Port Wings News Network:
‘Economic Competitiveness Package’ (ECP) is currently a matter of high priority at the World Customs Organization (WCO), Mr. Shantanu Bhadkamkar, immediate past Chairman of Federation of Freight Forwarders Associations In India (FFFAI) and the Chairman of International Federation of Customs Brokers Association (IFCBA) has said.
In an exclusive interview to Port Wings, the industry veteran spoke on different topics including the current status and future of freight forwarders.
Q. Tell us about the status and prospects of freight forwarding industry in India?
Mr Shantanu Bhadkamkar: Historically, Customs (and therefore Customs Brokers) has played an important role in International Trade. Customs Duty for Import, Export and Transit constituted important source revenue for the governments. The role of Customs has continually evolved -- from being an authority which collects revenue to protection of the domestic Industries and deterrence of smuggling across the borders, the policy and the functional role of customs have changed with time. In recent years, the role has become even wider, with focus on security & border protection on one hand and facilitation global trade on the other, in as much the original role of revenue collection is now only one of the task.
Customs Brokers were traditionally trained to understand and facilitate the compliance of the taxation laws and tariffs, and quantitative controls i.e. the licensing controls. Until about mid 90s the Customs Brokers were primarily concerned with using their expertise for an effective and efficient implementation of qualitative restrictions on the licensing control and tariff matters which include classification of goods and compliance of conditions of appurtenant to the exemption (including partial exemption) of notification.
The Customs Brokers had to be law compliant and yet ensure that their customer were tax efficient and were not excessively adversely affected by the quantitative (Licensing) restrictions. With liberalization, the sovereign boundaries became less relevant for licensing control. The world also saw a huge rise in globalisation wherein most large companies that were already multinational corporations became global corporations; and the companies that were local giants became multinational corporations (interestingly, the freight forwarders also followed the same suit). This has resulted into increased related party transactions; hence, the valuation of goods for purpose of customs duty assumed very high importance. But then the rise in terrorism & the globalization of the terrorist’s threat, the greatest concern of the customs department is border protection, consequently the most important task of the customs department is to ensure Secure Supply Chain.
The new initiatives such as KYC (Know Your Customer norms), C-TPAT (Customs – Trade Partnership Against Terrorism), AEO (Authorized Economic Operator), WCO’s (World Customs Organization) SAFE Framework of Standards including interregional initiatives for smart and secure trade lanes&World Customs Organization's (WCO) Customs Guidelines on Integrated Supply Chain Management (ISCM Guidelines)… is a paradigm change in the focus of the key function of the customs, it has also meant a big change in the service profile of Customs Brokers. Customs Brokers therefore have to work to build its capabilities to different factors & standards and develop new skill sets. The Customs brokers now are required to increase the exposure& response system to the international developments.
Almost the Customs Brokers of earlier years were single location operator, today many operate at multiple locations. Some are national operators and also have overseas offices. Similarly many customs brokers have diversified into asset based and non-asset based vertical integration. IT penetration in this industry is very high, though it is a resource starved industry.
Q. Tell us about the objectives and role of International Federation of Customs Brokers Association (IFCBA) in enhancing the industry?
SB: The Customs National Administrations of almost all the countries work closely with the National Customs Brokers Association & other stakeholder trade bodies. The interaction includes the implications of various regulations & rules on the EXIM Trade, effectiveness of the implementation, practical difficulties, field experience, understanding the changes in international supply chain and business needs etc.; in case of the national associations of customs brokers the discussions in addition include the regulations for licensing the Customs Brokers.
Incidentally, Customs Administration is one of the most accessible government departments, there’s an institutionalized mechanism for meetings such as Permanent Trade Facilitation Committee (PTFC) & Open House Meetings with Trade Representatives / Importers and Exporters. The EXIM Trade is seriously lacking in taking the full benefit of these forums, and it seems only the Customs Brokers associations take serious interest in these facilitation forums.
The World Customs Organisation (WCO) was established in 1952 as Customs Coordination Council (CCC), today WCO memberships comprises of 179 Customs Administrations across the globe representing 98 % of the global trade. WCO has played an important role in stimulating the growth of legitimate international trading and combating fraudulent activities.
WCO promotes honest, transparent and predictable customs environment which is a pre-requisite for a reliable and evolved international trade.The partnership approach championed by the WCO is one of the keys to building bridges between Customs administrations and their partners. By promoting the emergence of an honest, transparent and predictable Customs environment, the WCO directly contributes to the economic and social well-being of its Member countries. The WCO has devoted a great deal of attention to improving the quality, relevance and availability of its capacity building activities which led to the development of the WCO Capacity Building Programme.
The WCO Research Paper Series covers a broad range of Customs and international trade related topics including revenue collection, supply chain security, trade facilitation, performance measurement, informal trade practices, and the environment. The WCO has taken number of initiatives to enhance the dialogue with the private sector which includes establishment of ‘Private Sector Consultative Group (PSCG)’ which compose of international trade related business from around the world. PSCG provides professional advice to WCO.
‘International Federation of Customs Brokers Association (IFCBA)’ is a member of PSCG and presently IFCBA chairs this prestigious group. IFCBA has recently made presentation to the ‘Permanent Technical Committee (PTC)’ of WCO on ‘Facilitation of SME Sector’ & the ‘Economic Competitiveness Package’ (ECP). The ECP is currently a matter of high priority at the World Customs Organization (WCO). Economic competitiveness starts with trade facilitation, and is one of the WCO’s key objectives.
IFCBA has been invited as an observer by the United Nations Commission on International Trade Law (UNCITRAL) to attend the session of the UNCITRAL Working Group IV (Electronic Commerce), IFCBA will also make a presentation during the session.
Q. How do you feel about your new role at IFCBA?
SB: My new role of IFCBA is about personal evolution& global professional connect. During my days as a Managing Committee Member in the Brihanmumbai Custom House Agents Association (BCHAA), as a Chairman of Sub-Committee – Nhava Sheva, the role was to deal with& represent to the local customs administration on the day to day issues of bottlenecks, delays, operational problems. There used to be a continuous interaction with the concerned authorities particularly the Customs authorities, Custodians & Carriers for resolution of problems that can be solved locally. Federation of Freight Forwarders Associations in India (FFFAI) being a national body, the role as an office bearer was more of dealing with policy matters, particularly those related to the formulation of rules and regulations.
We met the authorities for resolution of difficulties due to varied interpretations or difference in interpretation at different locations. The role also involves representation on policy matters related to tariff and non-tariff matters for budget. FFFAI also gave an exposure to International Organisations.
The role in IFCBA however is very strategic and relates to global issues concerning e-commerce and secure supply chain dealt with by World Customs Organisation (WCO), UNCITRAL and such organisations. The difference is therefore two fold i.e. the former role related to skills of dealing with local issues of the members with whom you had direct interactions; the latter deals with global issues and global concerns & one deals with the leaders of National Federation. Local issues being matters of day-to-day concerns which are addressed and dealt with locally, the results are tangible and members can directly perceive the outcome. In case of global policy issues, an individual member is affected indirectly, the issues are of long term perspective and relate to greater commonality of interest (as against affected individual). Hence there is significant change of role, and it makes the role extremely interesting.
Q. As a Chairman of IFCBA, what are your priorities to enhance the role of freight forwarders in the supply chain?
SB: The occupation of Customs Brokers, while being a profession requiring high level of varied skills and wide range of knowledge in rules and regulations, has long been undermined by most as a trade rather than as a high profession. As Chairman of IFBCA, I am committed to work with closely with our Member Associations to strengthen the professionalism, implement IFCBA’s best practices and build the right image of the profession. The IFCBA is privileged to have observer’s status for the various meetings in inter-governmental organizations like UNCITRAL & WCO, and also has a consultative status with important bodies such as World Bank and Asian Development Bank. Currently IFBCA chairs the Private Sector Consultative Group (PSCG) of WCO.
The IFCBA works to bring about improvements in Customs policies and practices on a global basis. These improvements benefit both customs brokers and their clients. The international trade community depends on the work done by Customs Brokers and the IFCBA serves customs brokers by keeping them at the center of the international trading system.
The IFCBA (International Federation of Customs Brokers Associations) is entering its twenty-fifth anniversary year. As the only global organization representing customs brokers, it will continue to work to enhance the understanding of the customs broker’s role and value in facilitating trade and improving trade efficiency. The IFCBA Board set the Federation’s direction for the coming year, and will focus on themes of leadership through (a) expertise and innovation, (b) promotion of training and education,(c) strengthening the global connections by networking, (d) regional cooperation with members, and (e)cooperation with all other stakeholders on trade facilitation initiatives, including the WTO Agreements on Trade Facilitation.
IFCBA is committed to work with the member associations to strengthen the professionalism in the industry. IFCBA encourages the members to implement the IFCBA best practices and continues to add value to the services rendered by the Customs Brokers, on whom many small and medium sized businesses wholly rely for expertise and experience. The Customs brokers have integrated into global supply chains as experts in logistics and border management, and have made unparalleled contributions towards making supply chains tax efficient, legally compliant, environmentally friendly, safe and secure.
Q. When compared to International practices, where does Indian Freight Forwarding industry stands? & what is your take on improving Indian Freight Forwarding industry on par with the global standards?
SB: India is a country of extreme contrasts, this is something which applies to all the fields of life and it equally applies to Custom Brokers. While benchmarking with international standards, on one extreme end some Indian Custom Brokers are highly professional, enlightened and carry the ability of global thought leadership; on the other hand, the reverse of the same is also equally true.
FFFAI is a national federation, over the years through its training programs and biennial conventions, has strived to raise the standards not just by adopting best practices but also by global thought leadership and innovation.
There’s a difficulty is setting one global standard as working conditions and ease of doing business in every country is different. The per person productivity and benchmarks for time taken to handle procedures for a consignments of global forwarders is more akin to the Customs Brokers and Forwarders in the country of operation, rather than with their offices in other countries.
Q. What is the status of trained manpower in Freight Forwarding industry globally in general and India in particular? Is there any shortage?
SB: As explained by one of the highly successful NRI businessman: ‘The Indian education system is intensely knowledge & information oriented. The European education system on the other hand prioritises the vocational training. The American education system is enquiry oriented’. As a result of difference in the approach: The Indians, while they focus on graduation degree, are unemployable for the actual job. What they learn is of little help in the job role they perform. The Europeans, as they focus on vocational training, are highly professional and are very proud of their occupation.
Referring to our field, in countries such as Germany, Switzerland and Denmark (and in that order) there’s highly evolved vocational training program for the freight forwarders, and therefore the people trained in those programs are proud of their professions as International Freight Forwarder. Their pride is not less than any high professionals like medial professional, legal profession…, lacking such professional training in India, Custom Brokers and Indian Freight Forwarding Industry in general has yet to assume the same level of professional pride. It is therefore either by inheritance or by accident people joins this occupation. Being a Customs Broker or an International Freight Forwarder is never an occupation of choice, let alone an occupation of first choice.
It is our dream to make Customs Broker an occupation of First Choice, and get it the stature of high profession it deserves.
It is estimated that the total shortage of personnel in managerial cadre in logistics segment (both service user and service provider included) in India is about one million professionals. While logistics sector grow at a pace higher than the growth in GDP, there is lack of awareness about the logistics segment in general & logistics industry in particular. It is however a peculiarity of the industry segment that the industry tends to retain the people who join this sector. The diversity of challenges, the global exposure, the width of knowledge and management skills that are required in this industry are unparalleled compared to any other industry. Something which makes the job very interesting, it’s said there’s never a boring day in the life of a logistics professional.
Q. As an important pillar in fuelling economy, what are your expectations from the government of India?
SB: It is often said that three important things Indian economy needs is Infrastructure, Infrastructure and Infrastructure. We can qualify the term infrastructure by three different prefixes, viz Physical Infrastructure (Roads, Bridges, Ports/Airports, Connectivity by rail, coastal shipping & inland waterways, logistics hubs), Regulatory Infrastructure (for facilitation of ease of doing business& reduction in transaction cost) and Talent Infrastructure (availability of skilled personnel). The industry and trade in this country (and international investors) will be encouraged to invest more in business by superior infrastructure and conducive business environment rather than by incentives, rebates and tax breaks.
Q. What is your assumption on the role of Freight Forwarders in coming years?
SB: Customers seeking ‘Door To Door Solutions’ or ‘One Stop Solution’ is now things of past, it is a standard of past years. The customers now need greater support from freight forwarders in reducing their total cost, reducing their total time to the market and superior supply chain management, including planning. This requires a partnership approach from both sides.
The paradox is that the service providers have realised this customer need much before the customers. The EXIM or the logistics departments of the importers and exporters, in general, presently do not have goals beyond reducing the transport costs by mechanical negotiations, delaying payments & deducting the vendor’s money for their own faults. There’s a new path to be discovered by both the LSPs and customers.
Q. What is the present status of exports and imports globally?
SB: World Trade Organization (WTO) has been pursuing trade liberalisation initiatives consistently. One of the features of BALI package is that the trade agreement aims at lowering global trade barriers. It also very strongly focussed on trade facilitation by reduction of red tape and streamlining customs procedures. WTO agreement being legally binding, it will open up markets for free access at levels never reached before in any phase of history.The growth in E-Commerce will accelerate it further. As big local suppliers/manufacturers/producers are becoming multinational corporates and multinational corporates are turning into global corporations, it will further increase inter-plant movements.Newer supply chain strategies for shorter time to the market, coupled with growth of e-commerce, will lead to the physical location of production or warehousing becoming less relevant insofar as ordering by the customer is concerned. While there will be slogans for buying goods made in own country, both the international B2C Business & B2B business will see an unparalleled rise in growth in time to follow.