Not long ago, the airline industry had cumbersome procedures for shipping cargo, but they embraced digitisation and today the documentation doesn’t take more than two hours. First step to improve “Ease of Doing Business” in Shipping is to embrace end-to-end electronic exchange of documents. It is happening allover.
Some say it’s a story of value versus volume of cargo. Others reckon it is as a question of speed of delivery against distance. Either way, air and sea cargo have both long established their need and presence in India. They both have their clientele who dedicatedly ship their wares through their preferred mode of transport. But the question we’re asking here about why air cargo is being increasingly ticked to moving goods by sea. Your guess as anybody’s would be because it’s faster. But the real reason most say is because there are too many documents to fill out and many processes to go through before their cargo makes its way to the ship’s hold. Not so long ago, one had to fill out many documents to send goods to another country by air as well. The count was perhaps a dozen then. However, as connectivity improved and many an airline was flying out of India’s cosmopolitan cities, the industry soon realised there was a need to slash the paper work for exporters. Tulasi D Prasad, Head, Hyderabad Chapter, Air Cargo Agents Association of India says, “Ever since the e-movement of documentation started, we, as air cargo agents, had decided to reduce manpower and make bookings online.” All payments are made online and customs visits are scheduled too. The exporter is called upon for a physical presence only if any cargo needs specific inspection. In fact, booking air cargo, he says, has become as simple as sending an e-mail, which is the first procedure after confirming the freight rates in an airline. The agent, on behalf of the airline, sends the e-airway bill to the shipper. Once it is issued and signed, a copy of it is sent back to the airline after which the carrier issues an e-karting document which acts as a proof for the cargo to be allowed on board. The Customs officials verify the documents and the cargo is packed off in to pallets or sealed appropriately depending on its nature and weight.
“The process is all completed within two hours if the shipper has all his documents in place,” says Prasad. What is comforting is that the process remains the same whether the cargo is 2,000 or 6,500 kilos. Smaller shipments by multiple shippers are all aggregated by airlines and set in to one pallet to ensure there is no damage or theft. Today, most airlines have their own e-freight software and airlines such as Cathay Pacific, Lufthansa and Emirates accept only e-airway bills where the airway bills, exchange control bills and exporter copies are generated online. Prasad says, “Earlier, there were about 35 columns to fill in an airway bill and multiple copies had to be filled in to hand them out to the airlines. Now, all of this is done electronically and has eliminated the process of filling it manually.” About two-thirds of all the air cargo in India is processed this way for shipping. In fact, the customs department has gone a step ahead in making an online request for a no-objection certificate, or NOC from the Drugs Controller in case of shipment of pharma products. The exporters, in fact, can even claim their duty scheme benefits directly today from the Director General of Foreign Trade and the Reserve Bank of India digitally.
It is this e-transmission that is not entirely taking place with ocean trade. One of the main reasons is perhaps that multimodal transportation is involved in using a ship to sail across and transport goods. This would automatically imply more documentation – either online or offline, or both. Under sea trade, the requirement of documents is classified under four categories – commercial documents, financial documents, transport documents, insurance documents and other international trade related documents. Though the shipping industry has embraced technology greatly too, the amount of paperwork is significantly higher.
Ronny Marfatia, President of Container Movement Transport Private Limited says the multiple processes involved and the number of middlemen in getting cargo on board is what perhaps increases the number of documents required. From freight forwarders to container freight station and the customs handling agents to the container lessors, there are numerous individuals or institutions involved in getting a container on board. Unlike an airline, the negotiation process for a shipment is longer just as the shipping time is. Unless the cargo is meant for destinations closer to the Indian subcontinent, the average travel time for cargo travelling anywhere to the West is 22-25 days inclusive of transshipment. To cut the long story short, a shipper has to have multiple documents in place before the customs authority signs and seals it as good to go. A proforma invoice, packing list, sales contract, commercial invoice, inspection certificate, insurance policy, shipping order, a collection instruction exim licence and declaration Bill of Lading and the Let export order are of the documents an exporter will need to have handy. A Let export order is the final procedure of export Customs clearance procedures to export any goods outside country. But what’s relieving is that the procedure is more or less the same for full and less than container load merchants
But in the recent past, after much representation from the industry, India did take a leap forward in reducing the number of import export documents. The Director General of Foreign Trade issued a notification last March to this effect after consulting all the stakeholders. The decision to minimise the number of documents and reduce transaction costs and time for exports and imports came after the traders ascribed the high transaction costs to cumbersome documentation processes.
Based on the recommendations of the report, the RBI has agreed to do away with the ‘Foreign Exchange Control Form (SDF)’ by incorporating the declaration in the ‘Shipping Bill’ (for exports) and dispensing with the ‘Foreign Exchange Control Form (Form A-1)’ (for imports). Customs have also agreed to merge the ‘Commercial Invoice’ with the ‘Packing List’ and have issued a Circular for accepting ‘Commercial Invoice cum Packing List’ that incorporates the required details of both the documents. The exporters and importers, however, have the option of filing separate ‘Commercial Invoice’ and ‘Packing List’ also, if they so desire. Shipping Ministry has also agreed to do away with the requirement of ‘Terminal Handling Receipt’ and make the process online.
However, most exporters still bewail the necessity of so much paperwork when most other developed economies are doing away with many processes. The Ministry of Shipping has introduced many new courses of action such as direct port delivery to improve India’s ranking in the list of countries with whom doing business will be easy. If this has to be a reality, the Customs, DGFT and the Ministry of Shipping will all require another relook at the documentation to make the process as quick and hassle free as those nations whose ranking precedes India’s.
PCS 2.0 – Are we ready?
A recent step in this direction is the genesis of the Port Community System, or PCS in its new avatar (PCS 2.0) that owes it re-entry to two main drivers. One, a long standing demand from the industry for an efficient PCS 2.0 – Are we ready? A recent step in this direction is the genesis of the Port Community System, or PCS in its new avatar (PCS 2.0) that owes it re-entry to two main drivers. One, a long standing demand from the industry for an efficient because it increases port efficiency by connecting the information and communication technology systems of each of its members, thereby facilitating communication.
By definition, a PCS is an electronic platform that connects the multiple systems operated by a variety of organisations that make up a seaport, airport or community. It is shared among all the parties involved in the sense that it is set up, organised and used by firms in the same sectorin this case, a port community. And by function, the main objectives of a PCS are fourfold. First, to develop a centralised Web-based application which acts as a single window for the port community members, stakeholders to exchange messages electronically in secure fashion. Second, reduces transaction time and cost in port businesses, achieves paperless regime in port sector and finally implements an e-commerce portal for port community. The services within the port community system focus on all port sectors: container, break bulk, dry bulk and liquid bulk. All the links in the logistics chain can easily and efficiently exchange information through these services.
The PCSs in Europe and the US have long had a tradition of integrating all the stakeholders on to a single platform to make exchange of information seamless among the trading and trade facilitating community. India too had introduced its first port community system platform in 2007 where quite many ports were beginning to exchange information with shipping lines on the vessel management system and few smaller functions. However, the system was never implemented in its full scope as this would have meant upgrading a number of processes and bringing on board all stakeholders from the Customs to the freight forwarders and dry ports on one page. “A good collaboration with the key authorities, as well as with the stakeholders, potential customers and local trade associations is extremely critical in the success of such a system’s benefits reaching the end users,” says Sailesh Bhatia of the Association of Multimodal Operators of India. While there was consensus among all players about the need for such a system, what took ten years for the next version of the PCS to be spoken about is perhaps the changes required at the fiscal, regulatory and the port level.
With much of these nittygritties in place, India will perhaps have the much needed singlewindow information exchange and communication system that would standardise all procedures involved in export-import trade. Take for instance the manner in which a shipping line communicates with the ports. In the absence of a PCS, the carrier will have to engage with each authority separately providing information in bits and pieces. This has a direct impact on the costs of operating a complex information processing system. “A PCS can be tremendously helpful because it will ensure we as carriers interact with entities via the system only once. Each stakeholder is on the same system and can access data without the shipping line relaying information multiple times in different formats.” Inputting all the data on one system will result in huge manpower saving for a shipping line as the runner on ground need not be deployed to personally engage with the Customs and other authorities personally. At Haropa, one of France’s largest ports, all entities involved in a transaction from the port authorities to the municipal corporation of Le Havre to the transporters in city communicate through the PCS.
Here PCS is not just a message exchange platform but in fact, allows one to complete the entire transaction end to end. This helps in bringing down the transaction time from the average of 6.5 days to 2.5 days. “A common community platform will ensure everything works real time, goods won’t be surreptitiously stolen or moved from CFSs and data security is assured,” Bhatia said. Data security or timeliness of information is crucial for the government to identify and plug leaks in the complex shipping transaction.
But, the question everyone is asking is India ready for such a standardisation of disparate practices that the industry and customers have grown used to over the last many decades. To begin with, the Indian Ports Authority, has called for three international parties to make a presentation on the scope of activity involved. “The government is keen on implementing this on a PPP model where the government invests in the system and monitors the participation of the industry,” a government official said. The IPA is examining the possibility of upgrading the existing PCS to involve features or creating a new system to incorporate the requirements of the trade. However, the association heads who are working with the government assure there would be no big technological disruptions required to meet the tasks of the PCS from the stakeholders. “Each stakeholder has to create a bridge and customise it to the Indian transaction,” the shipping line official confirmed. The time taken for the PCS to come in to effect in total is probably a year and a half from today, the government official said. The Ministry of Shipping is, in fact, looking at an ambitious deadline of implementing the PCS in all major ports within 18 months of the contract being awarded to the vendor. Some, however, disagree. “PCS 2.0 is a long way off from being implemented,” says Capt Ashok Kumar Bhattacharjee, General Secretary, IPPTA. The IT task force that has been constituted to look through the current PCS and conduct a gap analysis is yet to submit its report to the IPA. After this study is completed tenders could be floated to create the PCS.
By far, the key challenge is that of integrating different operating procedures and IT systems of disparate ports on the single platform. About 30,0000 messages are exchanged among major and private ports today on a daily basis. Close to 15 banks are connected to the e-payment facility and financial transactions made via the PCS are valued at an average of `7 billion monthly with the current version of the PCS. This will quadruple with the new PCS. The Indian Ports Association has urged all the port chairpersons to create awareness drives. The nodal facilitating body has also reached out to the ports to see how the PCS that is at the heart of the spider’s web can make most of them paperless in functioning. A former Chairman of a major port said, “Once the PCS is implemented, the port should function merely as a clearing centre or a transit point where cargo is stationed until it is shipped off.”
Implementing the new PCS will become mandatory once India signs the WTO facilitation agreement. The agreement seeks to streamline customs rules and procedures across member nations involving in international trade to create platforms that are in sync with international standards. Therefore, the sooner India embraces a standardized technology to automate its logistics processes, the sooner it will be propelled in to the league of countries that enable easier business processes.