Automotive industry: The automotive industry of India has grown enormously over the last ten years. A substantial proportion of the vehicles are not only produced in India but also now designed in India.
A new imported vehicle is defined in India as a vehicle that has not been manufactured or assembled in India; neither been sold, leased or loaned prior to importation into India, nor been registered for use in any country, prior to importation into India. New vehicles can only be imported from the count of manufacture and their import is permissible only through three customs ports at Nhava Sheva, Calcutta and Chennai. None of the Land Customs Stations however process import of automobiles. The simple argument for this is that these customs stations are not technically equipped to handle such complicated and critical imports. One can draw any conclusions from this. For the imports of new vehicles the importers is responsible for all the provisions relating to the manufacturers.
38. The imported second hand or used vehicles cannot be older than 3 years from the date of manufacture. Imports of these vehicles are allowed only through the customs seaport at Mumbai. The second hand or used vehicles imported into India are required to have a minimum roadworthiness for a period of 5 years from the date of importation into India with the assurance for providing service facilities within the country during the five-year period from the manufacturer.
The roadworthiness has to be properly certified. At the time of importation, the importer must have a certificate issued by a testing agency that the second hand or used vehicle being imported into India has been tested immediately before shipment for export to India and that the said vehicle conforms to all the regulations specified in the Motor Vehicles Act.
1988. Also, a certification has to be submitted that the said vehicle conforms to the original homologation certificate issued at the time of manufacture. On arrival at the Indian port but before clearance for home consumption, the importer also has to get the second-hand or used vehicle tested by the Vehicle Research and Development Establishment, or Automotive Research Association of India, or Central Farm Machinery Training and Testing Institute and other agencies specified by the Central Government.
39. On 12 December 1997, the importation of components for motor vehicles in CKD or SKD form was prohibited, unless a special licence was issued for the same. Such special licences are only delivered to local joint venture automotive manufacturers who have signed a Memorandum of Understanding (MOU) with the Directorate General of Foreign Trade.
40. The certification of road safety tests, emission standards tests and the "Homologation Certificate", generally require at least six months, of very strenuous and detailed tests. At the end of all these tests however, nobody is 100% sure of getting certified. So all the efforts and expenses could go completely waste. Can any exporter afford such uncertainties or even wait for six months to get through this complex maze?
TECHNICAL BARRIERS TO TRADE (MANDATORY STANDARDS):
41. India has enforced mandatory certification for 109 products, down from over 150 products some time back. The mandatory quality certification covers a wide range of products: eg various food items, food colours, cements, gas cylinders and valves, electrical appliances and accessories, multipurpose dry batteries, X-ray equipment, feeding bottles, mineral water and clinical thermometers etc. Imports of these items are allowed only after Bureau of Indian Standards (BIS) certification and permission to use the BIS mark.
42. For certification of these 109 items detailed requirements have been issued under 7 different Acts (Annex). It is a general complaint that the Indian Government publishes Tariff, Additional Tax Rates and Notifications but there is no single official publication that covers all information on Tariffs, Fees and Tax Rates as well as the legislations under which certain formalities are to be completed.
All these are given in different Acts and all Acts have detailed Rules. Most of the requirements emanate from these Rules. This makes the whole system very cumbersome, time consuming and opaque. Hence, there is total lack of transparency. The standards specified are in many cases stricter than even the International Standards eg standards for bottled water are stricter than the internationally accepted Codex Alimentarius and those adopted by EU.
43. According to the Indian legislation the applicants for BIS licences have to pay application fees, processing charges, expenses of the inspection visits from India to Pakistan or wherever the applicant's manufacturing facilities are located. Testing costs, annual marking fees for the licences and licence fees have to be paid separately. The foreign manufacturer is also required to set up a liaison or branch office located in India with the permission of Reserve Bank of India.
The branch office itself is also required to meet all requirements with respect to BIS Act, Rules and Regulations for the purposes of BIS licence and the Rules/regulations of the Reserve Bank of India. A licence issued for any product is valid for one year only and has to be renewed annually. Before the renewal, new inspections and testing of samples are required.
All the costs, as well as renewal fees must again be borne by the applicant firms, year after year. Licensing fees include the cost of the initial inspector's visit and tests, an annual fee of approximately $ 2,000. The marking fee is 1 percent of the value of certified goods imported into India. This is virtually a 1 percent Customs Duty collected on the entire imports.
The system appears to be designed solely to discourage exports to India and protect the local industry in the garb of standards to protect the consumers or users. This is surely the responsibility of every Government, but in this case, the responsibility has been turned into a TBT (Technical Barrier to Trade) as well as a Tariff Barrier.
44. A system now exists by which foreign companies can receive direct certification for products made outside India, provided BIS has first inspected the production facility (at the manufacturers expense). This system is however not without problems and all the above requirements have to be fulfilled.
ROUGH MARBLE BLOCKS/SLABS:
45. Import of "Marble and Travertine - Crude or Roughly trimmed, Merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape and other Calcareous Stone" is restricted and subject to import 'licensing procedures. Applications for such licences are considered by a Facilitation Committee (an Inter-Ministerial Committee comprising representatives from various Ministeries/Departments).
46. THE FACILITATION COMMITTEE CONSIDERS THE APPLICATIONS FOR IMPORT FOR THE SUBJECT PRODUCTS IN THE FOLLOWING MANNER:
I. ELIGIBILITY:
Entitlement would be restricted to those applicants who have set up manufacturing/processing units in the country and have made imports of these items in the preceding years.
II. FLOOR PRICE:
Grant of licences is subject to the following floor price which are endorsed on all licences.
i. For crude or roughly trimmed marble - US $300 per metric tonne (MT);
ii. For rough marble blocks 0 US $300 Metric Tonne (MT); and
iii. For Slabs - US $450 per Metric Tonne (MT).
III. ENTITLEMENT:
The total import of rough marble blocks are subject to a ceiling of 1.30 lakh MT per licensing year. The entitlement of Individual firm is worked out on the basis of the turnover of the preceding year. The applicant is required to furnish a Chartered Accountant certificate certifying his turnover.
IV. The last date for receiving applications is 1st October of each licensing year.
V. All licences are subject to actual user condition.
VI. In this regard Licence holders shall file monthly returns regarding imports made by them to the concerned Regional Licensing Authority.
VII. The eligible applicants may file an application in the form given in 'Aayaat Niryaat Form' together with all relevant documents. All applications will be forwarded through the Chemicals and Allied products Export Promotion Council (CAPEXIL) who will certify the turnover of the applicant before sending it to DGFT (HQrs).
CONSUMER GOODS IMPORTED IN RETAIL PACKING
LABELLING AND MARKING RULES FOR IMPORTS:
47. The DGFT notification 44(RE)/24.1 1.2000 on labelling and marking rules for imports issued on 24 November stipulates that MRP (Maximum Retail Price), generic name of product, month and year of entry in trade channel, importer name and address and quantity in standard units must be carried prominently on the "principle display panel" of the packages. The requirement must be met before import clearance from customs.
48. Broadly speaking, "label" means any written, marked, stamped, printed or graphic matter affixed to or appearing upon any commodity or package containing any commodity which gives specific and authoritative information about the commodity/goods or contents therein so as to enable its identification or recognition and could distinguish it from other products. The mark or marking could include a device brand, heading ticket name signature word, letter, numeral shape of goods.
STATE REGULATIONS:
49. Packaged commodities broadly means packaging of any article or goods whether in any bottle, tin wrapper or otherwise intended for sale whole sale of retail distribution or delivery or stored for sale/distribution and would include pre-packaged commodity and group or wholesale package.
50. The stipulation regarding labelling and marking requirements on traded/packaged goods are laid down in a number of Central Acts and Rules.
Apart from this, the States have their own regulations in the matter.
THE MAIN ACT/RULES ARE DETAILED BELOW:
i. Standards of Weights and Measures Act, 1976 and Packaged Commodity Rules 1977.
ii. Prevention of Food Adulteration Act, 1954 and Rules 1955.
iii. Essential Commodities Act, 1955.
iv. Drugs and Cosmetics Act 1940 and Rules 1945.
v. Trade Marks Act 1999.
vi. The Bureau of Indian Standards Act, 1986 and Rules, 1987.
vii. The insecticides Act 1968.
viii. Breast Milk substitutes (Advertisements and Labelling) Act 1982.
ix. Copyright Act, 1957 and Rules, 1958.
x. Designs Act, 2000.
xi. Environment (Protection) Act, 1986 and Rules, 1986.
xii. Essential Commodities Act, 1955.
xiii. Explosives Act, 19884 and Rules, 1983.
xiv. Gas Cylinder Rules, 1981 and S&MPV (unfired) Rules, 1981.
xv. Geographical indications of Goods (Registration and Protection) Act, 1999.
xvi. Information & Technology Act, 2000.
xvii. Motor Vehicles Act, 1988.
xviii. Patents Act, 1970 and Rules, 1972.
51. The government also amended Prevention of Food Adulteration (PFA) Rules last December. The amendment seeks extra information on manufacturer details on each food package. This is over and above the current requirement for the name and address of the person who "owns" the original title to the package. The information must be on each and every pack to "catch" subcontractors who are in grand conspiracy with the original title holder to "defraud" the "poor and gullible" consumers.
52. For imported foods, the name and address of the importer must be indicated on the label. Where the food comes in bulk containers for repacking or bottling, additional details on the country of origin as well as the name and address of the packing unit must be given on each and every pack.
53. Besides the government has issued notification under Jute and Jute Textiles Control Order, 2000 to stipulate that each and every imported jute bag must give the country of origin on the bag and the DGFT code number of the importer. Presumably, the requirement must be met before import clearance at the customs.
Maximum Retail Price (MRP) base countervailing duty (additional duty)
54. An important amendment made in Section 3 of the Customs Tariff Act, 1975 relates to the valuation (for the purposes of additional duty) of packaged commodities imported into India. In the case of such goods the value would be computed on the basis of their maximum retail price in India.
55. THE PROVISION IS APPLICABLE TO GOODS:
a) Where it is the requirement either of the Standards of Weights and Measures Act or any other law to declare the retail sale price on the package (before clearance for home consumption); and
b) Like goods manufactured in India are notified under section 4A of the Central Excise Act.
56. In such cases, the value of the goods would be the maximum retail price (declared on the package) minus the abatement notified for like domestic goods under section 4A.
57. Extract from Section 3 of CTA 1975 on MRP Based Assessment of CVD. "Provided that in case of an article imported into India:-
a) In relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 or the rules made hereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such article; and
b) Where the like article produced or manufactured in India, or in case where such like article is not so produced or manufactured, then, the class or description of articles to which the imported article belongs, is the goods specified by notification in the Official Gazette under subsection (1) of section 4A of the Central Excise Act, 1944.
58. The value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement, if any, from such retail sale prices the Central Government may, by notification in the Official Gazette, allow in respect of such like article under sub-section (20 of section 4A of the Central Excise Act, 1944.
59. Explanation - Where on any imported article more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this section." Sanitary and Phytosanitary (SPS) Rules.
60. India continued import licensing of 600 items, which it said, was justified by other GATT articles, in particular on the grounds that restrictions are needed to ensure "human, animal or plant life or health". A number o f these continuing restrictions were challenged at the WTO by the EU, and in March 2003 some of the restrictions (on spices) were dropped. However, around the time of the general QR phase-out, old laws on plant quarantine, sanitary permits, food adulteration etc were reactivated and applied to imports: now imports of nearly all livestock, agricultural, and food products require some kind of phytosanitary or sanitary certificate issued under the general supervision of the Ministry of Agriculture. As in other countries, these regulations reflect legitimate national concerns, but they have considerable potential to be used to restrict imports. It has been reported that this in fact has been happening in India, with the rules not being rigorously applied to domestic production, but involving a substantial harassment factor at Customs which heavily disadvantages imports.
61. The latest development in SPS Regime of India is that with effect from 30-06-2005 Phyto Sanitary Certificate is also required for packing material containing the imported agriculture produce. The regulations also provided that in case no such certificate is furnished in respect of the packing material, the consignments can only be cleared by customs after obtaining a clearance from the local Plant Quarantine Authorities. They shall examine the consignments and if required subject the said packing material to treatment at the expense of importers. These requirements are not mandatory for the imports under passengers baggage rules.
OTHER NTBS
INTER-PROVINCIAL MOVEMENT OF GOODS:
62. Inter-provincial movement of goods is the major hurdle faced in India. In India each state has its own set of rules, regulations, and levies. Disputes based on these disparities can result in more costs both in terms of time and money. Similarly, the goods moving across the states are also subject of further inspections, which sometimes causes considerable delays and extra costs to the exporter. Some examples of such laws are U.P. Trade Tax Act (1998) and The Delhi Tax on Entry of Goods Ordinance (2000) etc. Surprisingly there is also a Central Sales Tax Act (1956), which applies all over India although all the states also have their own sales tax laws.
LIMITED NUMBER OF PORTS AND INLAND CUSTOM POSTS FOR IMPORTS:
63. India uses this technique very frequently and systematically to make the import of "sensitive" products more difficult, in the designation of specified ports and land Customs posts at which these products can be cleared. For example, initially, from May 2001, the 300 "sensitive items" could only be imported through 11 Customs posts out of a total of 21516. Only one out of 51 inland container depots at which containers could normally be cleared, could be used for these products.
In addition none of the 145 import entry points along the land borders with Bangladesh, Bhutan, Nepal, Myanmar, China and Pakistan could be used for "sensitive" items import. The list of authorised Customs clearance points for these products was later increased in February 2004 to about 70. But the ability to move products on and off the "sensitive list" and on and off the list of places through which they can be imported, still operates in many ways as a very effective non-tariff barrier for regulating imports from the inland areas of neighbouring countries.
64. Another example is of clothing accessories. In February 2004, clothing accessories could only be imported through five specified ports and two inland container depots. The same technique is also being used to regulate imports in other contexts eg under the India-Sri Lanka FTA, imports from Sri Lanka of clothing and tea (both "sensitive" products in the FTA, with duty free imports subject to Indian quotas) can only be made, respectively, through four and two specified ports.
The official reasons usually given for restricting Customs clearance points in these ways, is that Customs posts other than those specified are considered to be less reliable (eg in controlling mis-declarations and under-invoicing).
They also do not possess the required capability to monitor and provide timely information on the volume and nature of imports of these "sensitive" items (eg information that would be needed to keep track of how tariff-exempt tea and garment imports from Sri Lanka are developing in relation to the bilateral FTA quotas). However, it is interesting to note that the ports with these requisite facilities always happen to be the most distant ports and custom posts from the exporting country be it Sri Lanka, Bangladesh or Pakistan.
CUSTOM CLEARANCE AND CUSTOM VALUATION:
65. Although India is signatory to the WTO's agreement on Custom Valuation, however, the Government of India applies discretionary customs valuation criteria to import transactions. Pursuant to amendments to its valuation procedures issued in September 7, 2001, these criteria appear to allow Customs to reject the declared transaction value of an import because a particular sale: (a) was not undertaken "in the ordinary course of trade under fully competitive conditions;" or (b) involved a "reduction from the ordinary competitive price. It is reported that India's customs valuation methodologies do not reflect actual transaction values and effectively raise tariff rates.
66. Indian Customs requires extensive documentation, which causes considerable processing delays. In large part the delays are a consequence of India's complex tariff structure and multiple exemptions, which may vary according to product, user, or specific Indian export promotion programme.
STATE TRADING ENTERPRISES (STES):
67. The role of State Trading Enterprise is India is still very significant and important. India is the principal user of STEs in the region to control imports, notably of rice, wheat, all coarse grains except maize and barley, and copra. These crops between them account for about 40% of Indian agricultural GDP. Imports of urea and the most important refined petroleum products are also controlled by STEs. By contrast, in the other South Asian countries, import monopoly STEs are important in the petroleum sectors, but otherwise their role has been drastically reduced, in particular in agricultural products and fertilisers where they previously played a major role.
EXCESSIVE USE OF TRADE DEFENCE MEASURES:
68. Virtually all international trade agreements or arrangements contain safeguard provisions and exceptions. The term safeguard provision refers to a provision in an agreement permitting governments under specific circumstances to withdraw their normal obligations in order to protect certain overriding interests.
69. India frequently uses these provisions to discourage imports and spread a kind of harassment among the intending exporters by making maximum use of trade defence laws. The given table shows the comparative analysis of the use of these laws by various countries. It is clear that India has initiated anti-dumping cases (379) against its trading partners much more than any other country. Similarly, maximum number of antidumping measures taken by any country - 273 - is also by India. This shows how excessively India has made use of trade defence laws.
Tariff Rate Quotas (TRQs)
70. TRQs are being used by India to protect is producers of powdered milk, maize, crude sunflower and sunflower oils, and refined rape, colza and mustard oil. These were introduced quite recently to permit small quotas of these products to be imported over moderate tariffs, while applying high tariffs, which are generally prohibitive; to imports in excess of the quota amounts.
The high tariffs for the out-of-quota quantities are compatible with India's WTO commitments under the Agreement on Agriculture because of its high bindings (eg 60 percent for powdered milk and 100 percent for maize). A secondary function of the TRQs is to subsidise parastatal firms, since they are the only entities eligible to apply for them, and they therefore benefit from the economic rents.
OTHER HEALTH AND SAFETY REGULATIONS:
71. Apart from food products, there are two other major groups of import restrictions justified on the grounds of health and safety, pharmaceuticals and pharmaceutical intermediates. Import licensing for pharmaceuticals was introduced in April 2003, and has onerous requirements under which foreign manufacturers must register and subject their premises to inspection, along the lines of rules applied by the BIS.
Especially in the case of pharmaceuticals, health and safety are legitimate concerns, but domestic industries also have a motive to influence the ways the rules are applied in practice to keep out competing imports. In some cases protection of local producers clearly seems to be the dominant motive for the restrictions.
72. The case for banning or restricting the import of scrap and other used raw materials and second hand machinery on health and safety grounds is even more dubious, given the very large volumes of domestic scrap, second grade materials and old machines that are traded in India. On the other hand, India has adopted some of the most stringent emissions standards for imported, large displacement motorcycles. India's standards are written to favour small displacement four-stroke motorcycles that are primarily manufactured by Indian producers. In addition, India's procedures for establishing emissions standards are vague and non-transparent.
TO BE CONTINUED:
ANTI-DUMPING ACTION: INITIATIONS & MEASURES (1995-2003):
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Country No of Initiations No of Measures
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Argentina 180 138
Australia 163 50
Brazil 109 58
Canada 122 72
China 72 37
EU 274 187
India 379 280
Mexico 73 62
S. Africa 166 108
Turkey 61 61
USA 329 205
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Total 2416 1511
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