Nathula trade grounded by levy of high and unjustified customs duty by China

INDIAN TRADERS SUSPEND TRADING, WANT TO NEGOTIATE RELAXATION FIRST

RANJIT SINGH

GANGTOK, 03 June: Barely a month into its ninth season, and border trade between India and China has been suspended. Indian traders have refused to cross over to the trade mart on the Chinese side, Renquinngang and it is now a week that border trade has remained grounded. The reason behind the suspension of trading activities, as informed by traders, is undue harassment by the Chinese customs officials and the levying of what traders see as unjustified and usurious customs duty. Border Trade, incidentally, is duty-free trading [of items on the prescribed list].

This is not the first time that trade has been disrupted over such issues. Ever since Nathula was reopened to trade, officials on either side have been in a near competition to court controversy and constrict trade. This season, controversy has erupted over the excessive rates of customs duties being charged by the Chinese custom officials.

In fact, as informed by traders, the Chinese duties are so high that border trade has become impractical and a loss inducing venture for the Indian traders. Traders inform that the customs rates on goods being charged by the Chinese customs for payment by the Indian traders is 40% to 50% the value of goods.

The collection and enforcement of this Chinese customs duty is further exacerbated as the Chinese seemingly apply their rates on each and every item of good being taken on the other side and not as per weight or any other standard application of rates.

So, if a jar of Vanaspati ghee – which is in very high demand on the Chinese side and which has among the highest exports – costs Rs. 1,100 the customs duty which the Chinese are charging on each jar is Rs. 500. There are hundreds of jars of Vanaspati ghee crossing over into China on a good trading day. The same goes for other items of trade as well. “If the custom duty was 5% or 10% we would not mind paying it but this is excessive,” says a trader.

And the Chinese, it is informed, are very strict in applying the rates on each and every single item. It needs also to be mentioned that border trade, such as the one going on between India and China through the Nathula pass, is duty free. The very concept of border trade, as per the MoU, implies a no tax regime. This is now being violated by China. However, it also needs to be mentioned that the Chinese had attempted to do this last year as well; the controversy then had been subsequently settled.

Border trade through Nathula was reopened on 06 July 2006 with a bi-lateral agreement for border trade as a duty free port [for prescribed list of goods] on both sides. Trade picked up from the year 2008 onwards and export has been substantially higher than imports for Indian traders. In fact, official scale of import is negligible. 

Last year, the Chinese Customs is reported to have restricted the supply of the most in-demand good - Vegetable Oils - to 10 jars per trader per consignment. This year, the limit has been reduced to a clearly unfair One jar per trader per trader. This limit is for the amount that Indian traders can supply duty-free. Every jar [irrespective of weight/ quantity] above this limit attracts customs duty of 54 Yuan (Rs. 499.50), it is informed. 

Not only vegetable oils, but they are trying to impose tax on other products like tea, blankets etc.  The Indian traders are currently facing tough competition with the traders at the Khasa border between Nepal and Tibet and the taxation will further affect the present market. 

In protest against what they see as violation of a bi-lateral agreement by Chinese authorities [by taxing goods in a duty-free trade] the traders are voluntarily not participating in the trade and demanding proper guidelines on the subject as it is confusing for present and future trade. The traders are hoping that the State and Central governments will intervene in the matter.

Meanwhile, a delegation of Indian traders is scheduled to visit Renquinqaang, the trade mart on the Tibetan side, some time later this week. They hope to engage the Chinese customs officials in talks and negotiate a relaxation from the Chinese and resume the trade.

It may also be mentioned that there is not much that the state administration or the Industries Department can do about this matter. At most, the department can communicate with the Ministry of Commerce in New Delhi. 

The traders, however, are not taking any chances and have planned to negotiate on their own. Till there is some kind of an understanding and a toning down by the Chinese officials the imbroglio is likely to continue. Border trade between the two regions had only resumed in the first week of May this year.