Implications of facilitating trade — India and the Trade Facilitation Agreement

The Trade Facilitation Agreement (TFA) negotiations were concluded in 2013, and the Agreement is set to come into force, in terms of Article X:3 of the Marrakesh Agreement, upon domestic ratification by two-thirds of the WTO membership, i.e., by 110 members. Nepal recently became the 108th member to ratify the TFA, setting off the clock for effectuating the TFA. With only two more ratifications, India’s Category A commitments submitted to the WTO at time of ratification would become binding and enforceable. It is hence important to take a look at the commitments undertaken by India.

How does TFA work?

The TFA works through “self-designation” in a three tier manner. Members undertake three categories of commitments, Categories A, B and C. Category A commitments are determined by the individual Member and are enforceable on the date when the agreement comes into force. This is to say that on the date the TFA becomes enforceable, India should have implemented its Category A commitments. Category B commitments are enforceable at a self-designated future date, after the date of entry into force of the TFA. Finally, Category C commitments are those which come into force after a self-determined transition period but which require assistance and support for capacity building.

What are India’s Category A and Category B commitments?

India had notified its Category A commitments by Notification No. WT/PCTF/N/IND/1 in March, 2016. The commitments include:

1. the publication in an accessible manner of certain details such as the procedures for importation, exportation, and transit and required forms and documents; fees and charges imposed in connection therewith; customs valuation / classification; laws, regulations, and administrative rulings of general application relating to rules of origin;
2. notification through the internet of a description of its procedures for importation, exportation, and transit, including procedures for appeal or review, that informs governments, traders, and other interested parties of the practical steps needed for importation, exportation, and transit, if practicable in one of the WTO’s official languages, as well as the forms and documents required for the same;
3. provision of opportunity for regular consultations between border agencies and traders or other stakeholders located within India’s territory;
4. ensuring publication of advance rulings as well as the tightening of procedures for appeal and review;
5. with respect to SPS measures, undertake the publication of notifications based on risks, terminate measures immediately where the requisite circumstances no longer exist and notify such termination immediately as well as notification of the names and addresses of laboratories whose tests would be accepted for release of goods having SPS restrictions;
6. enforcement of certain obligations pertaining to the fees and charges imposed on or in connection with importation, exportation and penalties;
7. obligations pertaining to pre-arrival processing of goods, e-payments at customs ports, post-clearance audits, maintenance of records regarding average release time of goods, maintenance of procedures for expedited release of goods, provide priority clearance to perishable goods and /or an opportunity to arrange for suitable storage of the same;
8. cooperation amongst inter-member border agencies;
9. subject to certain conditions, permit movement of goods within the customs territory from port of entry to port of clearance;
10. application of international best practices / sharing thereof for ensuring eased formalities in connection with importation, exportation and transit, removing the requirement for submission of original or copy of export declarations submitted to the exporter’s member country, usage of international standards, reduction of restrictions under the Agreement on Pre-shipment Inspection, shall not mandate the use of customs brokers, introduction of common and uniform border procedures and documentation requirements throughout India, permit re-consignment of goods failing to meet SPS / TBT requirements, temporary admission of goods meant for specific purpose, re-export and have undergone no change other than depreciation and wastage;
11. ensure freedom of transit; and
12. promote customs cooperation.

India has also notified its Category B commitments vide Notification No. WT/PCTF/N/IND/2 in January, 2017. It includes all commitments contained in Section I of the TFA, except those designated under Category A. It may be noted that Section I contains provisions for expediting the movement, release and clearance of goods, including goods in transit. According to the latest communication, Category B provisions would be implemented by India within 5 years from the date of entry into force of the TFA. Since the date of entry into force is fast approaching, India’s five-year window will soon begin narrowing. '

What happens now?

India’s Category A commitments are primarily related to measures that are already in place and do not impose an additional burden for implementation. However, the Category B commitments would require forethought and planning for proper implementation, tentatively five years down the line.

What does India stand to gain?

The most important question is that of dividend for India in implementing the TFA. As per the WTO’s study [see end note 1], the TFA would bring down trade costs, by streamlining customs procedures and timelines. It is estimated that trade costs would be reduced by 14.3%, leading to increased exports upto $ 1 trillion. It is also estimated that more than fifty percent of these gains would go to developing countries. While economic gains for India cannot be predicted with certainty, it is certain that eased trading norms would boost trade for India.

[The author is a Senior Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi ]
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