Over the past three decades, Indian customs has undergone a remarkable transformation from a paper-driven, manual system to a technology-led, digitally empowered trade facilitator. In line with India’s vision of becoming a global trade hub by 2047, the customs ecosystem has witnessed a series of reforms aimed at simplifying procedures, reducing clearance times and enhancing transparency.
Key steps to facilitate custom procedures
The transition towards a paperless trade environment started with the launch of the Indian Customs Electronic Data Interchange System (ICES) 1.0 in 1995. The ICES 1.0 enabled the electronic filing of bills of entry and shipping bills, significantly reducing paperwork and improving processing time. The system facilitated digital filing through service centres.
The next major leap came in 2003 with the introduction of the Indian Customs Electronic Gateway (ICEGATE). This digital interface empowered importers and exporters to upload data and documents directly, making the customs process more transparent and accessible. Initially, the system handled about 8,500 documents per day, which has now been increased to 35,000 documents per day.
In 2005, India introduced the risk management system (RMS) for imports, revolutionising the customs clearance process. Instead of treating every consignment equally, RMS allowed for cargo to be assessed based on risk profiles, significantly reducing physical inspections. Starting with just 10 per cent of consignments, the coverage rapidly expanded to over 85 per cent for imports and 90 per cent for exports. RMS not only enhanced compliance but also ensured faster clearances.
Between 2010 and 2012, the ICES 1.5, a next-generation customs automation system, was launched. This version integrated with banking systems and expanded the digital footprint across the country. Currently, ICES operates in 288 locations, including remote regions of the Northeast, covering nearly 99 per cent of India’s international trade.
Further, the Single Window Interface For Facilitating Trade (SWIFT) and direct port delivery (DPD) initiatives were introduced in 2016. SWIFT enabled end-to-end digital clearance across multiple participating government agencies (PGAs) such as the Food Safety and Standards Authority of India, animal quarantine, the textile committee and the wildlife control bureau. Meanwhile, DPD allowed accredited importers to receive goods directly at their warehouses.
In 2017, trade facilitation expanded further with the launch of an express cargo clearance system (ECCS) for courier and e-commerce shipments; a web-based intellectual property rights application system; and an e-sealing system for cargo containers – enhancing speed, security and transparency.
Another landmark reform was introduced in 2019 – the implementation of e-SANCHIT (e-storage and computerised handling of indirect tax documents), a platform enabling the electronic submission of supporting documents and eliminating the need for physical paperwork. This was complemented by automation in customs processes such as the out-of-charge (OOC) assignment and the launch of ICETABS, a tool for digitally inserting examination reports immediately after inspections.
In 2020, the faceless assessment regime was introduced to eliminate jurisdictional biases and standardise assessment. This digital, randomised assessment model is supported by turant suvidha kendras and national assessment centres, where importers and exporters communicate with remote customs officers via email and electronic channels. Currently, the national assessment councils drive this process on a national scale.
Later, in 2022, the customs digital architecture was further enhanced with the launch of ICEGATE 2.0, featuring faster processing, improved integration with PGAs and enhanced system performance. The VAANI Chatbot, an artificial intelligence (AI)-powered assistant, provides real-time guidance to stakeholders. Additionally, the anonymised escalation mechanism allows users to escalate unresolved issues through ICEGATE without disclosing their identity, fostering greater trust and accountability.
Recent developments
The most recent innovations introduced under customs are single multi-purpose e-bonds and e-banking guarantees. This system allows importers and exporters to execute a single electronic bond for various customs-related obligations, replacing the need for multiple, transaction-specific bonds.
Besides, streamlined warehousing under Section 59 through the Manufacture and Other Operations in Warehouse Regulations allows businesses to import raw materials and capital goods without paying import duties. Import duties are deferred and can potentially be exempted if the goods are exported.
Also, with the applicable basic customs duty (BCD) and integrated goods and services tax (IGST) being waived, the license remains permanently valid unless revoked, eliminating the need for periodic renewals. After a point, capital goods can be used without any interest liability. Only customs duty and IGST need to be paid. This provides significant cash flow advantages, particularly during new set-ups or expansion projects. Moreover, since there is no interest liability, imported inputs or capital goods can be stored in the warehouse indefinitely, resulting in substantial working capital savings.
Indian customs have also enabled the electronic payment of stamp duty, eliminating the need for notarisation, while banks can now digitally verify guarantees.
Improving efficiency
Indian customs is poised to play a pivotal role in expediting the clearance of both import and export consignments, in line with the government’s broader objective of enhancing trade efficiency and global competitiveness. The aim is to reduce the average dwell time for imports to 48 hours and for exports to 24 hours at ports.
In 2023, Mumbai customs successfully reduced the average import clearance time to 72 hours, a significant improvement from the baseline of 160 hours recorded when the National Time Release Study was initiated in 2017. On the export front, the performance is even more impressive. While the national target is to release export consignments within 24 hours, Mumbai customs has achieved a turnaround time of just six hours, demonstrating the effectiveness of recent trade facilitation measures and digital reforms.
Key challenges
Indian customs has faced numerous challenges and issues over the years. The coexistence of multiple vendors managing different customs applications leads to inconsistencies in integration and data structures. The lack of end-to-end automation and siloed operations further impede seamless processing. Integration issues with PGAs, the Directorate General of Foreign Trade and the Directorate General of Commercial Intelligence and Statistics highlight the need for a more cohesive approach. While ICES and ICEGATE APIs are in place, inconsistencies in their integration with other customs applications hinder optimal functionality.
Looking ahead, the envisioned customs integrated system (CIS) aims to address these challenges by providing a unified platform designed to meet trade requirements up to 2047. By onboarding over 50 PGAs and eliminating manual interventions, CIS aims to create a seamless, efficient and transparent customs ecosystem. Through continued innovation and integration, Indian customs is poised to become a global benchmark in trade facilitation, aligning with the nation’s broader economic aspirations.
The way ahead
Indian customs stands at the forefront of trade transformation driven by digital innovation, policy reforms and seamless integration. From manual, paper-intensive procedures to AI-enabled, faceless assessments, the journey has been revolutionary.
Through consistent innovation and a commitment to efficiency, transparency and stakeholder empowerment, the Indian customs administration is steadily transforming the country’s trade infrastructure. While challenges persist, the increasing focus on reducing dwell time, enhancing user experience and enabling end-to-end digital clearance is yielding positive results. With continued collaboration, technological upgradation and stakeholder-centric policies, Indian customs is well on its way to becoming a globally benchmarked, future-ready trade enabler, powering India’s growth for decades to come.
Based on remarks and a presentation by a Jawaharlal Nehru Custom House representative at a recent Indian Infrastructure conference
