The European Union (EU) is moving towards a paperless and risk-based import compliance system, implementing the second phase of its Import Control System (ICS) from June 3, 2024. This change will affect Indian exporting firms, as the EU accounts for about 17% of India’s total merchandise exports.
What is ICS2 and how does it work?
ICS2 is a new system that replaces the older paper-based declarations for most goods entering the EU. It requires economic operators carrying goods by sea, inland waterways, road and rail to submit a complete Entry Summary Declaration (ENS) dataset to ICS2 electronically before the goods arrive in the EU. The ENS dataset includes information such as the Harmonized System (HS) code, detailed descriptions, value, and weight of the product being shipped.
The new system enables the EU to perform a risk assessment for each shipment based on various factors, such as the type of goods, the origin and destination countries, the trader’s compliance history, and any intelligence or risk indicators available. This allows the EU to focus more on checking goods that might be risky, while safe goods can move through customs faster. The new system also streamlines the customs clearance process by eliminating the need for physical paperwork at borders.
Why is it important for Indian exporters to comply with ICS2?
ICS2 is important for Indian exporters because it affects their trade with one of their largest markets. The EU constitutes about 17% of India’s total merchandise exports, amounting to USD 75 billion in 2022-23. Non-compliance with ICS2 regulations or errors in data submission could lead to delays in customs clearance and potential fines, resulting in financial losses and operational disruptions.
To avoid these consequences, Indian exporters must register in the ICS2 system and train their personnel on the new requirements and procedures. This may involve fees for registration and training programmes. They also need to upgrade their existing software and IT infrastructure to comply with ICS2 data formats and electronic submission requirements. They should also keep copies of all submitted data and related documents for potential inspections or audits and be prepared to answer questions and provide further information if requested by customs officials.
How can Indian exporters benefit from ICS2?
ICS2 can also bring some benefits for Indian exporters who comply with the new system. For instance, they can enjoy faster and smoother customs clearance for their shipments, as well as reduced administrative costs and paperwork. They can also improve their reputation and trustworthiness with their EU-based importers and carriers, who have the main responsibility for filing the ENS with ICS2 before the goods arrive in the EU. Moreover, they can leverage the new system to access more trade opportunities and markets within the EU, as well as other countries that adopt similar systems in the future.