Indian Freight Forwarding industry: Multi-national's entry-- a task or challenge?

Published in Sagar Sandesh, May 16 edition:

Indian Custom House Agents (CHAs), who works as a bridge between Customs on one side and clients – the EXIM trade on the other side, are facing an uphill task of remaining in the service race after the entry of multi nationals into the Indian freight forwarding industry.

Though a section in the trade see it as a task, the Chennai Custom House Agents' Association – (CCHAA), one of the oldest such associations in the country, sees it as a clear challenge and an opportunity to steer toward success.

In an exclusive interview to Sagar Sandesh, A V Vijayakumar, president of CCHAA and vice president of the Federation of Freight Forwarders' Associations in India (FFFAI), the national apex body of Customs House Agents' associations established at various custom ports and airports in India, spoke about the challenges and future of the CHAs.

Excerpts of the interview…

Q. Tell us about the CCHAA?

A V Vijayakumar: The Chennai Customs Clearing & Shipping Agents Association was formed in the year 1958 for the singular and noteworthy purpose of bringing together all Custom House Agents and to make them well organized in seeking support from all trade bodies to promote their interest for the common good of the community.

Everyone engaged in Customs Clearing & Forwarding business, had endorsed and welcomed the need to have an association.

The determination to unite and promote brotherhood among the professional colleagues and to carryout purposeful activities with wholehearted co-ordination and support of all resulted in the dawn of the Chennai Custom House Agents' Association – CCHAA.

 

Q. What is the role of Custom House Agent in the trade?

A V Vijayakumar: A Custom House Agent (CHA) is a bridge between Customs on one side and clients – the EXIM trade on the other side.

Till the year, 1984, CHA in India were accepted by each of the Commissionerate of Customs depending on the requirements but without any specific government guidelines or regulations.

In the year, 1984, the Custom House Licencing Regulation (CHALR), 1984 was formulated by the Govt. of India, Ministry of Finance, Department of Revenue and thus a legal entity for appointing and working of CHA was formed.

From the year, 1984 onwards (this Regulation was subsequently amended after two decades in the year, 2004) all CHAs have to comply certain specific requirements spelt out in the Regulation.

Q. Are CHAs are mere bridge or experts in their field?

AVV:  Globally, CHAs ( known as Customs Brokers in certain countries) are professionals who cater to EXIM cargo with expertise not only Customs formalities in each of the region but they are also experts in maritime laws and practices, packing procedures, vessel operations, cargo handling and all other exim cargo related activities.

In fact the expertise extends to Packing, Storage, Stowage, routing including providing shortest transit time between origins to destination ports with cost effectiveness.

Conventionally this expertise of the CHA was largely used by the exim trade more so for the unlimited knowledge of Rules, Regulations and Procedures of the regions for cross border trade.

CHAs become very handy for their knowledge of import and export rules of Customs.

 

Q. What is the status of CHAs after India opened its sectors after globalization?

AVV: In India after the mid 80’s, economic frontiers were opened with the liberalized policy of the government by opening the gates for free trading.

 

As a result of this, the regulation and restrictions for import or export were drastically reduced and coupled with the need for following the global order of reduced import duties.

 

Q. Is CHAs need to improve constantly?

AVV: Expertise on policy and tariff related matters alone could not be the hallmark for the CHAs.  Hence, there was a need to expand to other activities including Freight Forwarding, Transportation, Cargo Handling/Storage and a host of other cargo related activities as there was an expectation from the EXIM trade that CHA should offer value added services.

 

Q. What are the challenges Indian CHAs facing now?

AVV: After the India’s economic liberalized policy, like in all other professions, multi nationals entered the Indian freight forwarding industry, which later became a challenge to the whole Indian CHA activity.

With the entry of multi-nationals in Freight Forwarders, the dynamics of the functioning of CHA was forced to change.

 Q. What were those changes?

AVV: From establishing themselves as a Customs and cargo expert to file and process documents with Customs and provide valuable knowledge on the regulatory practice and tariff related activities, CHA had to become a Logistic Service Providers for survival.

It is in this background, the challenges are faced by the CHAs to face a testing time.

 

Q. How could Indian CHAs survive the changed scenario?

AVV: For the survival, the CHAs should necessarily expand from a knowledge-based support provider to an infrastructurally-able value added service partner of EXIM trade.

Customs, in the meanwhile, introduced an Electronic Data Interchange (EDI) System which is a platform for electronically transferring data from the importer /CHA to the Customs authorities.

From the normal paper-based process, it has become online facility and hence for survival, CHA should necessarily have both infrastructure, financial and manpower resources to meet the new system of data transfer.

While multi nationals of large freight forwarders, who are also CHAs, have the resources to generate/create their own infrastructure and software to facilitate the change, Indian CHA need to meet the challenges with their limitations.

Q Are the Indian CHAs took that challenge?

AVV: Despite the fact that resources are available in plenty, an Indian CHA is still scores over and performs better as they do not work within the contours of 9 to 5 working style.

Q. What are the other challenges Indian CHAs facing?

AVV: There is also a big challenge in providing infrastructural support for allied activities for EXIM cargo which includes transportation, storage, freight forwarding and other services.

The world has already moved towards third party logistics. In order to meet such demands the Indian CHA continues to provide such facilities even by outsourcing some of the activities like Storage, Warehousing, Transport, etc.

Many CHAs have also started creating their own transport facilities and some have storage and warehousing capabilities.

 

Q. What are the constraints CHAs facing while delivering their duties?

AVV: Enhancement of capacity at ports and terminals is not aligned with the growing trade volumes. Ports and airports across the country are constrained in their expansion due to various factors.

However, the Indian trade has doubled in their growth in the past few years while the ports and airports have become slow, sluggish and are burdened with various factors including long period for implementation of project.

The road connectivity to the ports and airports have become bottlenecks and there appears to be lack of concerted effort to create infrastructure facilities including connectivity with the Ports and Airports for the future.

 

Q. Does the CHA meets the last-mile-connectivity challenge?

AVV: This is another challenge faced by the CHA on a day- to-day basis as the last mile connectivity is deemed to be the responsibility of the CHAs. 
Thos is illustrated best by ports like Nava Sheva and Chennai, who are the first and second largest Container Terminal Handling Ports of the country.

Unless the infrastructure improved to meet the growing demands of EXIM trade, the challenges will continue and the pressure on CHAs will continue like a relay race, where the expectation and stress is always on the runner in the last leg.

 

“We have survived many challenges (in the past) and will continue to move forward despite the hurdles. Our profession is recognized at times of crisis and forgotten thereafter but to put it in a nutshell immortalized words of Alfred Lord Tennyson is borrowed - Men may come and men may go but I go on forever …” concluded A V Vijayakumar.