Govt considering mandatory licensing regulations for unknown imports

Mandatory licensing norms may be put in place for vast segments of India’s imports that have not yet been properly categorised and remain immune to policy measures, according to sources.

Through the move, the commerce department plans to restrict imports costing an estimated Rs 4 trillion, primarily from China. Currently, thousands of import categories are labeled “others” in the official trade classification handbook. Many of these bring in goods worth Rs 100 crore or more. But, little data is available on what these are.

Apart from controlling runaway trade deficit, licensing will end spurious products from entering India, a senior official said. “Imposition of a rigorous regime of licensing has been suggested for these products, until suitable technical regulations can be formulated for them,” he added. 

In the meantime, restrictions on 371 imports costing $127 billion or 26 per cent of India’s current annual imports have also been suggested. Eighteen core group meetings have been held by officials belonging to a cross section of ministries on the matter. The inter-ministerial group has suggested that restrictions be put on chemicals, plastic products, furniture, machinery and parts, electronics, and footwear.

Chinese tariff fraud

The issue has become important as the commerce department attempts to identify Chinese goods being routed into Indian markets through other nations such as Vietnam, Thailand and most recently, Myanmar. After facing dumping charges, China has been found to push solar equipment through Malaysia earlier in a bid to escape higher tariffs. However, officials said the licensing move would be one of last resort since the domestic industry is expected to push back against such a policy, with its negative implications on ease of doing business and cost escalation. A large part of these imports have been classified as ‘non-essential’ in nature, sources in the know said. The Prime Minister’s Office had asked the department to publish a list of such items by September 2018 when the country was battling a widening current account deficit.

To ascertain the nature of incoming goods under this category, the revenue department had been asked to provide details of inbound shipments. The Central Board of Indirect Taxes and Customs, which is under the revenue department, maintains databases on merchandise trade through India’s international ports. 

India’s overall imports stood at $514 billion in 2018-19, up by 11 per cent from the previous year. Duties on inbound goods were raised as many as six times. This was followed by a duty hike imposed on 29 primarily high-value agricultural imports from the US last year.

• India follows the global Harmonized System of tariff nomenclature

• The system is used to classify more than 10,000 separate import categories

• But 2,433 categories are classified as ‘others’ or as all other products not covered otherwise

• In many categories, import is upwards of Rs 100 crore, sources say

• Govt probe aims to map gaps in data and bring products under ambit of restrictions

Tough challenge

India follows the internationally standardised Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature to classify traded products.

The system consists of separate levels of data classification to categorise more than 10,000 separate categories of products. Latest official figures show all 2,433 cases classified under the “other” category or not clearly mentioned. The first six digits of the HS tariff number are used universally. Each country may then add up to six more digits according to its tariff and statistical needs. India has remained at the eight-digit level, while major exporting nations have graduated to even more detailed higher levels of trade classification.