July 30, 2007	Monday	Rajab 14, 1428

In spite of a noticeable cut in tariff rates, South Asia is highly protected as compared with other regional trade blocs. The non-tariff barriers are a common mode to restrict imports.

These include anti-dumping and countervailing duties, quota restrictions, packaging and labelling requirements, testing, quarantine and other certifications. India is known to have a larger number of such barriers as compared to other South Asian countries.

There are 109 specific commodities (food preservatives, additives, milk powder, infant milk foods, certain type of cement, household and similar electrical appliances, gas cylinders and multi-purpose dry cell batteries) that the Bureau of Indian Standards (BIS) must certify before goods are imported.. The licencing fee for this certification ranges between 0.2—1 per cent of the value of certified goods.

India implemented plant quarantine (regulation of import) order--2003 and its amendments without prior notification to the WTO SPS Committee. This affected exports of almonds, pulses, fresh fruits and vegetables. It has also implemented several sanitary restrictions which are not in consonance with the Office of International Epizootics (OIE) and CODEX recommendations. New Delhi maintains a negative import list.

The negative list is divided into three categories: (1) banned/ prohibited items (i.e., tallow, fat, and oils of animal origin); (2) restricted items which require a non-automatic import licence (e.g., livestock products, certain chemicals); and (3) “canalised” items (e.g., petroleum products, certain pharmaceuticals, and bulk grains) importable only by the government trading monopolies subject to cabinet approval on timing and quantity.

One per cent customs handling fee is assessed on imports in addition to the applied customs rates. There is a two per cent education cess on all sales. Education cess is a surcharge applied to almost all direct and indirect taxes. During inter-state commerce, each state levies taxes adding further confusion to the tax system. National Calamity Duty (NCD) is applied to tobacco products, motor spirit, polyester filament yarn, motor vehicles and two wheelers.

For the tariff, fees and additional tax rates applied to imports, there is no single official publication that includes all information. Importers have to consult separate tariff and excise schedules as well as any applicable additional public notifications and notices, to determine current tariff and tax rates. The system lacks transparency.

This situation is further complicated due to extensive documentation required by the customs which hinders the free flow of trade and leads to frequent processing delays. Delay is mainly caused by complex tariff structure and multiple exemptions. The number of signatures in South Asia are 12 for export and 24 for import. In India, the number is as high as 22 for export and 27 for import. Most of the South Asian countries have been agitating against high non-tariff barriers imposed by India on their products. Pakistan has identified a large number of non-tariff barriers which are specific to its goods. For example, textiles and textile articles are importable in India subject to a pre-shipment inspection certificate from a textile testing laboratory accredited to the national accreditation agency of the country of origin.

In case such certificate is not available, the consignment is cleared after obtaining samples of the imported consignment tested and certified from notified Indian agencies. The test is invariably conducted for each and every colour and for every consignment. Pakistani exports are still tested for AZO despite its ban by Islamabad. Costs incurred on such tests in some cases come to 10 per cent of the CIF value of the product.

The rules and procedures require that the imported yarn, fibres, fabrics and clothing products contain marking like producer identification, product composition, colour, form, size and even colour of letters and signs. Markings like the words secondary quality or damaged piece/defective piece and exact composition of cloth expressed in percentage by weight are required to be made on every alternate meter of cloth. The form, height, colour and even lettering pattern are specified. These requirements add additional cost to business, resulting in delays and some times disruption in business.

In case of woollen textiles, all consignments require a pre-shipment inspection certificate from a testing laboratory of the country of origin, certifying therein composition of the woollen textiles and blends. This certificate of origin is required even if no concessions are being claimed based on the certificate. Moreover, a certificate from brand owners certifying that the product is genuine must also accompany the consignment.

This certificate is required for each and every consignment separately. One certificate covering the mentioned aspects may serve the purpose but it is not accepted by the Indian customs. Non-tariff barriers normally applied by India can be categorised as under:

•Unnecessary and multiple queries on bills of entry on Pakistani exports; separate tariffs and federal excise tax schedules, as well as additional public notifications etc; Indian banks generally do not recognise L/Cs from Pakistani banks; hurdles in movement of goods through train; cumbersome procedures for getting visa for business purposes; multiple set of rules for inter-state movement of goods; import of sensitive items through specified ports and land customs stations; extensive documentation for customs valuation; import licensing required for about 600 items, on the grounds that restrictions are needed to ensure protection of human, animal or plant life or health. Imports of almost all livestock, agricultural, and food products require some kind of sanitary or phyto-sanitary certificate and import permission;

•In addition to food products, two other major groups of import restrictions are on pharmaceuticals, pharmaceutical intermediates, and second hand goods on the grounds of health and safety.

Other South Asian countries also impose non-tariff barriers. For example, Pakistan’s Import Policy Order bans imports of certain items on religious, environmental, security and health grounds. Sri Lanka requires import licences for over 300 items at the 6-digit level of the harmonised system mostly for health, environment and national security reasons. Importers have to pay a fee equal to 0.1 per cent of the import price to receive an import licence. There are 85 items that come under the Sri Lanka standard institutions (SLSI) mandatory import inspection schemes. Importers are required to obtain a clearance certificate from the SLSI to sell their goods.

Despite the South Asian Preferential Trade Agreement, to quote the Asian Development Bank,” the customs procedures at borders make intra-regional trade difficult and costly. Export and import in the Peoples Republic of China (PRC) or performers in ASEAN states takes about 20 days to export and import. Of the South Asian countries, only Pakistan scores similarly. Export – import time averages 34 days in India and 46 days in Bangladesh. Besides, it costs less than $400 in the PRC and less than $500 in Malaysia to bring a standard 20-foot container across the border. Prices in South Asia range from about $800 in Sri Lanka to $1100 in Bangladesh.

High non-tariff barriers in South Asia have the potential of frustrating the efforts for regional economic integration. India should take bold decisions to remove non-tariff barriers.