Bringing about Change: CFS operators contributing to the success of DPD

CFS operators contributing to the success of DPD

The direct port delivery (DPD) scheme was launched to reduce dwell time and transaction costs by moving containers directly from the port to customers instead of directing them to container freight stations (CFSs). The scheme received a mixed response from stakeholders. Initially, CFS operators claimed that they were well equipped to dispatch cargo quickly and that their operations did not add to logistics time and cost. Subsequently, though, ports and other stakeholders indicated that the scheme had resulted in a reduction in dwell time.

A look at the DPD experience for ports and CFS operators…

Implementation so far

The concept of DPD was first brought to the fore in 2016 when the Ministry of Commerce listed a slew of measures to be taken by the government and industry to ensure easier ways of doing business in the country. Following this, the Ministry of Shipping has taken several initiatives to promote trade and improve India’s ranking in the “trading across borders” indicator of the World Bank’s Doing Business report. Among these is DPD, implemented with a view to reducing dwell time and transaction costs.

In February 2016, the country’s largest container handling major port, the Jawaharlal Nehru Port Trust (JNPT) issued a trade notice allowing all its “accredited client programme” clients to opt to take delivery of their cargo directly at the port rather than at a CFS. Prior to the issue of the trade notice, only 11 agencies were availing of the DPD facility from the Jawaharlal Nehru Port Container Terminal. Subsequently, the number increased to 1,317 in 2017. As of May 2018, the Jawaharlal Nehru Customs House (JNCH) has extended the DPD facility to the top 1,083 importers. Besides, the average import dwell time has come down from 75.78 hours three years ago to 36 hours at present. The reduction in the average dwell time has resulted in savings of Rs 8,000-Rs 20,000 per container with the DPD of import containers and Rs 3,000-Rs 4,000 with direct port entry (DPE) of import containers.

Till January 2017, the total imports processed through the DPD facility at JNPT accounted for only 6-7 per cent (5,000-7,000 twenty-foot equivalent units [TEUs]). It subsequently increased to 30-32 per cent by April 2017 and to 35 per cent between mid- and end 2017. At present, the total imports processed through DPD stand at 40 per cent, which translates into 55,000 TEUs per month.

According to a study conducted by the Bureau of Research on Industry and Economic Fundamentals, the time taken by a CFS for clearing cargo is 145-150 hours. However, the Container Freight Station Association of India (CFSAI) states that on the contrary, the actual time taken by a CFS for clearing cargo is between seven and eight hours only. On an average, an additional 100 hours are spent by the importers for clearing the cargo from CFSs.

In contrast to the general belief, CFSs have helped in promoting the use of DPD. “CFSs have played an important role in increasing the share of the cargo handled through the DPD facility. Of the 40 per cent DPD-handled cargo, 32,000-34,000 TEUs (approximately 65 per cent) is still handled through CFSs (after the cargo is out of the charge of the port and till the next 48 hours),” said Captain Umesh Grover, secretary general, CFSAI, at a recent India Infrastructure conference.

The two game changers that have been majorly responsible for the success of DPD are the changes in the bill of entry and the finance bill with respect to the customs duty being paid in advance.

As a part of the latest development to promote DPD, effective March 2018, the JNCH has made it obligatory to upload the supporting documents for all the bills of entry filed at the customs house through the e-SANCHIT facility. As per the new guidelines, when a bill of entry is filed using the e-SANCHIT facility, a hard copy of the uploaded documents will not be insisted upon by the assessing officers. Instead, copies of the additional documents required during the assessment should be uploaded through e-SANCHIT as per the procedure outlined in Public Notice no. 162/2017. Certain documents/certificates in original (for example, certificates of origin, duty exemption certificate, etc.) are required to be mandatorily verified at the time of assessment and/or at the clearance stage, as the case may be. However, even such documents must be uploaded on e-SANCHIT before clearance.

In another development, in April 2018, the Nhava Sheva International Container Terminal (NSICT) in collaboration with the JNCH introduced “on wheel examination and sampling” for full container load shipments under the DPD scheme. As a part of this service, the NSICT has earmarked an “on wheel examination and sampling” area where samples under the scope of the DYCC Lab Customs and Textile Committee will be drawn by the participating government agencies. It is expected to ensure faster delivery of the DPD containers requiring sampling, thus making the supply chain more efficient and substantially reducing the inventory cost and transportation time from the terminal to the importer’s factory/warehouse.

Other changes which have been made to increase the percentage of DPD-handled cargo further includes the creation of a document processing area, an electronic seal to provide secure and system-based authentication, a centralised export assessment cell, and procedural changes to reduce documentation and charges, among others.

Besides, the DPD scheme has also picked up pace at Chennai port, where DPD cargo increased from 15.92 per cent in November 2017 to 44.21 per cent in May 2018. The port has the highest percentage of clearance under DPD of all the major ports. With a view to further increase the percentage of cargo moved through DPD, the Chennai Customs Zone permitted 24×7 DPE/DPD at the Container Corporation of India’s (CONCOR) Tondiarpet facility in March 2018. CONCOR has requested the traders to avail the 24×7 DPE/DPD facility at Tondiarpet for faster turnaround of containers at a highly competitive and economical cost. In addition, the CONCOR terminal has been declared as the designated CFS for the movement of DPD containers lying at the port beyond two days.

In a major development, in July 2018, the Chennai customs introduced an SMS service for authorised economic operators/DPD importers once the consignments get customs clearance at the DPD cells.

The volume of cargo moved through DPD as a percentage of total cargo handled at the port has increased significantly at Kattupalli port also. It increased from 33.33 per cent in November 2017 to 83.59 per cent in May 2018.

Critical factors for success of DPD

The success of the DPD initiative will necessitate the elimination of all the bottlenecks that discourage stakeholders from using the facility. The various steps which have been taken in this respect are the introduction of a single DPD code, transparency in charges, a reduction in shifting charges, documentation and other formalities, the involvement of CFS operators in the process, etc.

DPD is here to stay. The business model of CFSs will need to be relooked at to ensure their viability and sustainability. Even if DPD becomes widely adopted, there will still be services such as the consolidation of the less-than-container load cargo, sampling, packaging, etc., where CFSs are useful. “CFSs are acting as logistics partners. Almost all of them have taken permission for setting up warehousing and DPD-designated areas, which has increased/maintained their business. The success of the DPD scheme lies in the coordination between the port and CFS operators,” says Subhash Aggarwal, commissioner, JNCH.

In conclusion, the DPD scheme is no doubt an important step for promoting the ease of doing business in the country. The percentage of cargo cleared through DPD is expected to increase to 55-60 per cent from the present 40 per cent. Complementary growth in infrastructure still holds the key to translating these prospects into reality in the coming years.

Garima Arora