Lack of proper monitoring of the movement of export and import cargo
The export transshipment module (ETM) in customs EDI system (ICES) allows electronic monitoring of container movement through exchange of electronic messages between the Customs and Port authorities, the ICDs and shipping lines. All carriers (shipping lines/ICDs/other carriers) engaged for transshipment of containers are necessarily required to register a bond/bank guarantee along with application for export transshipment permit in the ICES application, which allows the container with export cargo to be transshipped from the ICD to the gateway port. As soon as the export general manifest is filed, i.e. cargo is ready to move, the bond which was debited initially gets automatically credited. In the manual system, the monitoring is carried out through reconciliation of landing certificates for imported cargo and transference copies for exported cargo. The monitoring of cargo helps in preventing theft, pilferage of goods and containers. Audit found that in test checked ICDs under Noida, Kanpur, Bolpur, Chennai port and Kolkata port Commissionerates, the ETM was not operational. In nine Commissionerates where manual system of monitoring was being followed, transference copies of shipping bills for exports had not been received even after 90 days of exports.
On the import side, Audit observed that the import transshipment module (ITM) was not functioning in test checked ICDs and CFSs due to technical glitches. Tracking of containers to their actual destination was not possible through the ICES.
( Para 5.1.1)
Pendency of uncleared cargo
From the data on undisposed containers collected by Audit from 85 ICDs/CFSs test checked, it was seen that as on 31 March 2017, 7877 containers occupying total storage area of 1.17 lakh square metres was pending for disposal. Out of these, 3397 containers (57 per cent) were pending disposal for more than 3 years. Analysis of uncleared cargo revealed that pendency was mainly due to delays in issue of no objection certificates by Customs, delay in clearance certificates from participating agencies like plant quarantine and pollution control agencies, delay in implementing orders for destruction of cargo and delay in re- export of containers.
Among the undisposed containers, Audit found 469 containers of hazardous waste like metal scrap, municipal waste, used tyres and used war material, 262 containers of perishable goods like food items and 86 containers of teak /timber logs.
Dumping of Hazardous waste
The Handbook of Procedures 2009-14 of Foreign Trade Policy regulates import of metal scrap and waste. Import of seconds and defective rags, PET bottles and waste is regulated as per the Import Policy under Schedule I of ITC. The Hazardous Wastes (Management, Handling and Transboundary Movement) Rules 2008 regulate the import of metal scrap and used rubber tyres under special permission by the Ministry of Environment and Forest and clearance of State pollution control boards.
Audit found in test checked 85 ICDs and CFSs, as on 31 March 2017, that there were 469 containers of hazardous waste lying undisposed from periods ranging from one to seventeen years. These included live bombs, war material scrap in three ICDs in Rajasthan, 92 containers of used tyres, metal scrap and hazardous chemicals in one CFS under Mumbai Customs Zone II, 15 containers of hazardous cargo in ICD Tughlakabad and 50 containers of mixed waste in ICD Moradabad.
Through detailed analysis of some sample cases, Audit found that the modus operandi for import of hazardous waste included import of cargo without mandatory documentation, import of municipal waste through high sea sales and imports of municipal waste by misdeclaring the cargo.
Apart from the fact that these imports were made possible due to laxity in implementing the laid down procedures, Audit also noticed absence of clear procedures for re-export of containers with hazardous waste that resulted in such containers lying undisposed.
Undue advantage to importers under Section 23 of Customs Act
Under Section 23 of the Customs Act 1962, an importer may relinquish title to the imported goods under certain circumstances as long as the goods have not been assessed for domestic clearance or for deposit of goods in a warehouse. Audit found in cases of test checked ICDs and CFSs that as on 31 March 2017, 838 containers had been abandoned by the importers after filing of bills of entry. Scrutiny of such cases of abandoned cargo revealed that certain importers were routinely abandoning cargo while continuing to import similar goods. Audit did not find any recorded reasons which had led the importers to wilfully abandon goods of high value. The imported items involved parts of windmill, steel coils, rubber tyres, etc.
Internal control and internal audit
In ten sub-paragraphs under this topic, Audit has reported on issues indicating weak internal controls in the regulatory framework of ICDs and CFSs. These issues pertain to shortfall in execution of bond/ bank guarantees and insurance by custodians, shortfall in cost recovery charges, theft and pilferage of cargo, manual filing of bills of entry and shipping bills. Further, Audit found that Local Risk Management Committees (LRM), as required under a CBEC circular of 2007, were not set up in at least 12 ICDs from where data was received. Audit noticed deficiencies like non-constitution of Post Clearance Audit (PCA) wings, pending scrutiny of documents selected for PCA audit, and non-existent internal audit.
(Para 5.8.1 to 5.8.10)