Amid the strained Indo-China geopolitical relationship, the security around the Indian ports and airports have been tightened and increased. Now, shipments from China are going through a 100% mandatory physical check. That being said, foreign companies such as Apple which import many parts, components and even finished goods from China to India might be exempted from this imposition according to people who are in the know.
After the Galwan Valley incident where 20 Indian soldiers were killed in a face-off with Chinese soldiers, anti-China sentiments rose to an all-time high, which quickly translated to Indian consumers wanting to ban Chinese goods and companies. This, in turn, further led to the trade relationship between both countries being adversely affected.
Currently, this particular issue has been informally flagged and escalated to the finance ministry. This has been done by the Department for Promotion of Industry and Internal Trade (DPIIT) after the US-India Strategic Partnership Forum, which represents key US companies in India, raised their concerns regarding the same. The forum has also written to the finance ministry on this issue as well.
Commenting on this matter, a government official, in a statement, has replied saying the Indian Government doesn’t intend to cause any hardship to the industry and that the representation of the forum is currently being examined.
As of now, the government maintains that no formal instructions to customs departments to carry out such checks have been issued. However, the government believes that the department of customs might be making them due to intelligence alerts. Also, because of the escalated issue, a new mechanism is being looked into which will possibly exempt the US and other non-China companies from the latest enhanced scrutiny.
The 100% physical examination of Chinese imports in India started from Monday midnight due to which numerous shipments of US tech and telecom companies have gotten stuck. US Companies such as the popular smartphone manufacturer Apple relies heavily on the import of both finished goods and components from China to service the Indian market. These Chinese imports of Apple in India are received at the Chennai hub which is also a key hub when it comes to the import of medical devices and auto components.
Among those impacted companies whose shipments were delayed are certain pharmaceutical firms, who have been unable to receive essential raw materials like active pharmaceutical ingredients (APIs) and key starting materials (KSMs) from the Mumbai port. Unfortunately, for Indian Pharma companies, currently, almost 70 per cent of all bulk drugs are imported from China by India. Thus, without the shipments coming in on time, these Pharma companies run the risk of being crippled.
Lastly, it should also be noted that companies, amid the growing levels of disruption in the supply chain, now are worried about it having an impact on production. Because of delays in receiving the parts which are dependent on Chinese imports, it might cause scarcity to rise, which could further lead to increased prices of the finished goods.
Businesses are also worried about the additional costs that the 100% physical examination of goods are going to lead to as custom brokers need extra manpower for this activity. Along with that, the physical checks will be leading to businesses having to repackage the goods which is another unnecessary and time-consuming activity.
Now, several business-related lobby groups, keeping these difficulties in mind, are actively campaigning for the free movement of goods. However, the Government is yet to address them with a concrete answer. We will keep you updated on all future developments. Until then, stay tuned!