DGFT issues draft Modalities for Pilot Launch of E-Commerce Export Hubs (ECEH)

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DGFT issues draft Modalities for Pilot Launch of E-Commerce Export Hubs (ECEH)

Swapnil

@swapnilyadavsy

September 1, 2024

Public Policy

202

DGFT issues draft Modalities for Pilot Launch of E-Commerce Export Hubs (ECEH)

The Directorate General of Foreign Trade (DGFT), Ministry of Commerce & Industry has issued the draft modalities for the pilot launch of E-Commerce Export Hubs (ECEH). In the Section B of the Chapter 9 of the Foreign Trade Policy 2023, E-Commerce Export Hubs (ECEH) were proposed as designated areas, acting as a centre for favourable business infrastructure and facilities for Cross Border E-Commerce activities. The major objectives of ECEH are to provide for predictability and shortest possible turnaround time for E-Commerce Exports, easy re-import for E-Commerce returns or rejects, bringing various cross-border E-Commerce stakeholders under one roof. These modalities marking the pilot launch of ECEH are a significant step in enhancing India’s e-commerce export competitiveness by improving processes and thereby enhancing Ease of Doing Business (EoDB).

On 4 January 2021, NASSCOM submitted a representation to the Commerce Secretary, towards the review of the previous Foreign Trade Policy 2015 – 2020 (FTP) that may significantly boost the performance of IT/ITeS industry in India. Additionally NASSCOM had interacted with the Hon’ble Minister of Commerce and Industry regarding the review of the FTP (read details here) and had submitted detailed response to the Directorate General of Foreign Trade on the review of the FTP (read details here)

As a result of nasscom’s s persistent efforts in engaging DGFT towards improving the e-commerce export framework, these modalities address several key issues highlighted by Nasscom in our previous recommendations (Read here). Further to the pilot launch and suitable feedback(s), Notification(s) and Circular(s) shall also be issued. In this regard, DGFT has also sought detailed proposals for setting up ECEH for examination, support and hand-holding.

Understanding the Draft Modalities

1. Movement of Goods to ECEH

Goods transported from suppliers to ECEH facilities must be accompanied by a document as per GST law, such as an E-way bill. The transporter must present this document to the ECEH operator, who will electronically capture its details. This system ensures transparency and compliance by tracking goods from the supplier to the ECEH.

2. Pre-Screening of Goods

Upon arrival at the ECEH, goods will undergo pre-screening by the ECEH operator. This process involves verifying the goods' description, classification, and compliance with EXIM policy against the GST document. Discrepancies are corrected in the GST document, and the data is fed into Customs Systems for reconciliation, ensuring regulatory standards are met.

3. Design of ECEH

The ECEH will feature two main areas:

Fulfilment Area: For storage, packing, labelling, and other preparation activities.
Customs Station: For customs clearance once, a buyer is identified.

The Customs Station may include ICT, ICD, AFS, or FPO, depending on logistics mode, integrating fulfilment and customs functions within a single hub.

4. Fulfilment Processes

ECEHs are designed to offer agglomeration benefits such as shared storage, packaging, labeling, certification, and testing facilities. This centralization aims to reduce costs and enhance efficiency for e-commerce exporters.

5. Process Flow for Customs Clearance

Once a buyer is identified:

A commercial invoice is generated.
The ECEH operator files the Shipping Bill (SB) and links it to the pre-screened GST document.
Physical packing occurs under customs supervision, with packages identified by unique QR codes.
The Cargo Ready Report is filed, and packages are registered on Customs Systems.
The Risk Management System (RMS) determines if an examination is necessary.
Goods are transported to the port of export under customs seal, and export-related claims are processed.

How the Draft Modalities address some our key concerns

1. Shared Facilities and Expedited Processes

The ECEH model incorporates shared fulfilment areas for storage, packing, and labelling. This approach aligns with Nasscom’s call for shared facilities.

Nasscom’s Recommendation: Establish E-Commerce Export Zones (EEZ) with shared storage, certification labs, and in-house customs clearance. Nasscom also recommended expedited GST refunds and waivers.

2. GST refunds

The electronic documentation and validation processes in ECEHs support efficient handling of GST-related compliance. Though the draft does not explicitly mention GST waivers, the integrated system may support quicker GST refunds and compliance

Nasscom’s Recommendation: Facilitate GST Input Tax Credit refunds within 24 hours and waive GST for services within EEZ.

3. E-Commerce Authorized Economic Operator (AEO) Program

The ECEH framework includes detailed customs clearance procedures and electronic systems that simplify the process. Although the draft does not specifically mention an e-Commerce AEO program, however the streamlined customs processes align with the end objective of our recommendations

Nasscom’s Recommendation: Create a simplified e-Commerce AEO program for MSMEs with benefits like facilitated customs clearance and automated GST refunds.

4. Returns and unsold Goods

The ECEH’s approach to handling returns and unsold goods suggests a structured method for managing such cases. This may indirectly support our recommendation for import-duty exemptions by facilitating efficient processing of returned goods.

5. Expanding India Post’s Reach

While the draft does not directly state the expansion of India Post’s network, the overall enhancement of logistics through ECEHs could complement existing postal services and support faster delivery timelines, aligning with our logistics improvement goals.

The draft modalities for E-Commerce Export Hubs represent a significant advancement in streamlining India’s e-commerce export processes. By incorporating centralized fulfilment and customs functions, the ECEH model aligns closely with several key recommendations made by Nasscom. As the pilot launch progresses, it will be crucial to evaluate its effectiveness in achieving these goals and supporting the growth of India’s e-commerce sector.

For any feedback please write to swapnil@nasscom.in

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Swapnil