We are here to help the trade save cost: Dr John Joseph

Dr John Joseph, chief commissioner of customs (Mumbai Zone-II), Jawaharlal Nehru Customs House (JNCH), has managed to remove congestion at India's largest container port at Nhava Sheva through various initiatives. He shares with DNA Money the challenges he faced while implementing Direct Port Delivery (DPD), a game-changer scheme that facilitates 'Ease of Doing Business'.

When you think of the Jawaharlal Nehru Port (JNPT), congestion and chaos come to your mind. It used to be a nightmarish experience for exporters and importers. How did you change the scene?

World Bank does a study on 'Ease of Doing Business', or how fast you can transfer or transport cargo with clearances. Last year's study on dwell time, or how much times does the container/cargo take to reach the terminal and the port to clear it, shows it used to take nine-12 days. That's why we are at 131-132 in the rankings. If it takes so many days to get cargo clearance from the customs, there's no future in doing business in that country. It has a huge impact on the economic viability of the product itself.

JN Port is the largest container port in India, handling almost 55%-60% of country's total container throughput. Almost 25% of the national revenue of customs comes from this port. If you see, of the Rs 2 lakh crore of the customs revenue budgeted, around 25% or approximately Rs 54,000 crore is from here alone.

When a container comes to a port, it is supposed to be taken to Container Freight Station (CFS). So, the container goes from the berth, or terminal to the CFS, and it is here the customs procedures for examination of goods, or verification of seals on containers (when no examination is there) take place. It used to take a few days to get the Customs clearance, and the industry had to pay a heavy cost. Once the vessel is berthed, it takes almost 24-48 hours for a container to be picked up from the berth and transported to the CFS. At the CFS, it will take a minimum of one-two days for someone to go and examine the box as they are stacked. In 2008, it was decided that we should speed up the entire process, and the Customs introduced the DPD scheme. While a few people were interested in, others were not. We hardly had 3-4% of containers coming through DPD. When I came here, there was something called an Accredited Client Programme (ACP) going on, and DPD was confined to those accredited clients. Hardly around 50-60 importers were there. This programme has now been changed to Authorised Economic Operator (AEO). In US, it is called Trusted Client Programme. Certification given by one country is accepted by others. Now, we hardly have less than 100, now trying to push it to around 1,000.

Are only those with AEO status allowed DPD facility?

AEO status holders are automatically entitled to DPD facility. However, after a careful examination of importers, JNCH has now given more than 1,100 importers DPD facility. We have extended it to all manufacturers registered with Central Excise, and of course, we have blacklisted all the potential fly-by-night operators. At JNPT, around 1.5 lakh containers come for clearance every month. It means almost 5,000 containers daily. Our staff strength is acutely inadequate. The risk management system (RMS) helps us screen the importers and their cargo. We keep profiling all Indian importers and exporters from other countries. We go through the materials and pricing in the local market. We are among countries having very high levels of the RMS, and one of the accredited people with World Customs Organisation (WCO). For every import, a bill of entry is filed, following which the RMS gets into action. With this, we get to know that the containers have come, but we aren't aware to whom it belongs. It's the bill of entry that helps us identify the owner. Nearly 75% of the containers get facilitation through RMS, while the remaining will be subject to customs checking. Earlier, all the 100 boxes on arrival used to go to CFS. At the CFS, customs officers will examine. They will check the seal, give clearance. Since not all boxes are going to be examined, why can't they go directly to the importer from the port? It doesn't make sense to hold them and making someone pay a huge cost, running up to Rs 30,000. The industry saves a lot of money.

If importers were to save so much money, why did people protest its implementation?

When the Customs launched the scheme, not many responded to the scheme positively. Later, I had to write to all CEOs of companies explaining the saving that they would make. The middlemen, who didn't want quick cargo clearance, tried to desist it. Several industry guys opposed it, some even forced employees to oppose it on the ground that there will be massive job cuts. We had to literally push importers to take the scheme.

Now, as importers increasingly enjoy the cost benefits, they are writing to us thanking the Customs for implementing the scheme and interestingly there is no report of loss of any jobs.

How do you take care of the security aspect? Aren't the containers carrying scrap a big security threat?

DPD has been extended to only to three-four scrap importers till now-- that too under a different circular. All scrap containers are screened for radiation, arms and ammunition. In case of doubts, they are sent to CFS for 100% examination. Also, only full container loads (FCLs) are allowed under DPD. If there's congestion at port, the Commissioner may allow containers to move, but they will be examined at their premises by Central Excise/Customs officers as they would have been done at the CFS.

Therefore, there is no room for security concerns. What is important is that the RMS takes care of the veracity of the cargo and importers. There's also surprise element pertaining to examination of goods. Nobody will be given 100% clearance at every point of time. After about certain times of no examination, there will be sudden check of their goods. Such examination under DPD scheme will be on a priority basis. If something is found wrong, there will be 100% examination of all the boxes.

Though the DPD scheme is meant for all ports, only JNCH has made it a huge success. Why not other ports?

The Customs at Chennai Port has implemented DPD since 2008. Their volumes were three times higher than JNCH, then. Now, it has come down to less than us. They used to do 15,000 containers earlier, and now, it has come down to around 6,000 boxes. It is because of the resistance by the industry. Several parties, including shipping lines, who were the biggest beneficiary in the absence of DPD, had opposed it earlier. Under DPD facility, we have allowed importer to select their preferred CFS, 72 hours in advance, and shipping line is bound to shift your container to your preferred CFS. This shipment will thus go to the DPD section of the CFS only if some sample is required under open examination or conduct other kind of examination. Any examination has to be done at the CFS. In some cases, there may not be any examination or assessment by the Customs, but other agencies, such as quarantine department and FSSAI, may need some samples for their verification. It is only then, the container moves to the CFS. Importer is actually getting benefited as they can also negotiate with the CFS depending upon their volumes. Once no-objection certificate (NOC) comes from these agencies, they can move their goods to their respective places.

At Nhava Sheva, we have also introduced a unique 'No-Use Bond', which is an out-of-the-box initiative. Under this, once samples are drawn by the respective government agency, the importer doesn't have to wait here at the CFS. The importer can take goods to his factories by giving 'No-Use Bond' and under Customs seal on the Container. This means that the importer will not use the cargo until NOC comes. Thus, containers will remain in their factories and not at CFS, thereby, saving a lot of money that was otherwise being paid as demurrage charges earlier.

Do you have similar schemes for exporters?

 Yes. It is called Direct Port Entry (DPE). Most of these importers also do export. Traders who do only exports or imports exclusively are not more than 10,000. If you look at automobile sector, everybody imports, but, they also do exports. We have already made 'Parking Plazas' operational for exporters near the port gates. It's a huge area, where Customs officers remain present 24x7 for facilitation of export containers. This has helped in saving turnaround time. Time taken by the Customs for clearing export containers is reduced to two-and-a-half hours from the earlier three-four days. Around 76% of all exports via JNCH are now under DPE.