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Indian Customs Logistics
Larry Disenhof
Group Director, Export Compliance
Cadence Design Systems, Inc.
2012
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Cadence India (Pvt.) Ltd.
Established circa 1987
Noida EPZ / SEZ
R&D and Support
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Bangalore STPI
Sales and Service
Infrastructure
• In a word: SUBSTANDARD
– Roads & Rail
– Ports
– Airports
– Utilities
• However: Rebuilding and Privatizing
– Highway network
– Airports
– Ports
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Roads and Infrastructure
• 3.5million km of roads
– Roadways handle 65% of freight
– Only 2% are highways, handling 40% of all passenger traffic
– Goods from Gurgaon to Mumbai can take 10 days by road
• “India’s 6 million trucks now average 19.8 kmph vs.
Washington DC at 74kmph” Bloomberg, 6/27/12
• National Highway Development Project NHDP
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Kicked off with 2001 start of Quadrilateral project
Public / Private partnership
Major projects underway, major progress seen
New plans announced to add 1,600km of roads with at least 6
lanes
Golden Quadrilateral
Create 4-6 lane highways
Corresponds to Quadrilateral rail lines
that carry 75% of all rail cargo
Phase 1 complete 5,900km
Linking Delhi, Mumbai, Chennai
and Kolkata
Completed at under 50% of budget!
NS-EW Project
Phase 2 total 7,300km
4/5th complete
Linking the outer state capitals
Direct link between New Delhi,
Hyderabad and Begaluru
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Pre-Yamuna Expressway
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State Border Tax Receipt
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Ports Infrastructure
• Seaports handle 95% of India Trade by volume
– 65 – 70% trade by value
– 12 major ports regulated by central government
– 137 minor/intermediate ports regulated by state governments
• 129 are operational
• Major shift towards “Landlord Ports” operations
– Push towards capital projects through Public-Private initiatives
• Ports rank low against international standards
– Low productivity, capacity, efficiency
• Lack of equipment, training, uneconomic labor practices
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Ports Infrastructure
• 12 Major Ports, handling 70% of the port traffic
– 11 operated by Port Trust of India
• 70% dry and liquid bulk
• 30% containers
– Handled 287 million tons (MT) in 2000
– Handled 229 million tons in just April – August 2012
• Down 3.5% from 2011
• Annualized 560 MT
– Average Ship turnaround decreased from 8.1 days in 1990
to 4.3 days in 2009-10
• Average turnaround time in Singapore is < 1 day
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Utilities
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Air Infrastructure
• 35% of India trade by value is handled by air
• Campaign to rebuild airports nationwide
– Government investing $30b in next 10 years
– Public-Private partnerships
• 30 year concession period to build, operate and maintain
• Concession allows for private commercial development
• Government retains voting share in corporation
– Greenfield
• Bangalore, Hyderabad
– Greater leeway in planning
– Brownfield
• New Delhi, Mumbai, Nagpur
– Stricter timetables and monitoring
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Air Infrastructure
• Airport projects
– Hyderabad opened March 2008
• 7m passengers / year
– Bangalore opened June 2008
• 10m – 12m passengers / year
• 3 Lakh tons cargo
1 lakh = 100,000 MT
Metric tonne = 2,205 lbs
3 lakh = 661,500,000 lb
• Road access a major problem
– (1) 6 lane highway
» Ring road, high-speed rail and Trumpet interchange
planned
– Proposed IT-ITES SEZ in the Airport Premises
» Green building and energy-efficiency concept
» Approx 50km away from the city
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Air Infrastructure
• Airport Projects
– Mumbai – master plan began 2006
– New Delhi – master plan 2006
• Phase 1 – new terminal, access roads, infrastructure
• Phase 2 – 2012 includes expanded cargo area
• Phase 3 – 2016 (depending on traffic) new terminal, increased cargo
facilities
– Nagpur – master plan MOU 2006
• 51% government, 49% private ownership
• Expanded airport to increased cargo capacity
– 870,000 tonnes expected
• SEZ and IT Park
• Boeing Repair facility
• Plan to include full multi-modal capabilities
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Historical Perspective
• Through the 1990s
– Lead time for delivery 12-20 days
• 3 days transit, balance in Customs’ clearance
– No automation
• Notification by mail
– Ignorance of technology
• Inspectors had no understanding of the basics of computer
hardware
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Existing Conditions – Air Freight Imports
Delivery 2-3 days from touchdown
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International flights arrive and depart overnight
Airlines release manifests at 2pm day of arrival
Customs clearance the following day
Metropolitan areas impose daytime restrictions on
trucks
– Palletized goods limited to large trucks - subject to restrictions
– Special permission needed for daytime deliveries
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What Causes Delays
• Insufficient Paperwork
– Details missing or confusing
• Certifications lacking
– Wood packaging – stamp required on the pallet
• Questions on valuation
– Variance from the norm
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SEZ, STPI, EHTP, BIO-Tech Zones
• These Zones are treated as foreign territory
– Entire site is considered a warehouse
– No routine inspection by Customs of export and import cargo
– Zone officials responsible for “Customs” inspection
– Exempted from customs duties and other taxes
– Domestic suppliers are subject to applicable rebates on export duties
– Consumables & spares have 3 year life, Capital has 5 year life
– Capital Goods are those essential for production
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SEZ, STPI, EHTP, BIO-Tech Zones
• Goods leaving the zones
– The government has provided incoming tax exemptions – so
they are paying attention!
• Inter-zone duty-free transfer allowed if there is a valid reason for the
transfer
• Goods can be sold into Domestic Tariff Area (DTA) upon payment
of duties
• Disposal or movement of the goods requires written permission
from Assistant Zone Commissioner
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Best Practices – Preparing a shipment
• Sort items according to zone tax exemptions
– Ship production items separately from office and/or sales items
• Written description must tie to visual inspection
– List external components – CPU, monitors, accessories
– Record all major items by serial number
– Do not list internal components
• If they can’t see it, it doesn’t exist
– Listing unseen internal parts creates a potential “backorder”
• However include the costs of internally-added options
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Best Practices – Preparing a shipment
• Used equipment – ask for guidance from consignee
– Certified Engineer certificate may be required
• Valuing lease / loan equipment
– Whereas we might sell to our local subsidiary and have them
handle the local loans, our customers are in SEZs so we must
ship to them directly
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Zone Importing Best Practices
• Get all paperwork pre-approved by your consignee
• Send signed invoices and AWB information to
consignee prior to expected arrival
– Paperwork is part of submittal required in order to bypass
airport Customs inspection and transfer cargo to the Zone
• Route shipment to land at the airport closest to Zone
• Request confirmation of delivery by consignee
• Keep records for eventual equipment disposal
– Disposal options, “Junk” letters
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SEZ deliveries
– Consignee must provide specially stamped quintuplicate Bill of
Entry with BL, AWB and CI to SEZ Customs Official at place of
landing
– Container or Truck is sealed for transport to SEZ; marks and
numbers on seal to be verified at SEZ gate
– Upon verification, goods delivered to office for self-inspection
– Office manager inspects cargo and reports same to SEZ officials
on duplicate copy of Bill of Entry
• SEZ official may re-inspect goods in cases of discrepancies to
approve the corrected paperwork
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STPI deliveries
– Consignee must provide “intimation” with cover letter, Bill of
Entry, Pro-forma/CI to STPI Customs Official at place of landing
prior to arrival of shipment
– Delivery is made to consignee’s premises, email is sent to STPI
Bonding official for inspection
• Goods cannot enter into office until inspection and sign-off by Official
• Bonding Official to arrive within 1 week
• In cases of discrepancies, re-inspection by Bonding official to take
place within 1 week to 1 month, depending on justification
– New in 2012:
• Test Model of “Self-Bonding” introduced.
• Self Bonding- Consignee Opens the Package and confirms the
authorities on proper/improper receipt of the goods.
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SEZ and STPI Audits and Recordkeeping
• SEZ
– Annual Customs audit of records and materials
– Annual report to show Positive Net Exports
– You must keep detailed records for eventual disposal of
equipment
• STPI
– No post-installation inspections
– Quarterly reports on Positive Net Exports,
– Annual report by Chartered Accountant required
• Detailed records audit within every 3 years
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Experiences
• Sharing equipment with a co-resident subsidiary
– Transfer across the hall = “Entering the DTA”
• The 14 digit serial number
– If the paperwork doesn’t match the actual – you could be
smuggling! At the least, you’ll lose a week.
• Shipping consumer products
– In 20 years of shipping, these are the only items to have “gone
missing” at the airport.
• HAND CARRY HAND CARRY HAND CARRY
• Shipping employee belongings
– Ensure you know what’s inside.
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Credits
Cadence Design Systems India team
Shridharan M. – SEZ Noida
Jayan S. - STPI, Bangalore
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