Chinese and Indian traders have found a new way of evading anti-dumping duties on goods that make their way to this country from the Middle Kingdom.
Ever since India signed a free trade agreement with Sri Lanka in January last year, Chinese exporters have been sending goods such as ceramic tiles, vitamin pills, dyes and toys to the tear-drop shaped island, tinkering with them there, and then sending them to Indian importers as bona fide Sri Lankan products, according to customs officials.
This way, importers end up paying the nominal duties that goods made in Sri Lanka attract, instead of the hefty anti-dumping tariffs introduced over five years ago on more than 100 Chinese products. For example, importers bring in “vitrified” tiles – ceramic tiles with a shiny surface – made in China, on which the duty is more than 50 per cent. But they declare them as Sri Lankan, by falsely showing that they were polished and glazed there, and pay just a 10 per cent duty on them, officials said.
India loses at least Rs 5,000 crore in revenue each year because of evasion of duties on Chinese goods. The Sri Lankan subterfuge is just the latest of many ruses, customs officials said.
“Of all the goods that are being smuggled in from China, two-thirds are using the Sri Lankan route,” said a senior customs official who did not wish to be named. But it is not easy to catch offenders since many of them are armed with documents showing that a major portion of the manufacturing took place in Sri Lanka, he said.
Besides taking the Sri Lankan detour, importers also employ the more blatant method of false declarations. For instance, traders try to declare silk fabrics as cotton or denim, which have lower duties. Some exporters camouflage bottles of counterfeit Viagra, the anti-impotency drug, with those of vitamin pills.
“It is not physically possible to check the entire container. We have also been instructed not to do so because it is time-consuming and also attracts charges of harassment.”
Detection may be difficult, but the penalty for getting caught is quite stiff, said lawyer Sujay Kantawala. Under the Customs Act, a person smuggling goods worth more than Rs 1 crore can be arrested. If convicted, the person can be imprisoned for up to seven years.