A new policy announced by the Indian customs authority simplifying container sealing procedures has the potential to mitigate some business continuity and supply chain security threats in the country. India’s Central Bureau of Excise and Customs (CBEC) issued a circular last week that outlines simplified export procedures by expanding the practice of self-sealing, whereby select exporters are permitted to seal containers with radio-frequency identification (RFID) tag seals on their factory premises without supervision by customs officials. The circular, which takes effect on October 1, is part of a broader push by the Indian government to facilitate trade and reduce costs and delays to businesses, largely by digitizing the country’s commercial infrastructure. India’s commercial system is heavily burdened by excessive bureaucratic and regulatory processes that significantly slow the movement of cargo through the country. These inefficiencies often make shipments more vulnerable to endemic supply chain corruption as well. The recent trend toward streamlining trade practices will likely have positive impacts on business continuity and supply chain security for some businesses attempting to move cargo through India. The reduction in compliance burden on exporters and increased supply chain visibility for companies may thwart the ability of corrupt customs officials or supply chain employees to exploit shipments for criminal purposes. However, the number of Indian firms with the technical and infrastructural capacity to take part in this program will likely be relatively low, limiting the overall scale of the reform’s potential positive impacts.
The CBEC circular eliminates the sealing of containers on factory premises under supervision of CBEC personnel, instead permitting certain exporters to seal containers on their premises without official supervision. Approved exporters must seal containers with specified RFID seals and provide the relevant shipping data, including the seal serial number, to customs officials. In order to participate in the scheme, customs officials must first certify that a given facility practices proper container stuffing procedures. Members of India’s Authorized Economic Operator (AEO) supply chain security program will automatically be certified under the new scheme.
By limiting scrutiny of export containers by customs officials, the new policy is likely to lighten the compliance burden faced by companies seeking to export goods from India. The Goods and Services Tax (GST), a related package of major tax and trade reforms that launched in July, similarly attempted to reduce impediments to trade caused by excessive inspection procedures, significantly reducing travel times for cargo trucks in India. While the self-sealing system is likely to expedite the exporting process for certified companies, the scale of these business continuity improvements relative to the broader Indian economy will very likely be limited, as only a small portion of all firms in the nation are expected to have the resources available to meet the certification requirements. For comparison, fewer than 200 companies in India are accredited under the country’s AEO program.
By increasing the digitization of India’s economy, the new self-sealing system and the GST also hope to limit the ability of government officials and supply chain employees to engage in corrupt practices. Criminals in India currently exploit the outdated, paper documentation-based trade system to smuggle or steal goods. For instance, authorities recently disclosed that criminals in Chennai successfully smuggled significant quantities of narcotics into and out of the country by falsifying shipments as legal pharmaceuticals. Authorities have recently specifically noted that RFID tagging of containers would likely limit the ability of smugglers to engage in similar schemes by enhancing official oversight of container movement. While the GST’s use of an online platform for trade documentation has adversely impacted some smaller businesses in India that lack the resources and expertise necessary for a more digitized system, the expanding use of technology in Indian commerce is likely to prove a net positive development for supply chain security and business continuity in the country overall.
