Quest for Speedy Clearances: Though a better option, DPD still lacks wide acceptance

Though a better option, DPD still lacks wide acceptance

Introduced by the Central Board of Excise and Customs (CBEC), Ministry of Finance, in 2015, the direct port delivery (DPD) scheme is aimed at trade facilitation. Under the scheme, containers are moved directly from the port to the customer premises instead of being directed to container freight stations (CFSs), so as to reduce the transaction time and costs associated with export-import trade.

Implementation so far

The concept of DPD first came into existence when the Ministry of Commerce listed a slew of measures to promote easier ways of doing business in the country. Following this, the Ministry of Shipping launched a number of initiatives to promote trade and simultaneously improve India’s ranking in the “trading across borders” indicator of the World Bank’s Doing Business report. Among these was the DPD scheme.

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. As a result, the number of DPD clients at the Jawaharlal Nehru Custom House (JNCH) increased from around 15 in 2016 to 1,522 in 2018. Further, as recommended by the CBEC’s Time Release Study [TRS], 2018, the JNCH has accorded DPD status to 3,080 importers/exporters,.

As per the TRS, 2019, conducted at the JNCH, with respect to both import and export cargo, there has been a significant increase in the number of DPD clients as well as the number of bills of entry filed by DPD clients. The number of DPD clients increased from 5,634 (38.2 per cent of the total bills of entry filed) in January 2018 to 9,023 (57.8 per cent of the total bills of entry filed) in January 2019. Also, 26 per cent of total number of importers who filed bills of entry in January 2019 are DPD clients, as against only 11 per cent in January 2018.

JNPT has been taking a number of initiatives to increase the percentage of DPD cargo. Key among these are the creation of a document processing area, an electronic seal to provide secure and system-based authentication, and a centralised export assessment cell, and procedural changes to reduce documentation and charges. Besides, JNPT has created a facility of “on wheel sampling” inside terminal premises. The customs house has also introduced a “one-time default intimation” option for the DPD mode of delivery by importers to the shipping lines.

At present, imports processed through the DPD facility at JNPT account for around 40 per cent of the total imports processed. Further, DPD imports account for approximately 50 per cent of the laden containers at one of JNPT’s terminals. Of this, 10 per cent of the cargo is processed directly via the DPD scheme (referred to as direct DPD), while the remaining 40 per cent is processed through CFSs and customs house agents (CHAs) (referred to as indirect DPD). These CFSs and CHAs are appointed as logistics service providers and as agents, respectively, by the importers, to carry out online customs documentation processes. From the point of view of the customers, these CFSs and CHAs are considered to be a part of the DPD process and come under its ambit.

Besides JNPT, the DPD scheme has also been implemented at Chennai port. As per the latest figures available, DPD has picked up pace at the port – DPD cargo increased from 15.92 per cent in November 2017 to 44.21 per cent in May 2018. With a view to further increasing the percentage of cargo moved through DPD, in March 2018, the Chennai Customs Zone permitted 24×7 direct port entry/delivery at the Container Corporation of India’s (CONCOR) Tondiarpet facility. In addition, the CONCOR terminal has been declared a designated CFS for the movement of DPD containers lying at the port for more than two days.

Challenges of the DPD model

Despite the inherent benefits, the DPD scheme is marred by a number of challenges. The ports in the country were designed considering CFSs as partners for smooth cargo flow. Adapting the ports to cargo flows of the DPD model requires spatial expansion of the yard area at the ports, and this poses a challenge due to shortage of land availability around the ports. The difficulties in switching the alignment of port operations from the CFS model to the DPD model have affected the level of DPD adoption.

Cargo owners rely heavily on intermediaries such as CFSs and CHAs for facilitating smooth and efficient clearance and delivery of cargo from ports. An increase in the adoption of the DPD model by cargo owners is likely to have a significant impact on the existing revenue streams of CFSs and CHAs. Further, some cargo owners may not be fully aware of the process and requirements of the DPD system. The lack of clarity with respect to the benefits of DPD and the role of various entities under the model hinders end users from adopting DPD for their supply chain planning.

With respect to JNPT, despite the demonstrated and quantified benefits of DPD, only 2,067 traders have completed the mandatory registration with the port authorities. The reluctance to avail of DPD facilities by many traders, despite significant efforts, appears to be attributable to the aforementioned concerns.

The way forward

The DPD scheme is undoubtedly an important step for promoting ease of doing business in the country. The percentage of cargo cleared via DPD is expected to increase further from the present 40 per cent. However, complementary growth in infrastructure still holds the key to translating these prospects into reality.

In order to fully reap the benefits of the DPD scheme, eliminating all the bottlenecks that discourage stakeholders from using this scheme is imperative. Outreach programmes need to be conducted to educate importers on the importance and effectiveness of the DPD model. The business model of CFSs will also need to be relooked at to ensure their viability and sustainability. Going forward, the widespread adoption of DPD will result in uncertainty for a plethora of services – consolidation of the less-than-

container load cargo, sampling, packaging, etc., – which are being offered at CFSs. In this regard, an inclusive approach to define and effectively communicate the alternative roles for CFSs and CHAs will hold the key.

Garima Arora (with inputs from Sameer Bhatnagar, Partner, Infrastructure, Government and Healthcare, KPMG, at a recent India Infrastructure conference)