I have written one article on 16th January 2020, on HS codes and immediately next day i.e. on 17thJanuary, 2020 DGFT has issued Trade notice no 46 & subsequently, Trade Notice no. 47 dtd. 29.01.2020. The title of both these notices was “Misdeclaration of goods under ‘Others’ category at the time of Import”.
My observations on these Trade Notices are as under:-
1. First of all, goods classified as ‘others’ do have not specific description. Normally, they are ‘Others – not else where specified’. Hence, ‘Others’ in itself cannot be a description.
2. Most of the ‘Others’ are normally classified under ‘90’, as 7th and 8th Digit of HS code system.
3. This 8 digit HS code has reference to description / products covered by 6 digit and then covered by 4 digit.
4. Even at 6 digit there could be a entry mentioning ‘Others’.
5. Specific HS code is not necessarily mentioned on the invoice when goods are exported by other countries. Such HS codes might have been mentioned in the Shipping bill filed by the exporters from other countries but, Indian importer does not have access to it as Shipping bill is a regulatory document and not commercial document. Some exporters may have been mentioning HS codes on their invoices, however it is not a mandatory requirement.
6. ‘Others’ is not a description and hence, actual description of the product may vary from country to country and from seller to seller.
7. Though the idea of these Two trade notices (46 & 47) is to identify the products byspecific HS codes, given the circumstances and practice currently being followed, it is not easy on account of various issues. Let’s understand them by a practical example.
I am reproducing hereunder the entry 2846 for ready reference:-
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Source:-http://dgft.gov.in/
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In this small entry we can observe 2846 10 90, 2846 90 and 2846 90 90, total Three entries are ‘Others’. Each ‘Other’ category has to be read with reference to first 6 digits& then with reference to 4 digits. The description at 4 digits reads as under:-
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If we search on Google the result is as under:-
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The 17 rare-earth elements are cerium (Ce), dysprosium (Dy), erbium (Er), europium (Eu), gadolinium (Gd), holmium (Ho), lanthanum (La), lutetium (Lu), neodymium (Nd), praseodymium (Pr), promethium (Pm), samarium (Sm), scandium (Sc), terbium (Tb), thulium (Tm), ytterbium (Yb), and yttrium (Y).
The most abundant rare earth elements are cerium, yttrium, lanthanum and neodymium [2]. They have average crustal abundances that are similar to commonly used industrial metals such as chromium, nickel, zinc, molybdenum, tin, tungsten, and lead.
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The end uses are in ‘Ceramics and Glassmaking, glass polishing and chemical catalysts’. Hence, one must be sure how the product is going to be used, in what industry and for what end use?
It is therefore necessary to understand this classification with reference to chapter notes, technicalities involved, composition and end use. The industry normally relies on CHAs for correct classification.
In the presentexample there may be 100 products covered under 2846 10 90, 2846 90 and 2846 90 90, all carrying description as ‘Others’.
This illustration is given so that, one must understand complexity of the category ‘Others’ with reference to specific HS codes. If DGFT wants all the details for 2300 entries by 15th February 2020, it is a herculean task. In a recent study it was stated that, almost dollar 84.90 billions worth of imports of Financial year 19 was under the category of ‘Others’.
If government wants to restrict all these imports under the licensing scheme, it would amount to issue of licenses to the extent of dollar 85 billions. Will this be treated as doing away with ‘Lisence Raj’?
There could be few suggestions for ease of doing business:-
1. We should work towards 10 digit HS codes, which will avoid the problem of ‘Others’ to the great extent.
3. DGFT and Customs must work together so that, there are no problems on interpretation of the HS codes.
4. It is equally important that industry should take a serious note of this issue and use proper HS codes.
5. The issue of HS code is of prime importance as it is used for various purposes like drawback, MEIS, Customs duties, FTA benefits, ITC on imports and tariff & non-tariff barriers etc. etc.
Let’s hope, we understand the real difficulties in ascertaining correct HS codes &we all will work together in this area.
Looking forward to your views!!!
Sudhakar Kasture
Director, EXIM Institute (A Division of Helpline Impex Pvt. Ltd.)
Mumbai.
E-mail:sk@helplineimpex.co.in