27 July 2021 • 17 min read
Impact of India's Direct Port Delivery ?
Know about Direct Port Delivery model and how it works. What are its benefits, eligibility and how it has fared since it was introduced and implemented for all the ACP members.
In 2016, India introduced Direct Port Delivery (DPD), a system that allows a select group of importers to clear cargo directly from the port within 48 hours of arrival. It is an alternative to the CFS (container freight station) model, where import cargo is routed to an off-site CFS and delivery takes roughly three times longer. The objective behind DPD is to reduce time and cost for importers, decongest ports and, in the process, facilitate trade and improve India’s Ease of Doing Business ranking.
The DPD model was first introduced at the Jawaharlal Nehru Port Trust (JNPT) – India’s busiest container gateway – and has since been extended to ports across India. This piece takes an in-depth look at this key government initiative and how it has performed in the last four years. Read on to know:
- What is Direct Port Delivery?
- What are the benefits of DPD?
- Who is eligible for DPD and who isn’t?
- How do you apply for DPD?
- What is your role as an importer/customs agent?
- What are the problem areas?
What is Direct Port Delivery (DPD)?
Under the DPD model, importers can complete customs clearance of their shipment and take delivery of it at the port within a stipulated time frame (usually 48 hours) of the shipment being offloaded. If the importer fails to take delivery within this time, the shipment is transferred en-bloc (as a whole) to a pre-designated CFS. The importer then has to follow the CFS model, under which cargo delivery takes roughly seven to nine days.
These flow charts show the stages in both models and how DPD eliminates three stages in the CFS model:
Under the DPD model, there are two modes of delivery:
- DPD/DPD: Here,the importer arranges for their own transport and takes delivery at the terminal.
- DPD/CFS: The importer arranges CFS transport and takes delivery at the terminal.
What are the Benefits of Direct Port Delivery (DPD)?
- It cuts the delivery time of import cargo by five to seven days.
- Importers save on storage, ground rent, CFS handling and terminal-to-CFS transport charges as well as detention fees payable to the carrier. The JNPT estimates savings of Rs 10,000-20,000 per container.
- The DPD clearance and delivery facility is open 24x7.
- Quicker delivery means faster turnaround of containers for shipping lines.
Who is Eligible for DPD?
Only importers who fulfil these government-prescribed guidelines can avail of this facility:
- Importers with Authorised Economic Operator (AEO) status. The World Customs Organisation (WCO) defines an AEO as “a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national customs administration as complying with WCO or equivalent supply chain security standards”. They include “manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors”. India’s AEO programme is implemented by the Central Board of Indirect Taxes and Customs (CBIC).
- Importers with a clear track record of compliance and import volume of 25 Full Container Load (FCL) TEUs through a particular port or otherwise in the preceding financial year.
- Importers who don’t fulfil the first two conditions can still be eligible for DPD if their “imports have enjoyed a consistent pattern of customs risk facilitation” and/or if they “provide an assurance that they would be in a position to pick up containers directly from the terminal”. This relaxation is aimed at micro, small and medium enterprises (MSMEs). The discretion of accepting such an application lies with the chief customs commissioner.
Additionally, DPD is open to shipments only if they fulfil these conditions:
- If the consignment is FCL.
- If it is covered by an RMS-facilitated Bill of Entry on a “no assessment no examination” or “assessment but no examination” basis (RMS being Indian Customs’ Risk Management System).
- If the importer has a pre-deposit account (PDA) with the terminal. The account should hold sufficient funds to pay terminal handling charges.
- If the importer has made their own transport arrangement to take delivery of cargo.
- If the importer has fulfilled any other procedural formality prescribed by the relevant customs zone.
Who isn’t eligible?
- Importers against whom a case of misdeclaration of description of goods or of concealment/diversion of imported goods/evasion of duty has been made in the preceding five years.
- Importers facing prosecution proceedings under the Customs Act, 1962.
- Those importing goods subjected to 100% examination.
- Those importing Less-than Container Load (LCL) consignments.
How do you Apply for Direct Port Delivery (DPD)?
Step 1: Submit a request letter – in the form of an application called Annexure-A (see copy below) – to the deputy commissioner, port customs house. This application must be on the importer’s letterhead and accompanied by these documents:
- List of authorised signatories of the importer
- Self-attested copies of PAN (permanent account number)
- Letter of authorisation for customs broker acting on the importer’s behalf
- Details of company official with photograph and signature in case self-clearance
Sample image, Credit: cbic.gov.in
Step 2: The customs house will respond either with a permission letter or a rejection.
Step 3: If you receive a permission letter, this and your documents will then be forwarded to the terminal.
Step 4: Your registration is complete once you receive a unique DPD code from the terminal.
Step 5: Using this DPD code, you will need to open a PDA with the terminal.
What are your Responsibilities as an Importer/Customs Broker?
- Advance intimation: You must submit the Bill of Lading (BL) number, consignment details, a copy of the letter of permission and your preferred CFS to the shipping line 72 hours before vessel arrival. Specify the DPD mode as well. If not, the carrier will by default mark the consignment as DPD/DPD.
- Advance BL submission: Once the shipping line/customs agent receives advance intimation, they will generate an advance invoice. You must pay the shipping line/customs agent as per the invoice and submit the BL, both in advance. The shipping line/customs agent will then issue an advance electronic Delivery Order (e-DO).
- Advance Bill of Entry: Your next step is to file an advance Bill of Entry and approach the terminal’s DPD-RMS Facilitation Centre for an out of charge (OOC) order.
- Clearance and delivery: You must pay the customs duty, submit the e-DO and take delivery of the consignment within 48 hours of vessel berthing.
Some Problem Areas
The DPD model has had its share of teething troubles, many of which have smoothened out while some persist:
- Lack of space/infrastructure: Industry insiders point to the fact that ports like JNPT were built on the CFS model in restricted spaces. Also, in an indication of the lack of infrastructure, Adani Hazira Port suspended DPD operations in April due to a pile-up of DPD cargo during the Covid-19 lockdown period. The reason, this report says, was because Hazira isn’t connected by rail. So, the containers couldn’t be moved en-bloc by train to CFSs, as had been done to decongest JNPT and the Chennai port.
- Lack of uniformity: Traders have often complained of a lack of uniformity on prices and free times across Indian ports. For example, importers have 48 hours to take delivery at JNPT and 72 hours at the Chennai port. Also, the private terminals at JNPT levy a shifting charge on DND containers, which varies from terminal to terminal. The Chennai and Haldia ports don’t have such a charge.
- Lack of choices: In 2017, home appliances company Voltas asked to be removed from the DPD list, saying its Uttarakhand factory could handle only 15 containers a day whereas the model required it to take delivery of all 50 containers arriving by ship. Similarly, luggage maker VIP Industries complained that if it failed to take timely delivery of its consignment, it would be sent to a CFS not of its choice but one designated by the port.
- Threat to CFS? When DPD was introduced in 2016, the 33 CFSs at JNPT feared loss of business and employment. Some cut down staff strength. However, this problem seems to have worked out as CFSs remain a critical component of India’s global trade. According to JNPT, increasing cargo volumes at ports will ensure a fair share of business for CFSs. Also, a good volume of DPD cargo is still shifted post-delivery to CFSs for storage due to limited warehouse space near the cargo owners’ factories.
Four years on, how is DPD model faring?
Despite its shortcomings, Direct Port Delivery is gaining in popularity and has made improvements:
- India’s DPD percentage stands at 56%. At JNPT, this has steadily risen from 30% in August 2017 to 40.67% in July 2018 to 57.9% in October 2020.
- In January, a CBIC directive allowed DPD importers to pay handling charges directly to terminals instead of through shipping lines. It was acting on complaints by shippers that shipping lines overcharge customers. The CBIC estimates this would save importers at least Rs 5,000 per container.
- As of September 15, DPD customers at PSA Mumbai, one of the terminals at JNPT, can pay terminal handling charges digitally through the online shipping documentation platform ODeX.
At a time when port congestion and high logistics costs continue to challenge importers and exporters, the DPD model holds out hope for more reforms in India’s international trade and shipping industry.