Import Blockage: Relief for Korean, Japanese, US firms; Chinese still stuck

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Published: July 1, 2020 6:01 AM

The other company, which despite not being a Tier 3 AEO, has been allowed relaxation is Foxconn, but only for its plant which manufactures phones for Apple.

Tier 3 is the highest category and importers make to this grade after long years and distinguished track record.Tier 3 is the highest category and importers make to this grade after long years and distinguished track record. (Representative image)

A week after the customs authorities clamped down on import consignments coming from China by subjecting them to physical checks reportedly on alerts of some contraband, there’s some respite for around 11 companies, which include the likes of LG Electronics, Samsung India, Toyota Kirloskar, Honda Cars, Siemens, and HP India.

These firms fall under Tier 3 AEO (authorised economic operators) importers and after the representation of the electronics body, India Cellular and Electronics Association (ICEA), the authorities have softened their stand and agreed not to subject their consignments to 100% physical checks.

The other company, which despite not being a Tier 3 AEO, has been allowed relaxation is Foxconn, but only for its plant which manufactures phones for Apple. Consignments for its other plant, which manufactures phones for the Chinese firm Xiaomi, have not been granted the relaxation and continue to be stuck at the ports.

Out of a total of 3,503 AEOs in the country, only 11 are of Tier 3 category. The AEOs are basically green channel importers who under normal circumstances get clearance automatically without any examination. Importers are categorised as Tier 1, 2 and 3 based on their size and past track record. Tier 3 is the highest category and importers make to this grade after long years and distinguished track record.

The result of this selective approach adopted by the customs authorities has ensured that plants of South Korean majors, LG and Samsung, or Japanese Toyota and Honda or US-based Apple’s do not suffer, but production has been severely hit of Chinese firms like Xiaomi, Oppo, Vivo, Realme, etc. Though the executives of these firms remained tight-lipped, industry sources said that total stoppage of production is not ruled out in their cases within the next few days.

Although several industrial sectors have been hit hard due to delays in clearance of import consignments, the biggest pinch is being felt by electronics players – manufacturers of smartphones, tablets and laptops – as they operate on very thin stocks, barely of a few days. Any delay in clearing consignments throws their entire production schedule out of gear.

According to Pankaj Mohindroo, chairman, ICEA, “The industry is already in very deep distress having lost production of over Rs 40,000 crore and has only recovered to less than 40% of normalcy. We have just begun to limp back to normal after a massive set of losses for three months – and now this. India is at a very crucial moment with the launch of production linked incentive scheme and two other schemes which require a high level of motivation in the headquarters of global and local companies.”

The vendors of automobile manufacturers also source components from China but their inventory levels are of few weeks therefore they do not face any immediate crunch, but if the delay runs into a longer period of time, they too would feel the pinch.

According to Rajan Wadhera, president of Society of Indian Automobile Manufacturers, “Inordinate delays in clearance due to congestion at ports could eventually impact manufacturing of vehicles in India. The industry is piecing itself together as growth is limping back. Any further disruption at this juncture is best avoided.”

Other engineering sectors like steel etc, source mainly machinery parts from China, where the frequency is maybe twice a year, so they are better placed.

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