E-commerce policy: Govt proposes to regulate cross-border data flow

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Updated: Feb 24, 2019 12:46 AM

A new draft e-commerce policy, released on Saturday, has provided for regulating cross-border data flows, setting up storage facilities locally and establishing a ‘data authority’ to devise a framework for sharing community data.

Draft e-commerce policy: Proposals to regulate cross-border data flowDraft e-commerce policy: Proposals to regulate cross-border data flow

A new draft e-commerce policy, released on Saturday, has provided for regulating cross-border data flows, setting up storage facilities locally and establishing a ‘data authority’ to devise a framework for sharing community data.

Asserting that the country and its citizens have a ‘sovereign right’ over data, the policy disallows sensitive data collected and processed locally but stored abroad from being shared with foreign governments and businesses outside India or any such third party even with the consent of the customer. The policy proposes to grant companies three years to set up storage. It also sought a review of the extant policy of exempting electronic transmission from customs duty “in the light of the changing digital economy and the increased role that additive manufacturing is expected to take”.

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The new draft policy, however, has junked some of the critical — and controversial — suggestions of an earlier draft policy on e-commerce finalised by a taskforce under former commerce secretary Rita Teaotia. It has scrapped the earlier suggestion to tweak policies to enable founders of domestic e-commerce companies to retain control even if their shareholding is small (the suggestion had raised fears of discouraging foreign investments, especially in start-ups).

It has also refrained from recommending a dedicated regulator to oversee any contravention of FDI rules in e-commerce, among others. Similarly, it has rejected the earlier draft policy proposal to allow 49% FDI in e-tailers holding inventory of locally-produced goods (apart from food retail). The preference for Ru-Pay, seen as a tiny local contender against Visa and Mastercard, too, found no mention.

The new draft policy suggests that all e-commerce websites and applications available for downloading in India “must have a registered business entity in India”.

Amazon and Flipkart said they were still studying the draft policy and will comment later. An Amazon spokesperson said: “We look forward to an enabling policy to serve over 4.5 lakh sellers and a policy that will allow us to scale up our logistics network, create new jobs and infrastructure, digitise payments and delight our customers.”

Atul Pandey, partner at Khaitan & Co, said it remains to be seen how the data protection envisaged in this policy inter-plays with the stringent data law of the EU.

The proposed ‘data authority’ is expected to regulate data collected by IoT devices in public space; and data generated by users in India by e-commerce platforms, social media, and search engines. The new policy highlights six major issues that are key to a vibrant e-commerce ecosystem — data; infrastructure development; e-commerce marketplaces; regulatory issues; stimulating domestic digital economy, and export promotion through e-commerce.

The policy has sugggested that during negotiations at multilateral trading forums like WTO on e-commerce, “policy space must be retained to seek disclosure of source code for facilitating transfer of technology and development of applications for local needs, as well as for security”. “Policy space to grant preferential treatment of digital products created within India must also be retained,” it said.

It has voiced concern that endorsing the demand—made by some countries at the WTO —that e-commerce be exempted from any tariff, will remove any duty protection available to domestic farmers, MSMEs and other such vulanerable players.

It has proposed to ban all parcels (except life-saving drugs), coming in through the ‘gifting’ route, as a temporary measure to curb its misuse. The policy says that by not imposing restrictions on cross-border data flow, India would itself be closing doors for creation of high-value digital products in the country.

However, it exempts certain categories of data from restrictions on cross-border data flow, including data not collected in India; B2B data shared between business entities under a commercial contract; and data flows through software and cloud computing services. Also, data (excluding that generated by users in India from sources like e-commerce platforms, social media activities, search engines) shared internally by multinational companies are exempted from restrictions on cross-border data flows.

The Department for Promotion of Industry and Internal Trade has sought stakeholders’ comments on the draft policy by March 9.

The policy has also suggested a series of conditions for operating online retail business through marketplace model, including mandatory mentioning of seller details on the website for all products and financial disincentives if vendors are found to be selling counterfeit products.

All seller details will have to be made available on marketplace website for all products; sellers must provide an undertaking to the platform about genuineness of products they are selling; trademark owners will be given the option to register themselves with e-commerce platforms. All e-commerce sites or apps available to Indian consumers (displaying prices in rupees) must have maximum retail prices on all packaged products, physical products and invoices.

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