Easier Customs norms for IKEA

Ikea. Photo: Wikipedia
Swedish furniture maker IKEA has asked the government for a faster Customs clearance mechanism for smooth business operations as it is gets ready to open its first store in India.

The finance ministry has assured the company, which is making the largest foreign direct investment so far in the single-brand retail space, of speedier clearance of cargo at ports to help it save time and cost. The first store will be opened in Hyderabad in 2017.

"IKEA has assured compliance to us and we have assured them time. The company has got into partnerships with the Customs of the 16 countries they operate in for faster clearance of cargo. They want a similar arrangement in India," said a government official.

The company's warehouse is coming up near Jawaharlal Nehru Port, east of Mumbai. It would bring in FDI of Rs 10,500 crore.

The government has assured the multinational retailer of import facilitation through a revamped importers scheme it plans to launch in a few months.

The finance ministry, in consultation with the trade bodies, is looking to unite and expand the scope of two separate programmes for importers - Accredited Clients Programme (ACP) and Authorised Economic Operator (AEO) scheme, allowing deferred payments of customs duty, relief from routine checks, and direct port transfers, besides significantly easing eligibility pre-conditions.

"We have informed IKEA that it can become the member of the revamped scheme to enjoy facilitation benefits. We have studied the performance of these schemes internationally and analysed how the US and China scaled it up. We realised that you cannot have an authorisation programme with a mindset of enforcement," another official added.

The revamped scheme will allow direct port transfers, allowing them to directly move their cargo as it arrives at the land or sea port to the warehouse without any checks.

"Importers can keep the transporter ready at the port ahead of the arrival of the cargo and plan their inventories better without a lag. IKEA works this way globally," said the official.

The government cleared IKEA's FDI proposal in 2013 to set up 15 stores and allied infrastructure in over a decade.

The Swedish company lobbied with then United Progressive Alliance government for relaxation in the 30 per cent mandatory sourcing norm. The government had changed the norms, allowing the company to source from anyone in the domestic market rather than the previously prescribed small and medium enterprises.

Last year, IKEA signed MoUs with Karnataka, Telangana, Uttar Pradesh and Maharashtra to set up stores. To be accessible IKEA is looking for store sites with direct access to mass public transport systems, preferably the metro and located near the highway. The Narendra Modi government is promoting ease of doing business by cutting red tape at various levels in order to make India one of the top investment destinations.

An AEO programme offers members reduced examination and inspection, higher facilitation than ACP clients, and acceptance of pre-arrival import declarations. Only about 18 entities so far have AEO status in India. At present, about 13 per cent of imports happen through the Accredited Clients Programme route and has just about 300-odd members, despite being launched in 2005.

The government is aiming that at least 40 per cent of imports occur through the revamped programme, with more than 1,000 members.

The US has 11,000 members on board; China over 1,000.

The government looking to do away with the eligibility criterion of Rs 10 crore worth imports in the previous fiscal to encourage medium and small enterprises be a part of this scheme as against just large members.

The government will also likely do away with the condition of no pending show-cause notice, which has been the biggest deterrent of the scheme so far.

The single unified scheme for importers will focus on taxpayers' services, extending convenience benefits. The central board of excise and customs is holding consultations with other government departments to come on board and mutually recognise imports and opt for only risk-based assessment for member importers.

"Talks are also on with the service tax and excise duty departments to work out a process for mutual recognition," said an official.


With a promised investment of Rs 10,500 crore, Swedish furniture maker IKEA is going to provide the largest FDI to India in single-brand retail:


Allow mandatory 30% sourcing from sources other than MSMEs
  • Made in: 2012
  • Status: Allowed by UPA govt
Reaching 30% local sourcing within five years from approval date will be tough. Count sourcing from the day of store opening
  • Made in: 2015
  • Status: Government obliged
Seeking easier and faster Customs clearance
  • Made in: 2016
  • Status: Government assures import facilitation

  • To open 10-15 stores over the next decade. Each store to be about 350,000 sq ft
  • First store coming up in Hyderabad in 2 years

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