Stale News: Custom Laws to Shift towards Trust-based Self-assessment Model

The Business Line on February 27, 2012 reported that the Customs department is considering shifting to a “trust-based” self-assessment model.  As it stands today, the duty and onus of verifying the compliance of importers and exporters with Customs laws is on the Customs department, although disclosures are made by the importers and exporters in the documents submitted by them to the Customs department.

However, it appears that the authorities are considering shifting to a model where, in the words of the Business Line, “businesses are expected to discharge their Customs duty liability, with no or minimal involvement of authorities at the port”. This effectively translates to an onus on businesses to comply with customs laws.

The proposed model envisages a compliance audit by the Customs authorities at a later point in time.

One wonders how would this “trust-based” self-assessment model, work with the IPR border measures under the IPR enforcement customs Rules. On one hand, the IP Rules vest the customs authorities with suo motu powers to check for IP infringement, and on the other hand the proposed systemic overhaul seems to encourage a laissez faire approach with minimal intervention from authorities.

Would a “trust-based” model encourage counterfeiting?

It might be argued that most customs regimes across the world have already adopted or are gravitating towards a trust-based model to avoid clogging of the customs conduit. But the question is, do Indian conditions justify adoption of the model?

It could be argued that a shift to a trust-based system enhances the onus on businesses, including counterfeiters, to be truthful to the authorities. This might translate to a presumption of fraud or willful non-compliance if IP infringement is established at a later stage.

This issue needs to be debated, and we look forward to hearing from our readers on their thoughts on it.