HARMONISED SYSTEM OF NOMENCLATURE
1. Context
On August 3, 2023, the government restricted the import of laptops, tablets, all-in-one personal computers, ultra-small form factor computers, and servers. The import of these products would be allowed against a valid license for restricted imports. Initially meant to be enforced with immediate effect, a revised order the next day deferred the enforcement until November 1.
2. Harmonised System of Nomenclature (HSN)
- The Harmonized System of Nomenclature (HSN) is an internationally standardized system of names and numbers used to classify and categorize traded products for customs and statistical purposes.
- It was developed by the World Customs Organization (WCO) to facilitate the uniform classification of goods across countries and to simplify international trade documentation and customs procedures.
- The HSN provides a systematic structure for assigning a unique code to each product, enabling countries to classify and identify goods in a consistent manner.
- This classification system is widely used by governments, international organizations, and businesses to streamline customs duties, tariffs, trade statistics, and other trade-related regulations.
- The HSN code for a particular product is typically a series of numbers arranged in a hierarchical manner. The first few digits represent broader categories, while additional digits provide more specific details about the product.
- This hierarchical structure allows for easy comparison and classification of goods based on their characteristics and intended use.
- The HSN is regularly updated and revised to reflect changes in technology, trade practices, and product development.
- It is crucial in facilitating global trade, promoting transparency, and ensuring accurate tariff determination for imports and exports.
3. Government Implements Restrictions on Import of IT Hardware to Boost Domestic Manufacturing
- The government of India has taken a significant stride towards reducing import dependency and encouraging domestic manufacturing by imposing restrictions on the import of certain IT hardware products.
- These products include laptops, tablets, all-in-one personal computers, ultra-small form factor computers, and servers. Initially slated for immediate enforcement, the implementation of these restrictions has been postponed to commence from November 1st.
4. Objective: Enhancing Self-Reliance and Trusted Hardware
The primary goal of this regulatory move is to decrease reliance on imports and promote the growth of domestic manufacturing. By imposing limitations on the import of specific IT hardware, the government aims to ensure better access to trustworthy hardware and systems, while simultaneously nurturing the development of a robust domestic IT manufacturing sector.
5. Detailed Orders and Exemptions
The new order targets explicitly items classified under the Harmonised System of Nomenclature (HSN) 8471, which covers automated data processing machines and units. Importing these products for sale to consumers will require a valid license. However, certain exceptions have been outlined. These include:
- E-commerce Purchases: Individuals can purchase a single unit of the specified products from e-commerce websites, with these items being brought into the country through post or courier. Only relevant duties will apply.
- Repair and Return: Importation of products intended for repair and subsequent return is permitted without a license.
- Research and Development: A license is not required for the import of up to 20 items per consignment for purposes such as research and development, testing, benchmarking, evaluation, repair, re-export, or product development. Post their intended use, these items must either be destroyed or re-exported.
- Essential Capital Goods: Importation of items that serve as essential components of an entity's capital assets is allowed.
6. Driving Domestic Production:
- The backdrop of this move lies in the increasing need for self-sufficiency and reducing foreign exchange outflows due to electronics imports.
- The government's introduction of the Production-Linked Incentive (PLI) Scheme 2.0 for IT hardware in May underscores its commitment to fostering domestic manufacturing.
- With projections indicating a surge in domestic demand for electronics hardware, estimated to reach approximately $300 billion by FY2026, the government seeks to bolster its domestic production capabilities.
7. Domestic Production Growth and Import Figures
- Domestic production of electronic goods has exhibited a noteworthy upward trajectory, growing from $49 billion in 2016-17 to $87.1 billion in 2021-22, reflecting a compound annual growth rate (CAGR) of 15%.
- Correspondingly, data from the Commerce Ministry reveals that imports for the discussed products in FY 2022-23 amounted to approximately $10.1 billion, indicating a decrease of about 13% year-over-year.
8. Challenges and Adaptations Ahead
- The implementation of these restrictions has raised concerns about the availability of stocks and potential price impacts.
- Global companies with a presence in India have requested a deferment of the implementation to ramp up domestic production and familiarize themselves with the licensing process.
- Market analysts anticipate that vendors will strategically boost their inventory across distribution channels leading up to October-end, in preparation for the festive sales season.
9. Pricing Dynamics and Future Outlook
- In terms of pricing, experts predict that vendors will maintain stable prices for the next three months, aligning with the festive sales period.
- However, customers are expected to expedite their purchases in anticipation of future price hikes.
- By November, adjustments to prices might occur to accommodate the new regulatory landscape.
10. Conclusion
- The government's move to restrict the import of IT hardware stands as a testament to its commitment to fostering domestic manufacturing, decreasing import dependence, and ensuring access to reliable hardware and systems.
- The path ahead involves a delicate balance between boosting domestic production, ensuring a seamless supply chain, and effectively managing potential price fluctuations.
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For Prelims: Harmonised System of Nomenclature (HSN), World Customs Organisation(WCO), Harmonised System of Nomenclature (HSN) 8471, Self Reliance.
For Mains: 1. Discuss the significance of the Harmonized System of Nomenclature (HSN) in international trade and its role in facilitating customs procedures, tariff determination, and trade statistics. (250 words).
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Source: The Hindu
