OPINION

Decoding the new MOOWR Scheme

Recently, the export incentives and duty benefits schemes like MEIS / EOUs etc., provided to Indian manufacturers, involved in exports of goods was challenged at World Trade Organisation (WTO). While the decision of the Dispute Settlement Body is averse to India’s positioning, an appeal filed by India is pending in WTO. Accordingly, Indian Government has started re-evaluating the existing trade facilitation and incentives to be compliant with WTO norms. Krishna Barad, Partner/ Customs & International Trade/ Indirect Tax, BDO India LLP, throws light on the amendments and its impact on EXIM.

Krishna Barad has over 28 years of experience with specialization in Customs, Foreign Trade Policy, International Trade, Shipping & Logistics related matters. He has advised and assisted clients in setting up operations in India. He has also handled SEZ and EOU/STPI related advisory, compliance and implementation related matters of various clients. He has done Bachelor of Science (Electronics), Diploma in Export Management and Post Graduate Diploma in Transport & Logistics.

THE Union Government, in an initiative to encourage local manufacturing, revamped the earlier ‘Manufacturing & Other Operation in Warehouse Regulation’ (MOOWR), which was first introduced in 1966 under Customs law allowing owner of any warehoused goods to carry out manufacturing processes or other operations in such warehouse, subject to specific conditions. The said scheme has been given fresh lease of life by altering certain key compliance requirements in the revised MOOWR, 2019, notified on 1 October 2019 to align with ‘Atma Nirbhar Bharat’ plank of the Government.

The revised scheme has caught the eyeball of many corporates in India, who cater not only to international market but also to domestic customers. Some large multinational companies are seriously considering this option in view of the distinct advantage and ease of administration, unlike other export formats.

When the raw materials or capital goods are imported, the import duty on them is deferred. If these imported inputs are utilized for exports, the deferred duty is exempted. Only when the finished goods are cleared to the domestic market, import duty is to be paid on the imported raw materials used in the production. Import duty on capital goods is to be paid if the capital goods are cleared to the domestic market.

The salient features, eligibility to apply under new MOOWR scheme, procedures, and key benefits under these new regulations are discussed hereinbelow:

SALIENT FEATURES OF MOOWR2019

Deferred Duty on Import of Raw Material: Until the clearance of finished goods, duty on import of raw material used in manufacturing or other options is deferred and will be waived in case finished goods are exported. Unlike other Bonded Warehouse, there is no time limit prescribed for consumption of the raw material stored/imported by the MOOWR unit. The custom duty is payable on scrap generated during manufacturing. The MOOWR unit needs to submit the self-declared, Standard Input Output Norms at the time of submitting the MOOWR registration application.

Deferred Duty on Capital Goods: Until the clearance from bonded facility for home consumption, Duty on capital goods used in manufacturing or other operations is deferred and can be avoided, if goods are exported. Currently there is no depreciation permitted on the capital goods, which are to be disposed-off in the domestic market after considerable usage or its life cycle.

Seamless transfer between Warehouses: A licensee shall transfer warehoused goods from one bonded facility to another without payment of duty. The liability to pay the deferred duty is also shifted to the transferee of goods.

No Export Obligation: An entity may sell entire 100% of goods manufactured in Bonded Warehouse in domestic market, in the absence of export obligation.

Appointment of warehouse keeper: The responsibility of the proper officer to oversee the operations of a warehouse has been shifted to a self-appointed warehouse keeper.

ELIGIBILITY & PROCEDURE TO OBTAIN LICENCE UNDER MOOWR 2019

Under new MOOWR 2019, following persons are eligible to operate:  A person who has been granted a licence for a warehouse under section 58 of the Customs Act (the Act), in accordance with Private Warehouse

Licensing Regulations, 2016.

 A person who applies for a licence for a warehouse under section 58 of the Act, along with permission for undertaking manufacturing or other operations in the warehouse under section 65 of the Act.

An application is required to be made to the Principal Commissioner of Customs or the Commissioner of Customs along with an undertaking:  To maintain accounts of receipt and removal of goods in digital form and furnish the same digitally to the bond officer on monthly basis,

 To inform the input-output norms and any revision in the norms wherever considered necessary, and

 To execute a bond in the specified format.

Upon satisfaction and due verification of the application, the Principal Commissioner of Customs or Commissioner of Customs shall grant permission to carry-out operations under the provisions of these regulations. The permission granted remains valid till it is cancelled or surrendered, or the licence under Section 58 is cancelled or surrendered.

SALIENT OPERATIONAL BENEFITS PLUS FLEXIBILITY OF THE SCHEME

1. Easy and hassle-free online application process through a

MOOWR provides benefits with extended operational flexibility without burdening the manufacturers with time-consuming compliances and procedural requirements. These regulations are a major step for India to become a global manufacturing hub as it is attracting huge foreign investments and boosting exports.

common application cum approval form.

2. The Principal Commissioner of

Customs or the Commissioner of

Customs acts as a single point of contact for all approvals.

3. Simplified digital record-keeping and monthly return filing of the receipt, storage, operations, and removal of the goods in the warehouse.

4. New manufacturing facility can be setup or existing unit can be converted into bonded facility irrespective of its location in India.

5. No investment threshold or export obligations, monitoring unlike other schemes.

6. Unlimited warehousing period for storage of capital and non-capital goods until clearance or consumption without any added interest liability.

7. No physical control by custom authorities.

NEED OF THE HOUR

MOOWR provides benefits with extended operational flexibility without burdening the manufacturers with timeconsuming compliances and procedural requirements. These regulations are a major step for India to become a global manufacturing hub as it is attracting huge foreign investments and boosting exports.

The MOOWR unit need not to take any authorization for import of capital goods or raw material as required to carry-out the manufacturing activities. There is no export obligation or obligation to achieve net foreign exchange earnings as required in other schemes under Foreign Trade Policy or SEZ/FTWZ. The MOOWR unit can procure goods from the Custom Bonded Warehouses including SEZ without payment of duty. MOOWR unit can send the goods for Job Work / Subcontract Manufacturing as well. New entrants from across the world are planning to set-up their manufacturing units in India, which will pave way to achieve the goal of ‘Atma Nirbhar Bharat’.

Key issues which will help the trade and needs clarification/resolution from Central Board of Indirect Taxes & Customs (CBIC), Ministry of Finance, Government of India are:  Depreciation on the used capital goods, when disposed-off for home consumption.

 Relocation of existing EOU/SEZ under the scheme

 Procedural relaxation in terms of compliance with allied Acts.

 Storage of finished products into another private bonded warehouse  Eligibility or frequency of change in the Bill of Material (BOM), which influences Standard Input Output

Norms declared at the time of application.  Relaxation in custom duty payment on the scrap generated during product manufactured and exported.

 Scrap destruction facility unlike

EOUs

 Exemption from registration for

Pharma products, who are operating under the MOOWR scheme.

 Benefits on export incentive schemes under Foreign Trade Policy or

RODTEP

 Flexibility to conduct the contract manufacturing for foreign entity / buyer.

 Permit set-up of MOOWR Parks on the side of Logistics Park to have multi MOOWR units operating in one demarked area to bring efficiency and reduced investment/operating costs.

While the scheme appears industry friendly, clarity on these aspects can make the scheme more agile and bring about certainty for industry and the investors.

THE MAZE MATRIX

“There is a view that if you can solve for India, you solve for the world. India is a very complex ecosystem, we have multiple different regions with varying levels of complexity, demography, languages, infrastructure, maturity, etc. So may innovations come out of India that can make things work. Of course, as a technology hub if we can mate technology solutions to real supply chain problems, we will have more products come out of here,” highlights Dinesh PA, Global Head – Engineering & Product, Director Supply Chain Technology, Kimberly-Clark…

How was the year 2020 for Kimberley-Clark in terms of managing supply chain? Kimberly Clark had a great year financially, we had one of our best years due to increased demand for our products during the pandemic. Due to this increased demand, we faced severe stress on our supply chain. These included increased demand from customers which made product allocation challenging (Sometimes 10x the normal demand), reconfiguring out network to have more dynamic network, several regional regulatory lockdowns, which made manufacturing difficult due to labor shortage and product mix changes that had to be changed real-time.

What were the immediate challenges & opportunities that you needed to address on a war footing? We saw our systems which allocate products to orders under severe stress, quick tech fixes to handle extra orders along with diverting our talent to fix hotspots. The Tech team also worked with the business to have new routes configured so that our products could be delivered directly to customer stores instead of customer DCs as our customers themselves were facing supply chain bottlenecks. This made us realize the importance of having real time visibility of demand and supply so that we are able to react well in future.

How did the technology transformation happen? Kimberly Clark has been investing in technology transformation over the past 4 years. These have been in the areas of Cloud, Analytics, External APIs and global systems that are standardized across the globe. So, in a sense, we were ahead of the curve and the supply chain stress we noticed during 2020 was handled better because we had, for a large part, the proper systems in place to absorb the shocks.

Can you share your supply chain digital transformation journey? Since Kimberly Clark is a global company which operates in more than 175+ countries, we felt a pressing need to have standard platforms and systems in place across the regions and countries. There are many benefits to this. First, it’s easy to roll out features across multiple regions, infrastructure costs are lower and more importantly it made our ability to support and respond to customer needs easier. The later part of the digital transformation journey is how to utilize the power of Cloud, AI/ ML, data platforms, customer centric UX and having more end-to-end connected systems, which are aware of upstream and downstream processes that can become more autonomous.

As they say in software engineering, you have to design for failure. So, this design for failure is critical and for us to not assume things will work seamlessly. I take inspiration from the Chaos Monkey theory that Netflix Technology team implements. It will be good for folks to catch up on this and see how they can implement it for their organizations.

Dinesh is an accomplished engineering leader with extensive experience in leading and transforming large technology teams for multiple Fortune 500 giants like Walmart, Dell, CISCO, GE, EMC and Kimberly Clark. His key expertise is building large high performing engineering teams which deliver results in a Product and Engineering mode. Dinesh has been one of the early stage leaders who has helped setup technology centers at Bangalore for companies like Walmart, CISCO and Kimberly. He has effectively used technology to develop large scale distributed systems in a variety of domains like eCommerce, Omni channel fulfillment and supply chain that has resulted in multi-billion dollars in additional revenue while simplifying costs and organization structures.

Was India better placed to manage external shocks? We have a hybrid model of a central supply chain business team that drives regional teams. This model is adapted in the supply chain technology teams too.

We have a hybrid model of a central supply chain business team that drives regional teams. This model is adapted in the supply chain technology teams too. The central team is able to sense what needs to be augmented from a long-term perspective and implement it in specific regions while the other regions / countries adopt the winning template. Talking specifically about India, we are in a high growth phase here and the systems that are present in more mature markets are being rolled out into India. We did not see rapid demand increase in India like our other mature markets but the India market has been growing in double digits, so in that sense, the India market was prepared to handle extra stress in the network.

The central team is able to sense what needs to be augmented from a longterm perspective and implement it in specific regions while the other regions / countries adopt the winning template. Talking specifically about India, we are in a high growth phase here and the systems that are present in more mature markets are being rolled out into India as well. We did not see rapid demand increase in India like our other mature markets but the India market has been growing in double digits, so in that sense, the India market was prepared to handle extra stress in the network.

How did you manage the supplier relationship during this time? This is a very good question. During this time, we were worried about supplier commitments, their ability to be financially viable and disruptions in their network which will ultimately affect us. We have a procurement function which did an excellent job of keeping in touch with our suppliers, raising red flags and in some cases looking for alternate suppliers where the supply was deemed to be at risk. We also had a real-time map of all Covid affected areas that was monitored worldwide, so we could figure out areas that are hit and the impact it would cause us and to our suppliers. This helped us tide over the difficult situation.

When did you anticipate that the demand for your products is going to skyrocket? This was probably once in lifetime situation where all forecasting models went for a toss, our forecast accuracy levels went down because factors that are worn into building the models changed overnight. While we are trying to improve forecast accuracy, at the same time, we were having teams on the ground to handle increased exceptions. So, this was literally like changing the tires of the car while it was running.

What are the supply chain innovations achieved by you during this journey? There have been many business process and technology innovations along the way. The business understood the need to have leaner and more standardized processes, which are frictionless. This has to be supported by technology. On the other hand, the technology teams put in innovations where we could predict failure in systems, automate tasks, and give visibility to the network with actionable intelligence.

What are the learnings that you gained during the journey? The biggest learnings had been that things can go really wrong even if you have the best-in-class systems. The way you react to exceptions in supply chain, enhance greater visibility through data platforms rather than siloed systems and ultimately have more machines take decisions with humans only augmenting them, rather than the other way around are the few key matrix that we feel help companies tide over the crisis.

How did your team manage the surmounting challenge? It has been stressful for multiple teams for sure. But this is a rather good problem to have (Increased demand) than have suppressed sales. Fortunately, we had a team of real good tenured associates and a mix of new blood. This helped us in understanding the context of why certain things were done earlier and what changes need to be put in place. In a way, the talent strategy plays a very key role in executing the vision.

What’s your view on sustainable supply chain? Supply chain is the engine that keeps the wheels of any company moving. Along the way, it is very important to have sustainability goals because it is not only good for the environment but also to the company’s bottomline. For example, if we can use or reuse packaging materials, it mitigates both the environmental impact and costs for the company. So, this is not a zero-sum game but very important to inculcate in the DNA. Fortunately for us, Kimberly Clark has sustainability goals, which are tracked and reported every year. Technology can go a long way in solving for inefficiencies in process or movement of goods, which can solve for reduced trip time, turnaround times, thereby reducing energy and other material inputs costs, which help reduce the impact of day-to-day operations. In totality, the Mantra of reduce, re-use and recycle are the basics of any sustainable supply chain operation.

How do you view India as the supply chain enabler in times to come? There is a view that if you can solve for India, you solve for the world. India is a very complex ecosystem, we have multiple different regions with varying levels of complexity, demography, languages, infrastructure, maturity, etc. So may innovations come out of India that can make things work. Of course, as a technology hub if we are able to mate technology solutions to real supply chain problems, we will have more products come out of here.

Towards Enhancing Eco-Expanse

“Integrating sustainability within value chain strengthens business resilience and accelerates the journey towards agile transformation and a low-carbon future. Marico’s Responsible Sourcing Framework’ titled ‘SAMYUT’ was institutionalized in 2018. The intent of the framework is to source material & services for Marico products through sustainable and responsible suppliers or business associates who share our sustainability vision”, highlights Bipin Odhekar, Head – Sustainability & Operations excellence, Marico Ltd., during an interview…

Bipin Odhekar has done his graduation in Production Engineering and Executive Management from IIM Bangalore. His professional experience of 22 years spans over multiple areas like sustainability, operations, projects, quality, safety, and process excellence. He implemented various projects in improving process efficiencies and manufacturing cost. Along with Operations Excellence team, Bipin played an important role in designing and institutionalizing Marico’s OE Model globally.

How do corporates view sustainability as a whole? Sustainability is a way of doing business, irrespective of sector it belongs to. It is no longer a ‘good to have’ function for taking environmental initiatives but it is a business differentiator to pursue responsible growth and create shared value for all stakeholders. One can easily recognize the success of corporates with sustainability as a core strategy.

What have been the sustainability initiatives taken by Marico? Sustainability aspects are embedded in business decision at Marico. A robust risk assessment and materiality analysis has helped us to identify specific impact areas with measurable long-term targets. There are eight impact areas, which encompass ESG material issues. These include Conserving energy and reducing emissions, Water Stewardship, Circular Economy, Responsible Sourcing, Product Responsibility (product quality, ingredient safety, health and nutritional opportunities, and reducing environmental footprint across life cycle of the product), Sustainable Coconut Conservation, Social Value Creation (CSR initiatives on Education, Skill Empowerment, Healthcare, Community Sustenance and Social Innovation) and a robust Corporate Governance framework.

How can sustainability be imbibed in supply chain? Integrating sustainability within value chain strengthens business resilience and accelerates the journey towards agile transformation and a low-carbon future. Marico’s Responsible Sourcing Framework’ titled ‘SAMYUT’ was institutionalized in 2018. The intent of framework is to “Source material & services for Marico products through sustainable and responsible suppliers or business associates who share our sustainability vision”. We have a threestep program (Educate, Evaluate and Evolve) which ensures forward movement of our supply chain associates in terms of “Ethical Standards”, “Environmental protection” and “Social commitments”.

There are innumerable stories and examples of organizations that are leading the sustainability agenda from the front. Taking specific names may not be correct but good work is happening in carbon & water neutrality, safe products, and waste / pollution control.

What are the sustainable packaging innovations that we can look forward to? Packaging related innovations have deep-seated value creation potential for a business like ours. The plastics economy is currently undergoing a paradigm shift in terms of how circularity principles are ingrained in the overall dynamics of the system. From a future-ready standpoint, we will see 100% recyclable packaging portfolios, increased use of recycled or bio-based content in packaging, innovative packaging designs to reduce consumption intensity, transport ease and improved material recovery cycles.

Kindly enlighten us on Marico’s theme, ‘Ecosystem Restoration’. ‘Ecosystem Restoration’ is a part of Marico’s overall goal towards climate action. As mentioned above, we have various programs related to resource management. Currently, Marico’s Perundurai factory has been externally certified as carbon neutral. As a small step to offset the carbon footprint

The plastics economy is currently undergoing a paradigm shift in terms of how circularity principles are ingrained in the overall dynamics of the system. From a future-ready standpoint, we will see 100% recyclable packaging portfolios, increased use of recycled or bio-based content in packaging, innovative packaging designs to reduce consumption intensity, transport ease and improved material recovery cycles.

from the factory operations, we created a Miyawaki forest in 2019 within the premises. This green patch currently comprises of 1100+ trees and sequester 5000kg carbon annually.

Your advice to companies to move towards Carbon Neutrality… Carbon neutrality means having a balance between emitting carbon and absorbing carbon from the atmosphere in carbon sinks. This paves business opportunities for companies to optimize costs through resource efficiency. Carbon neutrality also proves advantageous while managing physical and transitional climate risks to the entire value chain.

What are the learnings from the pandemic and the way forward? The pandemic has pushed organizations to transform business forever, requiring them to reprioritize their material issues as well as amplify the adoption of digital technologies by several years. As part of this transformed business focus, it has become imperative for organizations to embed sustainable and ESG goals in all aspects of their business strategies and transformation agenda. For us at Marico, the ‘next normal’ of business environment has been perceived as an opportunity to deepen our sustainabilityled efforts and impact while pursuing an agile growth journey.

Where is India Inc in achieving sustainable expanse? What can be done to enhance the green expanse? India Inc. has a promising future when it comes to striking an optimal balance between industrialization and protection of natural, ecological, and social assets. All stakeholders including governments, businesses, investors, social enterprises, academia, and consumers have critical and complementary roles to shape a greener, safer and more sustainable India in the times to come. Given the population rise and other global megatrends impacting India, there is a distinct opportunity for us to epitomize sustainable development on a global canvas. Education, techenabled disruptions, impact leadership from corporates and favourable policy mechanisms can fulfil our vision of replenishing natural resources and restoring ecological sanity.