NO RESPITE: New Customs Rules CAROTAR 2020 continue to harass importers, disrupt supply chain

Now companies are being asked to pay bank guarantees as the Central Board of Indirect Taxes & Customs (CBIC) fails to ensure judicious application of the CAROTAR 2020 rules. There seems no check on arbitrary practices during the customs clearance of goods.

Sanjeev K Ahuja On Feb 4, 2021

NEW DELHI: Despite repeated assurances by the Central Board of Indirect Taxes & Customs (CBIC) ensuring judicious application of the CAROTAR 2020 rules and check on arbitrary practices during the customs clearance of goods, the importers continue to face hardships.

Besides delays in consignments and disruption of the supply chain, the companies from the countries with which India has signed free trade agreement (FTA), continue to be harassed and are being asked to pay a bank guarantee instead (if not actual tariff).

And all this is happening despite the fact CBIC directed its field officers to initiate inquiry on the origin of imported goods only where there were ‘sufficient grounds‘ to suspect the origin of a good, or where the same was identified as a risk by the Risk Management System.

This situation seems to have rendered the Comprehensive Economic Partnership Agreement (CEPA) India entered into with countries like South Korea ensuring free trade almost obsolete and meaningless after the implementation of new Customs Rules of Origin (CAROTAR 2020) – Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 since September 21 last year.

Mandeep Sangha, Joint Commissioner (Customs), International Customs Division, CBIC in a letter dated Dec 17 on the subject “Verification of the Preferential Certificates of Origin in terms of CAROTAR Rules 2020” referred to the previous department directive issued on November 13 that ensured the “JUDICIOUS” application of CAROTAR 2020, without causing disruption to the supply chain.

The letter marked to all Principal Chief Commissioners, Chief Commissioners of Customs, Customs (Prev.), all Principal Chief Commissioner/Chief Commissioner of GST, all Principal Chief Commissioner/Chief Commissioner of Customs & GST, and all Director-Generals under CBIC, Sangha said, “It was also advised to review the function of customs ports under your charge to ensure that unnecessary delays and arbitrary practices are not being resorted to during custom clearance of goods. It was also advised to review the function of customs ports under your charge to ensure that unnecessary delays and arbitrary practices are not being resorted to during custom clearance of goods.”

The CBIC had assured the trade organizations of Japan and South Korea and other ASEAN countries that the department would stop the 100% inspection at the time of customs clearance, postpone the export country verification in case the importer could not provide cost and other confidential information, and unnecessary questions would not be asked.

According to Reena Asthana Khair, Senior Partner, and Head, International Trade & Indirect Taxation, Kochhar & Co., “It is doubtful that the latest guidelines of the CBIC advising the field officers to initiate enquiries only where there are sufficient grounds to doubt the origin will bring an end to the difficulties of the importers. CBIC Guidance as to what constitutes ‘sufficient grounds’ is necessary to bring clarity and uniformity in assessments.”

The CBIC had claimed that the instructions were issued to each customs office regarding the cancellation of inspections, repeated questions, and compliance with various deadlines, and operations would gradually become smoother.

“We are still observing and monitoring the situation and asking the companies about the situation. We are not willing to make any official or loud noise about this CAROTAR yet. Our member companies continue to face problems. Delay of the consignment is one thing. Even countries like Korea, that has CEPA or almost similar to free trade that means companies will pay less tariff between each other. But now that is almost obsolete and meaningless after CAROTAR’s implementation,” said Hee-chul Jung, Secretary-General, Korea Chamber of Commerce and Industry (KOCHAM) – a representative industry body of about 750 Korean companies in India.

Terming the situation as a serious one which is sending a very bad message not only to the Korean companies but also to the whole world, KOCHAM secretary-General said, “It’s a promise between countries, so we are trying to be patient and observe what the India government will do about this.”

“They are actually making the Korean companies pay bank guarantee at the rate of 10 percent of the import value and the interest rate is a big loss. The Indian government is not getting that money but the banks. This is not benefitting anyone and also sending the wrong messages. Therefore, we are very patiently waiting and observing. If this issue eventually doesn’t get resolved and people actually feel big pain about this, then we are certainly going to make an issue, but not yet. We are still observing and waiting for the authorities to sort things out,” Hee-chul Jung added.