for Nhava Sheva, will be allowed to go up to Cochin or Kolkata in the same vessel or by reloading goods into a smaller vessel.

Key points:

* The TIR Convention allows containerized goods from signatory nations to reach their destinations smoothly without the need to be inspected every time it crosses an intermediate border or docks at port in transit.

* It covers movements across sea, land and waterways and it is expected to boost trade with far destinations like Russia, Central Asia and Afghanistan whereby goods have to cross multiple borders.

* Experts point out India's trade with Russia and Central Asia operating significantly below potential.