Marine Lines - January 2022 by Marine Lines

Many experts believe that the current situation is worrisome for India due to the happenings in Afghanistan and other neighbouring countries like Pakistan which helps in processing the raw materials into different kind of physiotherapic drugs and providing logistic support for this illicit trade. As this business gets in lot of unaccounted money which is mostly used

for terror funding, illegal Arms deal. Many believe that the pre-planned but unprecedented withdrawal of the American Army from Afghanistan has endangered the peace perspective of the whole World. Afghanistan has always remained an ambiguous area since centuries. Today’s Afghanistan, according to the Mahabharata mythology, identifies Kandhar (Gandhar) and Kaba with Kabul, where the

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infamous war of Mahabharata was fought and many believe that that land holds the curse of instability and atrocities. But the fact of the matter is that everybody loves to do illegal business. Gradually the drug menace has become the most dangerous weapon of mass destruction than the biological weapons. No country can grow and produce such psychohropic substances of mass

destruction and sell it in the world market officially hence such soft spots with unstable governments are nothing less than a rendezvous for the drug mafias. The advantage for drug mafias and disadvantage for Afghanistan is suitable climatic conditions and it’s geographical location has created it into a drug trade capital. Recently the Gujarat coast has witnessed surge in landing activities of such drugs as here are cliffs scattered along the shores, the increase in fishing activities and allowing other state trawlers to carry out fishing activities in the border areas has created an authentication and credential verification problems for local authorities issuing seamen cards. The Marine world is too complex due to its diversified verticals. Sea going vessels, it’s registration hotch-potch with tailor made rules to suit every country to its own benifit is an escape route for imposters to silently penetrate the legitimate operations of EXIM business.There are 500MT to 2000 MT dhows, fishing trawlers and cargo vessels existing here for millennia, so it is tough to differentiate between boats engaging in legal and illegal activities. The local authorities issuing fishermen permission for venturing at sea are mostly seen dominated by local leaders and Associations. Recently

an boat was apprehended by agencies while venturing into sea on some fictitious registration number in Dwarka waters. Such vessels are vulnerable and difficult to trace after the wrong is done. Illicit crop cultivation is concentrated in certain areas, but frequently shifts within and sometimes between subregions and sometimes appears in areas where it was not previously given official cognizance. In 1985, India banned the cultivation of cannabis plant under the Narcotic Drugs and Psychotropic Substances (NDPS) Act. But this Act allows the state governments to allow and regulated cultivation of hemp for obtaining its fibre and seed for industrial or horticultural purposes under permissible cultivation. On understanding the tricks of the trade even the locals have entered into this illicit business lately. Recently 46 acres of cannabis crop was destroyed by Andhra Pradesh Police. ThePolice along with other Govt officials and villagers destroyed the cannabis crop in Visakhapatnam under Operation named Parivartan program. On the other hand the in 2019 the Madhya Pradesh government decided to legalize the cultivation of hemp or bhang.Uttarakhand has already done this. Hemp is a type of marijuana, which has medicinal uses.

The Chief Minister had permitted hemp cultivation only for medicinal purposes, such as for the treatment of cancer. In 2018, Uttarakhand became the first state in the country by allowing the cultivation of only those strains of cannabis plant which have a low concentration of tetrahydrocannabinol (THC) — the primary psychoactive constituent of cannabis that produces a high sensation. Uttar Pradesh followed a similar policy, while Madhya Pradesh and Manipur are reportedly considering it as well. Himachal Pradesh CM Mr.Jai Ram Thakur announced that the state government is coming up with a policy to allow controlled cultivation of hemp or cannabis in the state.This means the state wants to legalise commercial cultivation of the plant for nonrecreational uses such as making medicines and fabrics. For a state that is known for its ‘Mallana cream’, which is the charas or hashish that comes from the Malana Valley in Kullu district. Is this not an ambiguous policy decision?In parts of Himachal such as Kullu and Mandi, hemp had traditionally been used for making footwear, ropes, mats, food items, etc.“During snowfall, the locals used to prepare a dish from cannabis seeds which helped them keep warm and energetic,” said Himachal CM Jai Ram T hakur in the Assembly during a discussion on the subject, adding that the quality of cannabis which grows in the state is among the best in the world. He said that its seeds can also be used for making paint, ink and biofuel.Globally, cannabis products are increasingly being used for health and medicinal purposes, and the plant has also been used to make building material.Legalization of allowing to grow such substances under the disguise of faster economic recovery post pandemic is an astonishing concept. The state government in this hill state has been advocating the use of hemp in order to strengthen the state’s economy just because the Industrial and agricultural growth in Himachal is bound by geographical constraints, and the tourism sector has been hit hard by the pandemic. Initially the opium, marijuana were smuggled directly from Afghanistan through Pakistan to China via

MARINE LINES • 2022 JANUARY

DPT

DRUGS

GOVERNMENT TAKES THE CALL OVER MAYDAY DRUGS JEOPARDY

arco Coordination Center Meeting: The third meeting of the Narco Co-ordination Center was held under the chairmanship of Union Home Minister Amit Shah on Monday to put a tight rein on narcotics across the country. In this meeting, many important and big decisions were taken by the Union Home Minister. These also include that an effective mechanism will be created to prevent the influence of dark net and cryptocurrencies in the growing trade of narcotics. In this meeting, apart from Union Home Minister Amit Shah, many big officials including Union Home Secretary Ajay Kumar Bhalla and Intelligence Bureau Director Arvind Kumar were involved. In this meeting, many important decisions were taken while discussing the use of drug trafficking and other parameters. It also includes that all the states should constitute a Dedicated Anti Narcotics Task Force (ANTF) under the DGP, which should act as the Secretariat of the State NCORD. Instructions for formation of Central NCORD UnitInstructions were also given for the formation of a central NCORD unit under NCB at the national level. Narcotics training module should be prepared at 12

the national level, so that police, CAPF personnel, prosecutors and people of various civil departments can be trained.To prevent misuse of dual-use Precursor Chemicals, a Standing Inter-Ministerial Committee will be constituted, which will be operated by the Ministry of Chemicals and Fertilizers and NCB from the Ministry of Home Affairs and the representative of the Department of Revenue, Ministry of Finance should also be kept.On preventing the abuse of prescription drugsIt was decided in the meeting to constitute a Permanent Inter-Ministerial Committee under the Ministry of Health and Family Welfare to check the misuse of dual-use prescription drugs, in which apart from the departments related to medicines, NCBs from the Ministry of Home Affairs and experts from the industry should also be constituted. be included. Be a member of the Navy, Port Authority and Coast GuardIt was said in the meeting that it has also been observed that narcotics also come from the coastal states. Therefore, efforts should be made that in these meetings, besides representatives of all coastal states and union territories, Navy, Port Authority and Coast Guard should also be included as members, so that effective action can be taken on this issue. Containers

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arriving and departing at all ports, whether government or private, should be checked under a prescribed procedure and instructed to arrange container scanners related equipment for testing.Special unit facility should be made availableAccording to the decision taken by the Union Home Minister Amit Shah, instructions were also given to develop Narco-Canine Pool at the national level. In coordination with the Narcotics Control Bureau and the National Security Guard, formulate a policy, under which the state police should also be provided with the facility of a special unit as per the requirement. Increasing use of dark-net and crypto-currenciesAn integrated NCORD portal should be set up at the central level, which will act as an effective mechanism for information exchange between various institutions/agencies. An effective mechanism will be created to prevent the increasing use of Dark-net and Crypto-currency in the business of Narcotics. The Union Home Minister said that the cultivation of illegal drugs will be prevented by drone satellites and other resources. Along with this, the awareness campaign against drugs should be given wide publicity. He also directed to set up a drug de-addiction center.

DEENDAYAL PORT CROSSES THE 100 MILLION MARK ON 10.01.2022

Despite the constraints arising in international trade and shipping due to the ongoing Covid pandemic and the resulting constraints on the cargo handling front, DPT has crossed the 100 MMT milestone on 10.01.2022 and in the process became the 1st Govt. Sector Major Port, to cross the mark in the fiscal 2021-22. Incidentally, in the current fiscal, DPT has crossed the milestone 4 weeks ahead in comparison of the last fiscal, i.e. FY 2020-21 during which DPT had reached the landmark on 09.02.2021. Increase was seen in the Import cargoes such as POL, Edible

Oils, Liquid Fertilizer Raw Materials like Phosphoric Acid and Ammonia, Chemicals, Rock Phosphate, Steel pipes, Iron ore, Coal, Timber logs and Crude Oil. Export cargoes such as Edible oil, Chemicals, Foodgrains like Wheat and Soya Bean Mill, Bentonite and POL products at Vadinar have also witnessed growth in cargo throughput during FY 2021-22 as compared to FY 2020-21.The DPT’s cargo throughput growth in the 3rd quarter of current fiscal was the highest among all Govt. Major Ports, with the Port registering 33.52 MMT traffic in the Oct-Dec21

quarter. In the month of December 2021 only, DPT had handled 11.32 MMT cargo which had contributed to about 18% of the total cargo handled by all Major Ports.Shri S.K. Mehta, IFS, Chairman-DPT and Shri Nandeesh Shukla, IRTS, Dy. Chairman-DPT congratulates all Trustees, Officials, Workers, Trade Unions of DPT, Port Users & Stakeholders for their apprehensive efforts, initiatives and their continuous support behind reaching this important milestone. The Port’s cargo handling is expected to cross 127 MMT by end of the current fiscal.

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JANUARY 2022 • MARINE LINES

MARINE LINES • 2022 JANUARY

MOOWR SCHEME EXPERTS SPEAK

A FEASIBLE ALTERNATIVE TO SEZ/EOU AND A WAY TOWARDS ‘MAKE IN INDIA’

eeping in mind the competitiveness of Indian products in the international market, the Government of India had introduced many schemes over the years like; duty free import of raw-materials, capital goods, technical know-how etc for export products in the form of SEZ, 100% EOU, Advance Authorisation, EPCG and other export linked incentive scheme, however out of above SEZ and 100% EOU, failed to give much impetus to the desired goal. The reason could be attributed to dual control, lack of clarity on various issues, inconsistent implementation of SEZ policy across all the SEZ in India etc. It is also to be noted that the too much export centric policy had also hurt the domestic market for Indian made products, which are heavily depending on imported raw-material, as the costing of final product become more than the import value of that final product from China and other South-East countries. The Preferential Tariff agreement with some countries also hit the Indian made goods in the domestic market. The World Trade Organization (WTO) dispute settlement panel in October 2019 recommended India to withdraw import subsidies available under export promotion schemes like Export Oriented Units (EOU)/Advance Authorization (AA)/Export Promotion of Capital Goods Scheme (EPCG) and Special Economic Zones (SEZ) on basis export performance. The said panel report recommendations are not final, and India has initiated appeal against the panel report on 19 November 2019. The main bone of contention of the panel report was that the import duties are subsidized in India depending on the export performance which is not allowed in view of the Article 3.1 of the WTO Subsidies and Coun-

tervailing (SCM) agreement wherein all developing countries with gross per capita income of 1000 $ per annum for three consecutive years are required to stop all export subsidies. India had already crossed the per capita 1000 $ mark way before 2015 and therefore being recommended by WTO ruling to discontinue with above said export promotion schemes. While the appeal is filed by India against the said panel report recommendations which delays the scrapping of such schemes there has been overall demand and interest for alternative mechanisms to help boosts Indian trade globally. To mitigate the challenge of revamping Export Promotion Scheme viz; EOU and SEZ, the Government has introduced new Manufacturing and Other Operations in Warehouse Regulations, 2019 (MOOWR) which allow import of raw materials and capital goods on deferred payment of taxes for manufacturing and other operations like trading in a bonded manufacturing facility. Actually, the scheme has multi-pronged objectives; • To mitigate the challenge of revamping Export Promotion Scheme; • To give teeth to ‘Make in India’ program, introduced in India in 2014, with the view of making India a global design and manufacturing hub. • To meet the objectives of this program, the Government has dedicated itself to increasing the ease of doing business in India over the past few years. • Making FDI in manufacturing sector more attractive. • To give more competitive edge to industries those heavily dependent on imported raw-materials and capital goods, to compete in Indian as well International market against similar goods manufactured by foreign manu-

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facturer. • Stock and sell with labelling, re-labelling, repacking and with some processes for foreign traders. • More flexibility on procedures With all these objectives, the Government has introduced new Manufacturing and Other Operations in Warehouse Regulations, 2019 (MOOWR) which allow import of raw materials and capital goods on deferred payment of taxes for manufacturing and other operations like trading in a bonded manufacturing facility.MOOWR was first introduced in 1966 in exercise of powers provided under Customs Act, 1962 which allow owner of any warehoused goods to carry out manufacturing processes or other operations in such warehouse, subject to specific conditions. These 1966 regulations were superseded by MOOWR, 2019 notified in June 20191 which were also superseded by revised MOOWR, 2019 notified in October 20192. The October 2019 regulation are currently in effect. The Department of Customs has also issued Notification No.-69/2019 dated 1/10/2019 introducing the regulation of MOOWR, 2019 and a circular No.-34/2019-Cus to provide clarity on certain aspects of MOOWR3. Eligibility criteria Under MOOWR, the following persons are eligible to apply for operating under these regulations: • A person who has been granted a licence for a warehouse under Section 58 of 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 existing unit can also be converted into MOOWR scheme Application Process The application process under MOOWR is simple. The jurisdictional Commissioner of Customs is the single point of contact for all approvals. The applicant is only required to file an integrated application form4, on online, for obtaining license for a private bonded warehouse and the permission for manufacturing and other operations. Details of the goods proposed to be manufactured, proposed inputs and capital goods to be imported, and the floor plan of the warehouse premises are required to be submitted. The applicant is also required to furnish a general bond undertaking to comply with all the provisions. Customs Officer would visit the facility to evaluate compliances. Upon satisfaction, the jurisdictional Commissioner of Customs shall grant a licence allowing the applicant to carry out manufacturing and other operations in the bonded premises. This licence shall be valid indefinitely unless it is cancelled or surrendered. Maintenance of records and reporting In contrast to other export-oriented schemes like EOUs, SEZs and FTWZs which have elaborate record keeping and maintenance requirements, MOOWR prescribes a simplified procedure. The MOOWR licence holder is required to maintain a single record for receipt, processing and removal of goods5. Further, the requirement to obtain a permission from the proper officer prior to the removal of manufactured goods has also been relaxed. The licence holder can now clear the manufactured goods without prior permission provided that documentation such as the Form for transfer of goods from a warehouse, bill of entry and shipping bill, and payment of duties due are in place. This relaxation aids in timely clearance of finished products and avoids the delay caused due to the complicated intimation procedure under other schemes.

Payment of Taxes at the time of Export/ Clearance MOOWR allows the licence holder to import inputs and capital goods on deferred payment of customs duties (including import IGST component). The customs duties on the imported goods are also exempt in case of export. The details of taxes payable at the time of export/ clearance of the resultant goods is discussed below: Export: If the goods manufactured using the imported inputs and capital goods are exported, then the entirety of customs duties on such imported goods, which would have otherwise been levied, shall be exempted. Export of manufactured goods, being a zero-rated supply, shall also be exempt from GST. Domestic Consumption In case, the manufactured goods are cleared for domestic consumption, then customs duties shall be payable on the imported inputs contained in such goods. GST would also be payable on the supply of manufactured goods to the domestic territory. The import IGST component of the customs duties paid on the imported inputs would be creditable. Benefits under MOOWR • Deferred/ exemption from payment of customs duties: Under MOOWR, any person manufacturing or carrying out other operations in the bonded warehouse is entitled to import inputs and capital goods on deferred payment of customs duty (including import IGST component). Where the manufactured goods are exported, the customs duties on the imported goods are wholly exempt. • No interest payment: MOOWR also offers an unlimited warehousing period for the imported inputs without any added interest liability. • No export/ foreign exchange obligation: Unlike in case of other pre-export schemes like Export Oriented Unit (EOU), Export Promotion Capital Goods (EPCG), Advance Autorotation etc., manufacturer operating under MOOWR is not bound by any export

obligation or free foreign exchange earnings. Appointment of warehouse keeper Under MOOWR, the responsibility to oversee the operations of the unit, has been shifted from the proper office (applicable to other export-oriented schemes) to a self-appointed statutory warehouse keeper. These lucrative benefits and the liberalized approach are expected to attract a large number of exporters to avail the benefit of the scheme. Reportedly, a leading Japanese automobile manufacturer and a global e-commerce retailer have shown interest in the scheme. Open Issues While the Government has clarified a large number of issues in the circular, there are still certain loose ends which require addressing. A few of these have been discussed in brief, below: • Scope of ‘other operations’: The term ‘other operations’ has been used extensively across MOOWR. However, the activities covered under such term have not been mentioned either in MOOWR or in the circular. Given this, it is ambiguous whether services can be provided from the premises under MOOWR. • Temporary removal of imported inputs: There is no clarity as to the treatment of inputs temporarily removed from the bonded premises/ warehouse i.e. in the case of job work. In the absence of any guidance, such temporary removal without filling bills of entry and payment of duty may be seen as a contravention of MOOWR. • Depreciation on capital goods: Under MOOWR, the license holder is allowed to import capital goods, in addition to inputs, with deferred payment of import duties. Thus, duty on such capital goods is only payable at the time of their removal from the bonded premises/ warehouse. However, unlike in the case of EOU, MOORW does not specify whether depreciation is allowable on the import value of such goods. A clarification in this regard would

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bring certainty to the persons seeking to opt for this scheme. • Continuation of benefits under the Foreign Trade Policy (FTP): FTP provides a number of post-export incentive schemes such as Merchandise Export from India scheme. It is yet to be clarified whether the manufac-

turer-exporters opting for MOOWR would be able avail benefit under such post-export schemes, simultaneously. MOOWR offers comprehensive benefits to the manufacturer-exporters without burdening them with time-consuming compliances. With no export or foreign exchange obligations, the

manufacturer-exporters also have greater flexibility under this scheme. Considering these factors, this scheme is expected to provide much needed impetus to the manufacturing/ export industry and strengthen the ‘Make in India’ initiative.

Mr. Homer George Mathew, M.Com., EPGDIB, is a post graduate and post graduate Diploma from IIFT, New Delhi. He superannuated in March 2021 as Assistant Commissioner, GST. Prior to this, he worked as Specified Officer of Mundra Port & SEZ, Appraiser and Superintendent at Mundra, Kandla and Mumbai Customs. He had worked as Departmental Representative for Department of Customs & Central Excise in CESTAT.

JANUARY 2022 • MARINE LINES

MARINE LINES • 2022 JANUARY