SEALING INEFFICIENCY
The advent of TFA regime has shaken quite a few established processes which were deemed indispensable to the EXIM trade. And one such mandate is electronic sealing of containers that paves the path for secured multi-modal international container shipment while ensuring cargo traceability for shippers and Customs
The Indian Customs is in a hurry! It may amaze the speed at which the department is introducing a slew of procedural changes to release cargo that seemed unthinkable for India a decade ago. If one asks the experience of old timers in EXIM trade, getting the cargo through the Customs a decade or ago used to be more taxing than the entire exercise of export or import. So like other global ports Singapore or Jabel Ali, soon officials armed with handheld RFID readers clearing boxes is going to be a common site at Indian ports as well, and all this is going to happen due to the introduction of e-Sealing. It is seen by many as the next logical step followed by DPD to speed up Customs inspection and clearing. Notably, the Central Board of Excise and Customs (CBEC) had introduced the new procedure for sealing of containerized export goods with effect from October 2017, however, only those exporters permitted for self-seal of their export containers are eligible to avail the benefit of the electronic sealing facility.
Why e-Seals
There are various types of electronic sealing mechanisms in use in different countries, but from the prospective of convenience and cost, most of it is based on the radio frequency identification (RFID) technology. With the evolution of scanning technology, it has been possible to capture information about a package without even being present at the location physically. Technologies like RFID and Near Field Communication (NFC) helps to collect information about an object without physical intervention and it significantly enhances the pace of information collection, processing and due decision is made whether to hold or release the object, hence significantly speeding up cargo clearing capacity. As global trade volume is on the rise, over a period of time it has become impossible to physically inspect each consignment, which will have cascading effect not only on congestion at container terminals but also huge losses to the economy. Thus, technology like RFID-based e-Seals help increase trade between countries, and the advantage of e-seals is since it is based on a tamper-proof sealing mechanism where through the tracking number the package could be tracked end-to-end, from the country of origin till the destination.
Moreover, unlike the rudimentary paper-based information gathering which are vulnerable to data alteration at any stage, in the e-sealing mechanism, once information is capture by the scanner it is updated across the servers of all stake-holders, hence plugging the scope of any information tampering. Paper-based information gathering has its limitations and it is time consuming. On the other hand after the introduction of 2D barcodes, it has become possible to store information as much as 7,000 characters which allow to store details of a consignment like origin/destination, expiry date, product details and much more, and all these information could be transmitted wirelessly. With the global security concerns on the rise, there will be need for processing of even more volumes of information about a transshipped package which is not possible to pen down physically. Hence, capture information on the move. Another advantage of RFIDbased tags are that it can transmit information over a distance in excess of 100-meters, and it helps everyone in the process of shipment to keep track of the inventory.
Though introduction of e-sealing seems like a progressive step by the government but it is a compulsion which India is abide by as a signatory of World Trade Organization (WTO). As the world heads towards an era of borderless cargo movement and equal trade opportunity to all countries under the aegis of WTO, the Trade Facilitation of Agreement (TFA) has come into effect. Henceforth, TFA as per the mandate of World Customs Organization (WCO) is looking towards uniform Customs rules across member countries, and e-Sealing is one of the Customs clearing methodologies which is going to be adopted by all member countries. Thus, e-Seals are introduced in India.
Objective As part of the modal shift towards the TFA regime, it was quiet clear after the introduction of trade facilitation measures like AEO program followed by DPD mandate, the future role of Customs would be more of a facilitator and supervising authority rather than to intervene physically in day-to-day cargo movement. Unlike the previous years where a department official needed to be physically present at the time of sealing of export boxes, in the present regime an exporter is allowed to seal a container, and it would be allowed upon adherence of certain compliances which are ascertained based on risk management system owning to track record of exporter, risk profiling and trust-based compliance system among others. However, to ensure there is no breach of trust or tampering of self-sealed containers either at the factory or warehouse of the exporters or en-route to the port, the export containers need to be sealed with tamper-proof electronic seals instead of mechanical bolt seals. Exporters need to obtain one time approval for self-sealing of export containers. Additionally, the existing exporters who are already performing self sealing at their factory premises and AEOs are also eligible for selfsealing, thus qualifying for e-sealing facility. Furthermore, by implementing e-seals, the exporters can save on Merchant Overtime Fee (MoT) which it used to pay for availing Customs clearance and supervision services beyond office hours, as e-sealing method allows exporters the time advantage to seal containers at any time. Due to the tracking mechanism, cargo safety and traceability also improves for exporters and government agencies from factory till port of dispatch.
Many major and private ports have RFID readers already in place which will help to facilitate passage of e-sealed containers. Currently, only a handful of RFID e-seal vendors have been able to qualify on the parameters set by CBEC. One of such vendors, ibTrack Solutions has commissioned e-seal readers in October at DP World, PSA and Adani Katupalli terminals in Chennai. The company claims that the system has functioned smoothly without any glitches at all the three terminals. Soon the company will implement the process at Mangalore, Cochin, Tuticorin and Visakhapatnam. Various vendors are in the process of installing infrastructure at all ports and ICDs. Though CBEC had ordered for mandatory e-sealing from 1st of November 2017, but keeping in view of the fact that all ports and terminals are yet to install the infrastructure to facilitate e-sealing clearing mechanism, the implementation is likely to take place in phased manner, but all exporters will need to adopt e-sealing in couple of months. The e-sealed containers will have unhindered movement to the port terminal and unless there are good reasons or intelligence to warrant inspection of such containers, the container will not be subject to any examination. However, in case of tampering of e-sealing, the containers will be subject to physical examination and it has to undergo traditional methods of mechanical sealing and related procedures.
Implementation
CBEC has directed exporters to directly purchase RFID e-Seals from its approved vendors, however till November 2017 there are only 10 vendors which have been able to comply with the norms set by the department. As a result availability of RFID e-Seals remains an issue for exporters. Speaking about the advantage and challenges in adopting the new mechanism by exporters, Unnikrishnan K, Deputy Director General, Federation of Indian Export Organisations (Southern Region) said, “One important issue which we see is that even though the multiple vendors are appointed, but there seem to be service deficiency from the side of vendors as most of them are not ready, and consumables are not readily available leading to long waiting time for getting e-Seals. We have also noticed that most of them are not equipped with adequate man power to address sudden spur in demand at least in the first 6 months.” Meanwhile Unnikrishnan is hopeful that the e- Sealing procedures to reduce transaction cost and time of exporters.
While e-Seals have certain advantages but its effectiveness in detecting pilferage, tampering, and wrong declaration remains the key to its future. The decision of e-sealing has been envisaged based on after risk assessment mechanism. Meanwhile, speaking on this aspect, Unnikrishnan said that e- Sealing procedure is available to select categories of exporters who are having good track record. The e-Sealing if tampered or damaged during voyage, the RFID reader can detect it and in this situation, the container will move for manual intervention and checking. The procedure has been adopted with full faith in the trade. As e-Sealed cargo do not need to go to ICD for document processing, and there will be no detention at the gates which will save lot of logistic costs for the exporters apart from helping them in fulfilling ‘Just in Time’ deliveries. Most of the vendors are selling e-Seal through e-commerce portals and pricing of each e-seal is around `250 and a minimum order of 15 units is needed.
Speaking about the new method, M.S. Arun, Chairman, (Chennai Chapter), National Association of Container Freight Stations, said “The e-seals have to be imported. The approved vendors do not have any estimate about the demand and therefore they import on the basis of orders placed. Hence, there is a delay in supply. And Customs has introduced e-seals in order to secure the cargo, since e-seals cannot be duplicated. Though the method is very effective in detecting pilferage and tampering, but wrong declaration cannot be prevented. As of now the seals are not available off the shelf. The time lag is about 30 to 45 days. However, the time lag may be reduced in course of time when the demand picks up. A RFID reader may take up to 45 days for delivery. For imports these are useful for movement from Ports to CFSs or ICDs.”
Though new mechanism can significantly help in saving time and speeding up clearance process, but its success lies in the hands of vendors who will supply RFID e-Seals and Readers. Currently, the work is moving at a snail pace and there are issues related to availability of e-Seals to exporters. Meanwhile, detailed e-mail query on e-Sealing and even calls over phone by Maritime Gateway to nine CBEC approved vendors remained unanswered, and only one company Infotek Software & System clarified its position.
e-Seal process flow
Elaborating on the process flow of an e-Sealing mechanism, Ashim A. Patil, MD & CEO, Infotek Software & System explains that when an exporter attaches e-Seal to a container, they have to associate the unique seal number with the Shipping Bill details, Container details, truck or trailer details and save the data on the e-Seal vendor’s web-application. When the container reaches the Custom station the hand held device used to scan and read the e-Seal gets access to the relevant data from the vendor’s web-application and the data is displayed. The customs officer checks the data for the correctness correctness to declare successful scanning or rejection. If the E-seal is successfully scanned and the data is verified for the correctness by the Customs, the container is ready to be exported without being opened at the port. The e-Seal works on RFID technology in the Ultra High Frequency (UHF) band and on ISO 18000-6C protocol. The e-Seal is meant for exporters and it looks and feels similar to a conventional mechanical bolt seal. To read the RFID e-Seals handheld or fixed readers are required. These readers have to be fixed at Customs Stations in Ports/Terminals or Custodian locations. Depending on the brand of the RFID e-Seal, its data can be captured from various distances. The e-Seal is certified under ISO 17772 (H) which means that if there is an attempt to open a sealed container the e-Seal will be tampered permanently. This system is effective in detecting if the container was opened after it was sealed at the factory premise. The cost of E-seal with relevant software access is about `200-300 per seal. Each vendor gives access to a Web platform to exporters where the exporter logs into the Web application by using a user name and password and as one time exercise provides the details of the exporter as detailed in the application. At the time of export the exporter has to fill in the necessary and mandated shipment details through the application. In case of an ICD or CFS being used, secondary data needs to be filled. Each e-Seal has an unique id which is linked to the vendor web application and corresponding to an e-Seal exporter needs to fill shipment details such as e-Seal number, shipping bill number, container code, port code with shipping bill, transporter data, among others on the web application which later transmitted to the Customs application. Customs stations read the data by using fixed readers or hand-held mobile readers. The shipment data will be forwarded by Customs officials to its Risk Management Division for assessment.
Future Outlook
The intension of the government to implement the e-Sealing mechanism is noble and it can significantly boost India’s ranking on the charts of cross-border trade and ease of doing business. Though there will be initial implementation cost but owing to economies of scale, the initial high cost will come down over a period of time. However, like every new initiative it has some teething issues. The e-Seals are not manufactured in India and vendors are procuring it from many international OEM suppliers of ISO e-Seals. Hence, its availability remains an issue at the moment. Meanwhile, as the demand increases and it is certainly going to rise as Customs aims to make it mandatory for exports, the supply chain will be streamlined. Till that moment, exporters have to bear with the niggling issues of new process implementation.
