Faceless assessment in customs: What it means and some challenges
Updated: Nov 12, 2020 11:19 AM
The initial feedback, particularly from the precious metal sector has been alarming in the context of delay in assessment, creating unnecessary parleys between the importer and the custodian and customs.
By Prof Arvind Sahay & Sudheesh Nambiath
The faceless assessment module of imported / export goods, according to a circular issued by the Revenue Department, Ministry of Finance, is being rolled out in phases and is expected to be completely implemented pan India by 31st December 2020. For implementing the same customs has set up faceless assessment groups for verification of assessment of any bill of entry that is assigned to this group in the customs automated system.
Additionally, the port assessment groups – the appraising group currently located in each port of import for the assessment and other related functions as is the normal practice – would be set up to handle the import bills of entry which are not marked to the faceless assessment group by the automated system as well as the bills of entry that are referred back by the faceless assessment group to the port of import for any reason, whatsoever.
Furthermore, Turant Suvidha Kendra have been set up in ports to facilitate the trade in completing various formalities relating to the customs assessment locally at the respective ports of import, as is presently done, even though the actual assessment may be done remotely or virtually by the proper officer physically located in another customs station.
All of these are, in principle, excellent initiatives at facilitating trade and streamlining the processes to eliminate corruption. Also, it is imperative that it is done in a calibrated manner that causes minimum hassle to the importers; this cannot be overemphasized, as we do not want a dislocation in economic recovery under way.
It is well known that customs assessment is a specialization developed by appraising officers over a period of time. In a faceless module, it is not necessary that the automated system shall mark the particular consignment to officers who have specialization in a particular group.
When an officer not accustomed to a particular group of goods, particularly of high value like precious metals under chapter 71, is expected to assess them, there are likely to be unnecessary time delays. The need for transition time in the light of teething problems is an understandable predicament in any system and the faceless assessment, arguably, is no exception.
The initial feedback, particularly from the precious metal sector, dore gold, has been alarming in the context of delay in assessment, creating unnecessary parleys between the importer and the custodian and customs. Will the proposed solution create more problems than it solves?
When it comes to clearing dore (the unrefined form of gold and silver) shipments, a sample is taken by drilling through the dore bar from each shipment and is sent to a government-approved lab in the same city for verifying the reported purity. The importer in the meantime releases the shipment by providing a ‘Test Bond’ to the Customs under provisional assessment of bill of entry. In faceless system, the process is same, however, the sample and documents are sent to remote customs office who may have no understanding of the assessment procedure of dore. To note here is the sample that is being couriered is of high value.
Our recommendation is, for high-value items it may be considered in the short term to make an assessment in the same port of import to avoid logistical delays. In the medium and longer term, officers need to be identified who have the necessary skills in customs assessment of gold and dore and there be a random allocation among these officers in a double blind way similar to the peer review process of top quality publications.
We need to keep in mind that the nightmare of demurrage charges – fee that is charged when the imported cargo exceeds the allotted time for sitting at the terminal of the custodians – is looming large in addition to other customs procedures – should the transition to faceless assessment not happen smoothly.
Faceless assessment, to curb corruption, is definitely a progressive step. However, it needs to be acknowledged that time is the key and guidelines have to be issued by the central board of indirect taxes and customs for time bound disposal. There are many instances wherein the bill of entry is filed in X port and is sent to Y station for assessment. An innocuous query is raised and upon reply, many a time the bill of entry is sent back to the port of import. It is known that in the current process, there is a customs broker in the assessment station to chase the file and this reduces the probability of heavy demurrage charges. What would be the alternative mechanisms to keep the file moving in the system in the absence of a customs broker?
Following the lockdown, there were multiple circulars issued by the Shipping, Aviation, Logistics and the Revenue department regarding the waiver of demurrage charges. Then the clashes with China in border areas created immense delays in customs clearances of Chinese origin (or even good transited through China). Now, the faceless assessment is the third major change in the same year. There is a serious need for addressing these operational concerns particularly in the context of time bound clearances to avoid demurrage charges and interest costs, that can potentially increase cost of doing business in the faceless module. Without careful consideration of the implementation, the very idea of faceless assessment may end up being counterproductive by creating business bottlenecks and creating the motivation to create non formal system facilitation processes to keep businesses running smoothly.
(The author is Chairperson at the India Gold Policy Centre at IIMA and Sudheesh Nambiath is the Head, IGPC@IIMA)