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A major milestone for the global trading system was reached on 22 February 2017. While Trade Facilitation Agreement (TFA) aims to facilitate trade between countries and ease non-tariff barrier, it is going to impact all stakeholders in EXIM trade and everyone should prepare themselves to embrace the change
Q How Trade facilitation Agreement will impact EXIM and service sector?
The WTO-Trade Facilitation Agreement (TFA) has come into force on 22nd February 2017 in member countries, including India, but India has 1 year time to complete all processes. Some countries depending on their status have about 1-5 years time period to streamline all processes and compliance. The effect of TFA varies depending on the sector. Exporters and importers have to plan meticulously with regard to all documentation in compliance with TFA. There have been some changes in the process post-TFA, for example, for import consignment Customs has introduced a new section where if importer doesn’t file Bill of Entry within 24-hours of arrival of goods, it will attract late filing charges. In a bid to make amendments transparent, government has notified rates in terms of penalties to be paid for amendments in shipping bill. Hence, amendments are going to be expensive in the Post-TFA era. The positive development is that shipper gets an assurance of hassle-free cargo clearance if all paper work is in place.
The deferred payment of duty has its roots in the TFA. TFA for the first time has made provisions to separate release of goods from clearance of goods. It is a positive development that Customs for the first time incorporating terms like ‘release’ and ‘clearance’ in its clause. It is important for importers and exporters to keep all paperwork ready in advance involving all participating government agencies.
Q How will it impact service providers like Customs Broker?
In case of service providers like Customs Brokers, they have to accept a new role in working which will be a depart from the past. Previously, the practice was that relation management for a Customs Broker with Customs official was very important whereas post-TFA there will be lot of stress on technology and filing. Hence, compliance of norms will have greater role, and if there is a mistake in filed document, it can only be corrected by paying a fee. Due to which correction in documents will be an expensive affair. Moreover, with RMS, Deferred Payment of Duty and Direct Port Delivery coming into the picture the number of processes involving import and export that a Custom Broker used to undertake earlier will come down significantly, hence affecting his earning. Even the number of consignment being processed earlier through them will come down. Due to which Customs Brokers have to think about strategy to realign their existing work force as the job done at their end will come down. There will be requirement for better qualified staff. In case of custodians, the number of cargo they used to handle will come down due to introduction of concepts like DPD and RMS. Hence, custodians also have to reinvest their business model.
Now, even the cargo carriers (shipping lines and airlines) also have to realign their business. They have to practice a lot of discipline and bring in clarity in IGM and EGM that comes from their end, including adherence to strict timeline and penalty involved in it. In the past, consolidator had never took Customs clearance very seriously, but they will be forced to change with the introduction of a number of penalties for amendments and late filing. Hence, all 18-19 stake holders who are typically involved in the movement of EXIM cargo have to undergo change to stay in compliance with the TFA regime.
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