 "Regulation glitch takes sheen off special economic zones")
Indian businesses may still be in denial mode about the impact, but the US has passed the Trade Facilitation and Trade Enforcement Act on February 24 this year, which Indian exporters to that country need to worry about.
The Act was passed with the intention of protecting the US industry from dumping, but the US customs authority have been given powers to stop such imports under the garb of health and safety, protecting Intellectual Property Rights, currency manipulation, goods produced using forced (salvors) or child labour, money laundering, bribery and various other practices which are putting the US industry at a disadvantageous position as local compliance costs are higher.
The Act is already in force and India is seen as one of the countries which could be under watch. US President Barack Obama had said while signing the Act that the US industry needs to be protected and there are several countries against whom they have filed cases in WTO. He categorically mentioned India against whom they had won a case in WTO on dumping of steel products in the US. He has also asked the US border and customs authorities "to use the Act wisely."
Hala Bou Alwan, Head of Risk Market Development, Thomson Reuters, said: “Now the US customs authorities are under obligation to screen and grade whatever is imported and ensure that the exporter has followed the best practices and not violated any prescribed norms.” India, according to her, should be in a proactive mode and ensure compliance of the Act.”
The issue is not as simple, atleast for Indian exporters as there is a whole chain from which goods are passed at various stages of manufacturing. The ultimate exporter will not be able to ensure whether all the provisions which the US has prescribed in the Act are complied or not. Hala says: “Process on how to approach such issues is to be finalised and we believe there should be a compliance manual and processes’ guidance internally within organisations and externally from regulators. However, concerned exporting companies have to give undertaking for ensuring norms are being followed to the best of their knowledge and they have to secure similar undertakings from their suppliers down the line of the manufacturing process. The companies should not be waiting to do that until regulatory detailed processes are in place. However, they should comply with it anyways, not only for the purpose of this Act, but also to ensure they avoid any reputational damage.”
The undertakings and declarations shall contain pledge not to deal with child labour, etc., and they have in place proper risk management policies to ensure compliances of various other provisions and best practices.
India’s mercantile exports to the US is around $40 billion per annum and gems and jewellery, pharma and textiles are among the top export products. Gems and jewellery and textiles are such that at some stage unorganised sectors come in to the picture in the manufacturing process. Sourcing of gold could be an issue which the final exporter will find is difficult to keep a tab on.
Hala said they are getting requests from Indian companies on this Act and: “We ask them to know their suppliers and ensure they deal with legitimate sources, we ask them even to educate their staff to know how to deal with this and educate further their suppliers in this regard, as in all cases the suppliers have to know very well their own suppliers, it’s a chain which should be always a clear and clean one.”
