By TIOL News Service

NEW DELHI, SEPT 28, 2014: DR Parthasarthy Shome headed Tax Administration Reform Commission yesterday submitted its second report the Finance Minister. The latest report focuses on capacity building of Customs Department and Data & Information Exchange.

It notes that in the face of the increasingly globalized world, customs today face multidimensional challenges. One the one hand, globalization, while affording opportunities for economic growth also provides opportunities for trans-border crimes. Customs, being at the frontline of the border have to play an important role in the country’s physical as well as economic security. At the same time, they have to facilitate legitimate trade so as not to impair the country’s competitiveness and attractiveness as an investment destination. The steady growth of international trade leading higher volumes and the emerging trends such as increase in regional trading arrangements etc., e-commerce, changing supply chain dynamics etc. are adding to the challenges faced by customs. These trends necessitate creation of new capacities in diverse areas without necessarily increasing the human resources. The demand on customs, therefore, is to do more with less.

To face this challenge, Indian customs would need to move away from their traditional administrative approach towards a more proactive and wholesome compliance management approach. They would need to transform their governance, change their control paradigm and become a highly technology driven organization with a robust and reliable risk management based approach to governance. They will have to move away from excessive revenue orientation to be able to fulfil their mandate in relation to areas such as supply chain security, effective implementation of their responsibilities in trade related areas, IPRs, OGA requirements etc. and play a much more proactive and prominent role in trade facilitation. Hence their compliance philosophy needs to be oriented towards promotion of voluntary compliance based on a trust based approach towards the compliant trade coupled with very effective enforcement against noncompliance. This will require large investments in capacity building in human capital as well as physical and technological infrastructure. Trade facilitation in particular will need capacity building not only in customs but also in other regulatory agencies. By virtue of their strong background in cargo processing and high international alignment of customs processes, customs need to be given a lead role to achieve inter agency harmonisation and coordination in this area.

To enable the transformative changes that are required, the government needs to empower and enable customs by according the CBEC functional and financial autonomy as recommended in the TARC’s first report, subject, of course, to the restructuring and accountability as also recommended in that report.

In its Second Report, TARC makes following recommendations with regard to capacity building of Customs Department:

Governance:

++ The CBEC should immediately commence work on the development of a customs vision and strategic plan, setting out the strategic goals and the implementation strategy that will ensure its place among “best in class” customs administrations. The strategy must enhance customer focus and proactively promote voluntary compliance and should include measures like customer guidance in the form of self-assessment check-lists, manuals containing standard operating procedures and fully updated, user friendly and reliable website. Active guidance should be provided to importers through lucid and detailed publications furnishing detailed guidance about the valuation regime.

++ The control paradigm must shift from high levels of pre-clearance interdictions to intelligence led, risk-based interventions by exception, supply chain management and post-clearance audit.

++ The Risk Management Division should be strengthened. The risk management module for container selection needs to be integrated with the CBEC's other operational systems. The CBEC should progressively move away from a local approach in risk management to a strong national approach and move towards setting up a national targeting facility such as the ones set up in the US, Australia and New Zealand.

Customs core clearance processes:

++ The CBEC should revamp its core clearance process and aim at aligning with the best international practices to ensure that cargo moves seamlessly through Indian ports and airports and build substantial capacities in the area of post-clearance audit. It should abandon the “gatekeeper” approach underlying the current control mechanism as it is ineffective and promotes rent seeking.

++ The CBEC should move to a model of centralised assessment for compliance verification, adopting the centres of excellence concept. There needs to be a thrust on full digitisation of the processes, dematerialisation of the documents and documents management system.

++ The regime of advance filing needs to be effectively implemented ensuring high data quality.

++ Development of advanced passenger information system (APIS) incorporating modern identity management and entity analytics solutions should be fast-tracked.

Enforcement and Anti-smuggling:

++ Greater capacity needs to be built in Customs to counter trade based money laundering by greater use of analytics and strong co-ordination among the DRI, RMD, FIU and Directorate of Enforcement.

++ To motivate officers in anti-smuggling operations in remote areas, a package of special facilities should be developed.

++ Specialised training facilities for anti-smuggling operations, tailored to specific requirements, should be created.

RTAs and Trade remedies:

++ A Directorate of Origin should be set up in the CBEC to handle RTA related issues. It should develop specialised expertise on rules of origin and related areas.

++ Posting of customs officers in the Directorate General of Anti-dumping will ensure enhanced co-ordination and better management of anti-dumping measures.

International Co-operation:

++ Directorate of International Co-operation should be created and adequately staffed in view of the high importance of international co-operation in Customs functioning. A clear framework needs to be created for international data exchange and dedicated resources assigned.

++ In consultation with the relevant ministries, the CBEC should initiate a programme for cross border co-operation with India's neighbours, which can lead to joint border control as envisaged in the Revised Kyoto Convention. This can begin with an institutionalised arrangement for regular border meetings between designated customs officials to deal with day-to-day operational issues that create difficulties for trade.

viii) Capacity building: oo) The CBEC needs to revisit its transfer policies that presently prevents specialisation, dilutes accountability and affects its performance. It needs to address the issue of people development in a properly constructed competency framework.

++ Urgent steps are required for bridging the skill gap of Groups B and C officials through effective training and competency building.

++ NACEN needs to substantially upgrade its curricula and training methodology with greater infusion of technology and widening of its training coverage. It will also have to build capacity for delivery of training to all levels in emerging areas of customs administration.