The World Trade Organisation (WTO)’s Customs Moratorium on Electronic Transmissions (Moratorium) is due for re-assessment at the 12th Ministerial Conference of the WTO being held at Nur-Sultan, Kazakhstan from 8 to 11 June 2020.
Currently, digitised products are not subjected to customs as historically this presented a technical challenge and thereafter the Moratorium gave it a legal cover. Overtime, the technical feasibility has improved and therefore the case for an automatic rollover of the ‘temporary’ moratorium without assessing the economic implications has weakened.
Both the economic impact and technical feasibility are directly related to what is considered under the scope of electronic transmission. A wide definition could present many challenges and make it impractical to lift the Moratorium. Given this, we believe that a wider definition is a nonstarter.
Conversely, a narrow definition could be a basis for a realistic evaluation of the merits and demerits of the Moratorium.
In framing a narrow definition, concerns such as classification of digitised products (as goods or services), and the scope and valuation of the dutiable object (whether the value should be limited to the carrier medium carrying content or subsume the content as well) need to be settled.
In this backdrop, NASSCOM has put together an Industry Consultation Paper on the issue of the Moratorium. This paper seeks to (i) inform framing of an appropriate scope of electronic transmissions; and (ii) identify concerns that may remain should the Moratorium be lifted based on a narrowly defined scope.
Accordingly, this paper seeks industry feedback to:
- Formulate a narrow definition which would ensure that there is least uncertainty on services being clubbed under the scope of electronic transmissions, with a view that this narrow definition could be proposed by India to the WTO to drive a global consensus.
- Evaluate the pros and cons for India and more specifically, the Indian IT industry including e-commerce considering both imports and exports, if a global consensus on the definition is achieved.
- Understand whether lifting of the moratorium, in the absence of a global consensus, could lead to certain IT products and/ or services to be covered under the scope of electronic transmissions. This concern arises as nations may take unilateral positions with respect to the scope of electronic transmissions. However, the concern needs to be tempered with the view that a nation’s position would apply uniformly to both exports and imports of that country. Given that services are a major export for the developed countries which are India’s export markets, it may be argued that it would not be beneficial for the developed countries to cover IT services under the scope of electronic transmissions.
- Determine whether the strategy for the Indian Government should be
- to propose a narrow definition that meets the test in (i) above; and
- evangelise this globally and based on this take a position in June 2020.
- Understand the concerns of the Software Products industry given that India’s Software Products annual revenue is USD 7.1 billion out of which USD 2.3 billion are exports. Given that we are a net importer with Software Products import at nearly USD 10 billion, what could be the impact on the Software Products industry, should the moratorium be lifted?
- Understand, if it is in India’s interest to consider a rollover of Moratorium for a further period of two years, in either of the two scenarios:
- There is a consensus on the scope of the narrow definition; or
- There is no consensus
- Understand, the implications of a continued Moratorium keeping in mind trends such as substitution of trade in goods in favour of trade in services, on account of technologies such as additive manufacturing.
We request the inputs been sent to the NASSCOM Public Policy team, latest by 31st January 2020. Please send in all inputs to email@example.com