India has recently notified the World Trade Organization (WTO) of the complete implementation of its Trade Facilitation Agreement (TFA) commitments. This is a significant milestone that did not get the recognition it deserves.
Time is money goes the adage. Nothing exemplifies this more than in trade- especially international trade. Delays, be it because of, cumbersome documentation, lack of technology, clearance of goods, or lack of accurate information could mean an order being cancelled, vessels being missed and loss of money and reputation.
WTO had recognised the importance of ensuring the issue gets addressed. The Singapore Ministerial Conference in 1996 initiated the process of 'undertaking exploratory and analytical work on the simplification of trade procedures. After several years of exploratory work, the negotiations on trade facilitation commenced in July 2004.
The aim was to improve specifically a few Articles of the GATT 1994 agreement. Articles V (dealing with Freedom of Transit for vessels and other means of transport through the territory of a contracting party) Article VIII (relating to fees and formalities connected with importation and exportation) and Article X (dealing with publication and Administration of Trade Regulations).
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The WTO was conscious also of the huge disparities between the needs of developed countries, developing countries, and less developed countries. It recognised that it was essential to have a meeting ground between these disparate economies. A negotiation group was constituted which began work, which culminated ultimately in the historic ninth WTO Ministerial Conference in Bali in December 2013.
The centerpiece of the Bali Package as it came to be known as the Agreement on Trade Facilitation or the Trade Facilitation Agreement (TFA). The TFA consists of 24 Articles covering the whole gamut of measures aimed at expediting the movement, release and clearance of goods including goods in transit. It aimed at harmonization of processes and standards across borders, putting in place automation, and ensuring the availability of information in the public space.
Every member country was tasked to categorize the provisions of the TFA into Category A, B, and C. Category A provisions related to developed countries that would implement its commitments immediately when the TFA came into force. Category B provisions which would be implemented within 5 years or earlier of the TFA coming into force. Category C provisions where a country would require technical assistance for acquiring implementation capacity and capacity building.
India had ratified the TFA in April 2016. The TFA was to come into force when two-thirds of the WTO members completed their domestic ratification procedures and accepted the TFA. This threshold was reached in February 2017 with 110 counties ratifying the TFA.
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Given the fact that import and export involve multiple ministries ranging from commerce to railways to shipping to roads to civil aviation, India also set up a National Committee on Trade Facilitation (NCTF) headed by the Cabinet Secretary. The aim was to bring on board all the stakeholders so that a concerted action plan could be formulated to meet its TFA commitments. What the National Committee also effectively did was sensitise all the departments of India’s TFA commitments. It helped also foster a culture of facilitation.
Given the fact that Indian Customs was already largely compliant with the TFA requirements, India was in a happy position of being able to notify that 72 percent of the TFA provisions as Category A -those that had been implemented. The remaining 28 percent were categorized as Category B which were to be implemented within 5 years-that is by 2022. This is a significant milestone that has now been reached.
The process of implementing the TFA provisions commenced immediately after India had ratified the TFA. There was a clear recognition that trade facilitation is a key enabler of a country's economic development. It fell in line with the Make in India initiative. All the measures put in place meant that results were soon visible on the ground.
The now-discredited Doing Business report of the World Bank saw India’s rankings dramatically improve from 130 in 2016 to 63 in 2019. The Global Survey on Digital and Sustainable Trade Facilitation saw India’s implementation score improve from 69 percent to 80 percent. OECD’s trade facilitation indicator saw a 15 percent improvement in the overall average score.
The Central Board of Indirect Taxes & Customs (CBIC) carries out regular Time Release (TRS) Studies which as the name suggest seek to measure the time taken for the release of cargo -into the country in case of imports and for movement out of the country in the case of exports. The latest TRS released in February 2022 provides proof if one was needed of significant improvement in trade facilitation. It covers trade from seaports, Inland container depots, air cargoes and land customs stations.
Trade facilitation is a continuous process. All departments involved must ensure that there is a mechanism to constantly review the implementation and carry out improvements. Simultaneously, it is essential that trade also ensures due compliance. Trade and Industry will be expected to ensure honest and correct declarations and to provide feedback to the department on possible areas of improvement. Every major customs house has regular trade facilitation meetings which give an opportunity to the trade to interact and sort out problems. This forum should be used.
What India’s fulfillment of its TFA commitments would also mean is that the road to achieving India’s ambitious targets of becoming a $5 trillion economy and export of $800 billion has been set. It is for the trade and industry now to rise to the challenge.
— Najib Shah is the former chairman of the Central Board of Indirect Taxes & Customs. The views expressed are personal.
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