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Import Monitoring Mechanism (14th Jul 2020)

Import Monitoring Mechanism

Context

The government is planning to raise non-tariff barriers on the number of products by putting in place product-specific monitoring system or by allowing them only through licensing or by adding them to the restricted list.

Background

  • Various ministries including commerce, finance, along with line ministries are discussing the plan of Import Monitoring Mechanism and a series of meetings are taking place in view of Prime Minister's call for Atmanirbhar Bharat which would mean reduce import dependency and boost local manufacturing.

Summary of the Debate

Import Monitoring Mechanism

  • Import Monitoring System or Mechanism is a process where importers have to register themselves for the imported products with quantity and the country of origin.
  • Such a mechanism is implemented under the ‘foreign trade development regulation act, 1992’. Under Foreign trade development and regulation Act 1992, the director-general of foreign trade in the Department of Commerce is the nodal authority to notify the regime for regulating export and import. From time to time they come out with the EXIM policy.
    • Under this policy all the goods are classified into 8 digit Indian trade classification harmonized system code, of which the first 6 digits are International classification and the other two are Indian specific classification.
    • A unique registration number is given and only that needs to be quoted by the importer at the clearance of his document by customs.
    • For each of these 8 digits code the imports are free unless put specifically in 3 categories:
  1. Restricted requiring import
  2. Channelize imports only through designated agencies.
  3. Prohibited
  • This mechanism must be based on the scientific evidence and compliance with the WTO rules and regulations so that the foreign players could not raise questions.

Different Mechanism for different Products and sectors

  • Import mechanisms can be different for the different products depending on which aspect of the product is important for us. If there are certain chemicals which are coming into the country which could have dual-use and we could try to find out if we restrict it only for the particular use.
  • Monitoring mechanism for Steel: There is already an import monitoring system that exists for steel products since 2019, known as the Steel Import Monitoring System. The system monitors certain product lines of steel for value, volume, quality, and country of origin. It is basically about compliance with the Bureau of Indian standard.

How Non tariff barrier helped the industry?

  • There are two kinds of ways by which we restrict imports. One is by putting a tariff barriers, which government in the last 5 years is increasing the tariff for almost 3500 out of 11000 imported items.
  • The other way is that we have a non- tariff barrier that is by way of-
    • Online monitoring of imports, where every importer before importing has to register on the portal and after registering he has to mention how much quantity is importing, from whom is importing, the value of import, and country of origin.
    • Restricted list: Before importing they have to take permission from the government, and then the government can control the imports.
  • Non- tariff barrier performs important objectives:
    • The government can take the necessary policy intervention whenever it is required.
    • There have been a lot of instances where China and other Countries divert their imports through other countries. To detect the country of origin (if some country is not Producer of certain items) such barrier helps.
    • These Policy intervention controls are possible when you have this kind of online Monitoring system or restricted category in place.

Benefits to Indian companies/ Manufactures

  • The producer specific import control is based on quality, public safety, and other general laws and regulation. The idea is not to discriminate between imported products and domestic products.
  • If a certain product is considered to meet certain quality specifications and standards the standards apply equally to domestically manufactured goods as well as imported.
  • One can only exempt imported goods from the domestic quality requirements if they are meant for re-export.
  • It keeps on checking the ingress of poor quality imports being dump.
  • It provides a hazardous nature public safety angle.

Challenges faced by Indian Industry

  • Cost of doing business is much higher in India.
  • Cost of productivity: Cost of labor is cheap but the cost of productivity is higher here. There is a lack of skilled labor in India.
  • Cost of Compliance: Indian industry has near about 2000 to 5000 compliances which is far larger than the foreign counterpart.
  • Cost of land and availability of land: For companies, it takes usually near around 1 year to get land and infrastructure in India.
  • Cost of power and electricity: For being competitive in the market we need to reduce the cost of doing business by reducing the cost of power and electricity.

Way Forward

  • Import Monitoring Mechanism is a good step to improve the ease of doing business and reduce the cost of doing business. It must be based on scientific evidence.
  • There is a need of reforms for the industry inland acquiring and reducing the cost of production. Cluster-based system district wise having common facilities must established.

Main points made by Guests

1. Subhash Chandra Pandey, Former Advisor, Ministry of Commerce and Industry, GoI:

  • The mechanism is implemented under the ‘foreign trade development regulation act, 1992’.
  • The producer specific import control is based on quality, public safety and other general laws and regulation.
  • The idea is not to discriminate between imported products and domestic products.

2. D. K. Aggarwal, President, PHD Chamber of Commerce & Industry

  • There are two kinds of ways by which we restrict import. One is by putting tariff barrier and the other is non- tariff barrier.
  • Challenges faced by the industry: Cost of doing business, Cost of Compliance, Cost of land, and availability of land, Cost of power and electricity.

3. Jayant Dasgupta, Former Ambassador at WTO:

  • Import mechanisms can be different for the different products depending on which aspect of the product is important for us.
  • If there are certain chemicals that are coming into the country which could have dual-use and we could try to find out if we restrict it only for particular use.

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