‘ROLE of CFS in INDIA – Import & Export’

All Cargo imported into the country or exported out of the country by sea, air, land or rail routes are governed by the provisions of the Customs Act, 1962 and other laws of the country related to the country. Customs ensures that the import and export of goods are in compliance with the Customs Act and other laws in force. Accordingly, customs procedures are intended to provide definite, predictable methods by which the goods can enter the country and get cleared on payment of applicable import duties, fulfilling the requirements of the law of the land.

To regulate and to exercise effective control over import and export activities, goods are allowed for import/export at notified places under section 7 of the Customs Act, 1962. Custodians are appointed under section 45 of the Customs Act, 1962 for safe storage of goods till they are cleared for home consumption or warehoused. Clearance of goods involves classification, assessment, examination and payment of Customs duty on imported cargo on the basis of Bill of Entry presented by the importer or his authorized agent. The Central Board of Excise and Customs (CBEC) have prescribed the procedures through notifications, rules, regulations and circulars which are implemented by field formations. These are updated and modified according to the need, demands of trade and to improve the efficiency of the system.

CFS is a place where containers are stuffed, de-stuffed and segregation of export/import cargo takes place. With the growing volume of international trade, the need for expeditious clearance of goods at the port within the minimum possible time has been gaining importance. This is more so when the ports are facing congestion at their premises. Further, for optimal utilization of existing infrastructure (space, equipment), the goods that land at ports need to be evacuated straight away without any loss of time. Accordingly the concept of Container Freight Stations, (CFS) has grown in importance along with the development and growth of ports.

A CFS is an extended arm of Port/ ICD where import/ export goods are kept till completion of their examination and clearance. The imported goods can be immediately shifted from the port to CFS which also helps in the reduction of port congestion. All the activities related to clearance of goods for home consumption, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export and transshipments takes place from such stations. 

Therefore, clearance of goods from CFS is an important point of consideration for trade in respect of export/ import Cargo as it is the final Customs contact point.

The goods received at ports are brought to CFS and stacked for customs and examination for deliverance to consignee. In respect of import consignment, the Steamer Agents/liners/ Importers desiring to take the consignment to CFS, file Import General Manifests in the port. After obtaining the permission from the AC/DC, the Container moves to CFS under Customs escort or under bond and bank guarantee. The CFS allow de-stuffing of the goods. The CHA / importer files the Bill of Entry at Customs House and then Customs formalities of assessment, examination and payment of duty are completed. Thereafter, Customs gives “Out of Charge” and the Custodian releases the goods from CFS by issuing a Gate-Pass.

In respect of exports, the goods are brought directly to CFS under a Shipping Bill. The export cargo in Less than Container Load (LCL)/ Full container Load (FCL) is received by the Custodian of CFS for safe custody. After stuffing of the goods, Container/ Customs Bonded Truck (CBT) is sealed by the Custom Officer and the same is removed from CFS for export through the terminal.

The Inter Ministerial Group (IMG) noted that the Department of Revenue has already taken certain significant steps in the area of facilitation of the trade and simplification of procedures. There is a permanent Action Group on Trade Facilitation which recommends simplification of customs procedures leading to reduction of dwell time in cargo clearances. This group also provides inputs for Trade Facilitation Negotiations at the WTO  The Action Group has since its inception, made The recommendations on which the CBEC has already issued instructions with the overall objective of reduction in dwell time and simplification of procedures:-

1. Direct clearance facility of containers from the ports, without the need for transshipping them to CFS/Customs areas provided to Importers availing Green Channel facility.
2. Reducing procedural formalities at airports by dispensing with the permission required from Customs for palletization of cargo.
3. Imposing penalty on incorrect and incomplete filing of import manifest/ report with the objective of reducing dwell time of cargo.

The overall goal should be to release about 70% of the consignments on the basis of system appraisal and without examination of the cargo. This should be achieved within six months of the full implementation and should be monitored by the CBEC. Regular periodic monitoring should be done by CBEC for further enhancing the facilitation measures.

A faster delivery system needs to be put into place by creating a separate area in the port premises clearly earmarked for immediate delivery of cargo to the specified accredited importers. The proposed arrangement would enable accredited importers to move out their containers without necessarily going through a C.F.S.

Thus, the recommendations made by the Inter Ministerial Group (IMG) in the present report will bring about an efficient and facilitative environment for expeditious Customs clearance of cargo.

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Piracy on the high seas - Its impact on trade and business

For many people, the phrase maritime piracy evokes images of a one-eyed sailor drinking rum and singing obscene songs. For some younger people, piracy may bring to mind the picture of Hollywood actor Johnny Depp, wearing a headband in a scene from the film Pirates of the Caribbean.

However Maritime Piracy is not just an action movie. It is the practice of attacking and robbing ships at sea. The UN Convention on the Law of the Sea defines piracy as “illegal acts of violence or detention” committed on the high seas against ships or aircraft. Piracy is a serious problem and it poses a real threat not only to the safety of vessels and their crews, but also to the economies of affected countries.

Although the issue of piracy recently rather dropped out of the top headlines, the world’s oceans have certainly not become any safer. On the contrary, the level of risk remains high, especially around the coasts of Africa and in the Singapore Straits.  For example in the Horn of Africa, despite a strong presence of naval forces patrolling in the Gulf of Aden and the adjacent Indian Ocean; merchant navy vessels are regularly attacked and hijacked. Of 445 attacks reported globally in 2010, 219 were attributed to Somali pirates. 49 of these were successful hijacking. Yet the waters of Somalia are far from being the only piracy hotspot for International Shipping. Vessels also fall prey to attacks especially off the coast of Nigeria, Indonesia, Malaysia, Bangladesh and in South China Sea.

Though the attacks may differ in location, method and impact, they all share a common trait which is they have become a problem of ‘International Politics’. There are 2 reasons:

1. Shipping routes form arteries of global economy accounting for over 80% of International trade.  So violent attacks here have the potential to cause real harm
2. Piracy touches directly on elementary interests of all trading nations. Security problems on land are increasingly linked to questions of maritime security in the global context.

The spectrum of options is broad and advise is offered to ship owners and masters in constantly being reviewed and Best Management practices guide compiled by IMO and the shipping industry. Measures adopted include registering vessels, planning the transit through the high risk areas around Somalia with national and international authorities that have forces deployed to the region, developing an internal emergency plan to provide an effective response. 

Since the west coast of India is also vulnerable to the long range activities of the Somali pirates, constant vigilance has been enforced.  This however does not prevent random acts of stealing on vessel at anchor which can be considered as piracy on a reduced scale. 

But piracy is not the only security threat at sea. Piracy has drawn attention to wider problems of maritime insecurity, such as trafficking and smuggling of humans, weapons and narcotics, and illegal and unregulated fishing activities. Hence, the attention currently being given to the fight against piracy could be used as a stepping stone by the international community to create sustainable institutions of maritime security. The Indian Government is particularly concerned about the transit of vessels along its coast especially after the Nov 2008 Mumbai terrorist attack where the terrorist landed in the city from the sea.

International institutions are crucial for counter-piracy efforts, but they require long-term and multinational commitment. The African Union has already declared that its objective is to implement the African Maritime Security Strategy by 2050. Among the strategy’s goals are to “ensure security and safety of maritime transportation systems,” and to “prevent hostile and criminal acts at sea, and to coordinate/harmonize the prosecution of the offenders.”

It is a long-term strategy, but without a doubt concerted action is needed now to stop piracy in West and South Africa before it deteriorates and spreads to other coastal areas. 

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Crude Oil exports from U.S. - A recent welcome development!

Mineral oil, now known as crude oil was accidently discovered in Pennsylvania (US) in 1848. The first oil well was drilled in the same location in 1859 and commercial production commenced in 1860. Exports of crude oil by sea commenced in 1861, when a wooden hulled sailing ship, “Elizabeth Watts” carried a full cargo of oil and economic development US became the largest consumer of crude oil (in barrels) from US to UK across the Atlantic.

With industrialization and economic development US became the largest consumer of crude oil. For over a century, US were both an exporter and importer of crude oil, but owing to its high domestic consumption has been a new importer.

Exporting domestically produced crude oil made US an important participant in the global crude oil market, which sets crude prices. This ended in the 1970’s when, in response to the 1973 oil embargo crises, a ban on domestic oil exports was imposed.

Since then, the ban has continued and with growing domestic consumption, declining production for decades, the dependence on imports increased, and made exports unthinkable. Developments of new technology, horizontal drilling and hydraulic fracturing have squeezed torrents of oil from shale rock deep underground. This has resulted in production of more oil in 2013 than ever before and production surpassed imports for the first time in over two decades.

In June 2015, US surpassed Russia and Saudi Arabia to become the world’s biggest producer of crude oil and gas. The next logical step was obviously to lift the ban on exports. However on account of high domestic consumption, US still will be an importer of oil though imports have reduced by about 50% over the last five years.

Now in a historic move considered unthinkable even a few years ago, US has lifted a 40 year ban (1970’s) on export of crude oil and exports of crude oil have commenced. This would be beneficial for energy deficient countries, such as China, Japan, Korea, India, etc. as it would provide one more source for crude oil imports and also have a moderating and stabilizing effect in global oil prices in the long term.

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Ship inspection by high-flying robots! Drone-based remote structural surveys could cut costs and save valuable time

During ship construction and thereafter during the operational life of a vessel, a number of inspections and surveys are required to be carried out. In this regard, a recent innovation is described below.

Unmanned aerial vehicles (UAVs) are increasingly being used for a variety of tasks in the maritime industry to save time, money and, wherever possible, to increase operational efficiency.

With shipbuilders, for example, continually looking for cost-saving innovations and new ways to speed up production, UAVs - more commonly referred to as drone technology - potentially provide a cost-effective solution for many aspects within the construction and maintenance processes.

Ship surveys and inspection work are the type of tasks which could be performed by UAVs and pioneering demonstration tests have recently been carried out in a Polish shipyard to gauge the capability of drones for this essential work. This latest use of ever-evolving drone technology has taken place at the Remontova ship repair yard and involved a flying robot inspecting internal spaces on a ship following an overhaul.

The inspection was carried out on the chemical and product tanker CPO Japan. Conducted by the DNV GL classification team based in Gdansk, Poland, camera-equipped drones were used to visually check the condition of remote structural components through a video streamed to a tablet which was also recorded for review and documentation. One surveyor operated the drone while a second checked the video feed in real time.

The drone was able to access all areas inside the vessel's cargo tanks and, with its powerful headlight and high-definition camera, successfully produced video footage considered to be good enough quality-wise for initial inspection purposes. Traditional close-up surveys may still be required if any structural damage is detected.

According to the surveyors managing the technology demonstration tests, the UAV was remarkably stable in confined spaces as it produced the necessary visual inspection material. Its stability was such that it even managed to rest against the bulkhead while hovering. Contact with the tank wall is possible because of the special frames which protect the propellers.

"We have been looking at ways we could help our customers by accelerating the survey process," says Cezary Galinski, manager of the DNV GL maritime classification flying squad in Gdansk. "Camera-equipped drones are now much more widely available and affordable, and by using them for a first screening we can identify areas that require closer inspection quickly and without extensive staging which can be both costly and time-consuming."

Visual inspection by drones may also prove to be very useful in helping to remove the need for more detailed, hands-on inspections, such as ultrasound thickness measurements, which would avoid the time-consuming and costly expense of erecting scaffolding.

We compliment the team of DNV GL and Remontova shipyard, Poland for the above innovation and look forward to the benefits that would accrue to the shipping industry in savings in time and cost, and enhancement of safety during inspections and surveys.

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“Green” ship recycling yards at Alang…

The recycling industry has changed dramatically over the last few years. It has developed from being a shameful part of our business to being an area that most modern owner wants to be proud of – in the same way they are proud of the standard of their ships in operation. This change has come in part due to the constant focus from environmental groups and the media and has been made possible with a will to change the international legislation governing this area. In a competitive world, the responsibility we have towards our environment cannot be shouldered by some ship owners alone – it must be a common effort from all players in the industry.

The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships was adopted by the International Maritime Organization (IMO) in May 2009.

The Convention regulates the design, construction, operation and preparation of ships to allow for safe and environmentally sound recycling. It will also provide strict guidelines for the operation of ship-recycling yards. The Convention dictates that vessels must carry an Inventory of Hazardous Materials (IHM) on-board. Ship-recycling yards will be required to provide a detailed ship recycling plan before work can commence. Member-states will be asked to ensure that facilities under their jurisdiction comply with the Convention.

Green Ship Recycling services is specially designed for the socially responsible ship owners who demand a demolition process that offers safe working environment at the yard, together with safe removal and disposal of hazardous materials on board. The process of green recycling is tedious and requires proper planning and preparation. "Pre-cleaning" is the first requirement prior demolition. Pre-cleaning is the safe removal of all hazardous materials and wastes such as asbestos, fuel oils and lubes, cable insulation and other PCBs, deck coverings and insulation materials, gases and refrigerants (CFC), paints and thinners, stores and spares, fire alarm sensors and radioactive materials and all other hazardous and potentially hazardous materials. An IHM or Green Passport is the pre-requisite prior to the vessel moving to the recycling facilities.

Whilst in the recycling facility, the acceptable approach is "Demolition" which is the actual cutting up of the ship’s steel structure in blocks of manageable sizes. The correct trimming and steel cutting including the removal arrangements are critical. The blocks with oil content and machinery are placed in special areas on shore with proper drainage and containment arrangements. Firefighting procedures and evacuation routes are manned properly.

The process of Pre-Cleaning and Demolition are fully documented in a 'Green Recycle Plan' - a document developed using the IHM or Green Passport with inputs from yard. This plan has to be prepared in advance and is vital towards green recycling.

Two ship-breaking yards from Alang in Gujarat have become the first ship recycling facilities in entire South Asia to be issued Statements of Compliance (SoC) by Japan’s leading classification society, ClassNK, for taking steps for safer and greener ship recycling. This certification comes at a time when most shipbreaking yards at this recycling unit near Bhavnagar have been battling issues of pollution and contamination for last three decades. Overall the companies feel that Class NK certificate holders from Alang will be given priority when they will go for buying ships.

The main objective is to implement a proper health, safety and environmental approach towards ship recycling. It is hoped that Ship Owners and Ship Breakers work in tandem to implement this project thus ensuring a better and healthier living for future generations.

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DNV GL Approves First Polar Code Compliant Vessel

DNV GL and the Danish Maritime Authority have confirmed that the AHTS Magne Viking, owned by Viking Supply Ships, is in compliance with the IMO Polar Code – an industry first for the classification society.

 The 85-meter (280-foot) Magne Viking, built in 2011, is a high Ice-classed AHTS vessel capable of operations in harsh environment offshore regions, as well as Arctic/Sub-Arctic operations.

Ships operating in the Arctic and Antarctic are exposed to a number of unique risks. Poor weather conditions and the relative lack of good charts, communication systems and other navigational aids pose challenges for mariners. The remoteness of the areas makes rescue or clean-up operations difficult and costly. Cold temperatures may reduce the effectiveness of numerous components of the ship, ranging from deck machinery and emergency equipment to sea suctions. When ice is present, it can impose additional loads on the hull, propulsion system and appendages.

A risk-based approach to regulation is well-established now at IMO and has been incorporated into the Polar Code.

Based on long experience from Arctic operations in low temperatures and ice covered waters, Viking Supply Ships saw value in the Polar Code and decided to implement it early on. The process has included upgrades to the vessel and equipment as well as providing the required documentation.

 The International code of safety for ships operating in polar waters (Polar Code) covers the full range of design, construction, equipment, operational training, search and rescue and environmental protection matters relevant to ships operating in the inhospitable waters surrounding the two poles.

The IMO Polar Code is mandatory for all SOLAS vessel entering Arctic and Antarctic waters from 1 January 2017. The Code is an add-on to existing IMO codes where the main requirements are related to safety (SOLAS) and protection of the environment (MARPOL).

The Code will require ships intending to operate in the defined waters of the Antarctica and Arctic to apply for a Polar Ship Certificate, which would classify the vessel as Category A ship - ships designed for operation in polar waters at least in medium first-year ice, which may include old ice inclusions; Category B ship - a ship not included in category A, designed for operation in polar waters in at least thin first-year ice, which may include old ice inclusions; or Category C ship - a ship designed to operate in open water or in ice conditions less severe than those included in Categories A and B.

The issuance of a certificate would require an assessment, taking into account the anticipated range of operating conditions and hazards the ship may encounter in the polar waters. The assessment would include information on identified operational limitations, and plans or procedures or additional safety equipment necessary to mitigate incidents with potential safety or environmental consequences. Ships will need to carry a Polar Water Operational Manual, to provide the Owner, Operator, Master and crew with sufficient information regarding the ship's operational capabilities and limitations in order to support their decision-making process.

The chapters in the Code each set out goals and functional requirements, to include those covering ship structure; stability and subdivision; watertight and weather tight integrity; machinery installations; operational safety; fire safety/protection; life-saving appliances and arrangements; safety of navigation; communications; voyage planning; manning and training; prevention of oil pollution; prevention of pollution from noxious liquid substances from ships; prevention of pollution by sewage from ships; and prevention of pollution by discharge of garbage from ships.

The Polar code regulation will be implemented through a new SOLAS registration 4, chapter XIV, “Safety Measures for Ships Operating in Polar Waters”, and by amendments to the MARPOL Convention.

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Indian Coastal Shipping – Need of the Hour!

India has a long coastline, spanning 7517 kilometers, forming one of the biggest peninsulas in the world. It is serviced by 12 major ports and 187 notified minor and intermediate ports. These ports account for nearly 90% (by volume) of India’s international trade. Yet, coastal shipping accounts for about only 6 to 7% per cent of the country’s total domestic freight (on a tonne-km basis)

The explosive economic growth as seen in India over the past decade has led to congested roads and over burned railway network. India has 4 million kms of roads, accounting for nearly 60% of the domestic traffic of which the National Highways’, which are 1.7% of the network, carry as much as 40% of the road freight. The Indian Railway network, one of the largest in the world is overburdened and operating at over 100% utilization. While there are numerous projects for up gradation under way, these projects are unlikely to keep pace and meet the future demand.

Coastal shipping is an alternate and most efficient mode of transportation that can help address the challenges faced through use of            and rail. World over use of sea/waterways for transportation is much more prevalent. It is apparent that India has a very significant dependence on road to move cargo. In the case of China and Europe, waterways have a larger share than that of road or rail which is approximately 40 to 41%. There are many inherent advantages of this mode of transportation. Coastal shipping or use of water as a mode of transportation is much safer, more economical and less polluting. Waterways are 50% cheaper than road and about nearly 30% cheaper than rail. The coastal leg, apart from being more fuel efficient, can also carry larger parcel sizes and provides a great opportunity for consolidation of loads.

Looking at the Indian scenario, and to decongest the load on the roads and infrastructure, there is a compelling case for a modal shift of freight from road and rail to waterways. Although water ways is the most efficient, cheaper also viable mode of transport so then, why is it that only about 6% to 7% domestic cargo moves through the coastal mode? There are many reasons that contribute to this low utilization which are stated below:

v  The port marine dues are at a high cost

v  Bunker fuel costs are high and duty is levied 

v  Government taxation for domestic coastal operators is also high and

v  There are customs issues for domestic coastal shipping

There is a definite need to bring in a comprehensive coastal shipping policy. The Ministry of Shipping and Government of India is working on a new policy to promote coastal shipping.

While there is a general shortage of infrastructure for vessel and cargo handling at Indian ports, there is also a need for dedicated infrastructure to handle coastal vessels. There is need to improve operating efficiencies and bring down the overall cost for users. Increasing the draft at many of the minor ports and developing rail and road connectivity are some of steps required. To further augment the connectivity and usage, we need to build terminals and handling facilities on our inland waterways, so that the 14,500 kilometers of river network can be used and connected with the ports.

Expanding the cargo profile, today composition of the domestic cargo is basically dominated by POL, Coal and Iron ore – constituting 90% of all cargo.

The future of the port sector in India, especially for the minor ports hinges a lot on coastal movement and inland waterways. Minor private ports have to play an extremely critical role in the development of coastal shipping. The government needs to encourage PPP (public & private partnership) models for development of infrastructure at ports and rivers to develop connectivity and promote coastal movement.

While the debate on cargo v/s infrastructure has been ongoing, the port developers need to build capacity for attracting domestic cargo and by doing so reduce waiting time and improve operating efficiencies. Thus, coastal shipping will prove beneficial for GDP growth by shifting the transportation mode from land to sea.

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