ATA Carnet System and Tax Administration

BRIEF SYNOPSIS

The Article delves into the ATA Carnet system, an international document aimed at simplifying customs procedures for temporary imports, primarily for exhibitions and trade fairs. It outlines the historical context, illustrating the challenges and complexities faced by businesses before the system’s introduction in 1961. The article explores the roles of key governing authorities, both at the international and national levels, in ensuring the system’s efficacy. It then details the procedure for obtaining ATA Carnets, emphasizing the security guarantees and conditions that must be met. The Article highlights the numerous benefits, including streamlined customs procedures, reduced bureaucracy, and duty relief, making it a vital tool for promoting international trade and safeguarding domestic markets.

INTRODUCTION

ATA Carnets are International Uniform Customs documents which provide duty-free temporary import of goods into countries by eliminating the problems encountered in making out a Customs declaration on a national form at time of importation into each country. These are issued by 79 countries of the world that are signatories to the Customs Convention on ATA Carnet. The purpose of these documents is to create uniformity in the customs systems and reduction of administrative work for tax authorities of both the contracting parties. The present Article aims to analyze the efficacy of this system in simplifying the customs formalities for the international trading community, bearing in mind the security of the domestic markets of the contracting countries.

HISTORICAL BACKGROUND

1. Problems before the ATA Carnet system was introduced.

To understand the Carnet System, we first need to understand the international trading scenario before introduction of the system. What were the procedural problems before 1961 due to which a need for a unified international document was felt?

1.1 Custom Barriers: Before the adoption of the Carnet System, the trading community worldwide was facing challenges with respect to promotion of their businesses in the international market. Before digitalization of the world economy, the only way for traders to promote their goods internationally was to participate in trade fairs or international exhibitions. The whole purpose behind conducting exhibitions in a foreign country is to promote their business and attract that country’s market by exhibiting samples of their goods. For this, the traders would have to physically take samples of their goods to various countries and thus, these goods must be able to be transported easily and rapidly across these custom territories to fulfill their purpose effectively. But these traders would face a plethora of problems regarding temporary importation of these goods in the foreign territory. The exhibitors would have to get involved in various tedious and time-consuming custom procedures.

1.2 Temporary Importation Costs: They would also have to bear the cost of payment of varying custom duties in each territory they visit. This would add up to significant business costs, especially considering these goods were not even intended to be sold in the country, but just exhibited for potential buyers.

1.3 Bureaucracy and Red Tape: The paperwork associated with temporary importation like customs declarations, providing financial guarantees, dealing with various government agencies, was a cumbersome task. Especially considering that every country has its own regulations and requirements, it became even more burdensome for businesses to navigate the whole process. If there was any misunderstanding or mistake in any of these varying custom procedures, that could lead to confiscation or unnecessary delay at the border.

1.4 Lack of uniformity: Absence of any standardized universal system resulted in a lot of chaos. If a trader wanted to exhibit samples of his goods in multiple international trade fairs in the course of one journey, he would have to navigate different rules and requirements in each of those countries he wished to visit, which would be extremely time consuming as well as confusing.

2. Istanbul Convention

Between 1950 and 1970, there was a proliferation in the number of international Conventions, Recommendations, Agreements and other instruments on temporary admission, creating confusion for the international business community and complicating the work of Customs. In the early 1990’s the WCO decided to take draft a world-wide Convention on temporary admission to combine 13 existing temporary admission agreements into a single international instrument. The Convention on Temporary Admission was adopted in Istanbul in 1990 and became known as the “Istanbul Convention”.

Objectives of the Convention were to:

• to gather all existing temporary admission facilities under a single instrument,
• to avoid need for drawing up of any future instruments on temporary admission by creating a framework in which new categories of goods needing temporary admission facilities can be incorporated,
• to simplify the temporary admission formalities under existing instruments,
• and to extend use of ATA carnets by making their acceptance obligatory to customs whenever a document and security is required for temporary admission.

3. Establishment of the ATA System

The ATA Carnet system was developed to address the needs of various businesses to move their products to international trade fairs and exhibitions as samples to attract potential buyers, or even simply as their own professional equipment without any intention of making a sale. The system facilitates international trade by providing for a standardized international customs document that simplifies the temporary importation process.

Thus, in response to all the abovementioned problems, in December 1961, the World Customs Organization (formerly known as the Customs Co-operation Council) adopted the “Customs Convention on the ATA Carnet for Temporary Admission of Goods”. The term “ATA” comes from combining the initial letters of the French term “Admission Temporaire” and the English term “Temporary Admission”.

GOVERNING AUTHORITIES UNDER THE ATA SYSTEM

The ATA Carnet system is governed by a set of international and national regulating authorities to ensure its proper functioning. These authorities set the rules and regulations for the use of ATA Carnets and oversee their implementation. Here are the key regulating authorities internationally and in India:

1. International Chamber of Commerce (ICC): The International Chamber of Commerce is composed of representatives of the National Associations of Chambers of Commerce of various countries. The main function of ICC is to promote development of international trade. ICC is the primary international governing body for the ATA Carnet system. It established the framework and guidelines for the use of ATA Carnets through its World Chambers Federation (WCF).

2. World Chambers Federation (WCF): The WCF (formerly, the International Bureau of Chambers of Commerce) is a part of the International Chamber of Commerce and is responsible for administering the ATA Carnet system at the international level. It maintains the international guaranteeing chain, promotes the system, and provides information and training to national guaranteeing associations.

3. World Customs Organization (WCO): The WCO plays a significant role in supporting the ATA Carnet system. It works with national customs authorities to ensure proper customs procedures for goods covered by ATA Carnets. The WCO’s Customs Convention on ATA Carnets (Istanbul Convention) sets the international standards for the use of ATA Carnets.

4. Federation of Indian Chambers of Commerce and Industry (FICCI): In India, FICCI is the national guaranteeing association responsible for administering the ATA Carnet system. It works in cooperation with the Indian Customs authorities and other stakeholders to facilitate the use of ATA Carnets for temporary imports and exports.

5. Indian Customs Authorities: Customs authorities in India, under the Central Board of Indirect Taxes and Customs (CBIC), work in coordination with FICCI to ensure that the ATA Carnet system is implemented correctly and that the goods covered by ATA Carnets receive the appropriate customs treatment.

These regulating authorities collaborate to ensure the smooth operation of the ATA Carnet system, both at the international and national levels. The system’s success relies on the adherence to the guidelines and standards set by these organizations, as well as the cooperation of customs authorities in various countries, including India, where temporary importation is sought.

CONTENTS OF A CARNET

1. Green Cover

This is the main front page of a carnet which must include name of the issuing domestic association (first line of page one), holder information, carnet countries and names of their corresponding guaranteeing associations, customs certificate to initiate the carnet, period of validity of the carnet, and the original General List.

2. Counterfoils and vouchers

These are color coded documents; Yellow is for specifying exit from or return to India, White is for entry into or departure from foreign countries, and blue one is for transit. So, when importation is made on a Blue Transit Counterfoil, that would mean the time limit for re-exportation is only for a few hours from importation (if this time limit is exceeded, duty/penalty charges may apply). Validation of a counterfoil and its corresponding voucher by customs authority constitutes a single customs transaction.

3. Items not allowed to be exported under ATA Carnet

• Perishable goods and items such as paint, cleaning materials, food, oils, leaflets and brochures, which are considered as “consumable items” and intended to be given away, disposed of, or utilized abroad as they would not ordinarily be re-exported.
• Items already sold or offered for sale. Such items are not considered samples.
• Un-mounted gems or gemstones; theatrical make-up, etc.
• Alcoholic beverages, tobacco and fuels, etc.
• Goods intended for processing or repair.
• Postal Traffic.

PROCEDURE OF SECURING CARNETS

The ATA Carnet system allows hassle-free movement of goods across frontiers for their duty- free temporary import into a customs territory. This single document serves as a goods declaration at import, export, as well as during transit.

1. Guaranteeing Associations

ATA Carnet facilitates duty-free temporary import covered by the system since an internationally valid security has already been provided by the national guaranteeing associations who issue these carnets. These national guaranteeing associations are affiliated with an international guaranteeing chain administered by the International Chamber of Commerce. In India, the Federation of Indian Chambers of Commerce and Industry (FICCI) is appointed as the National Guaranteeing & Issuing Association for issuing ATA carnets.

A carnet is Issued in the name of an Individual or a company who must be a permanent resident of India. It should include clear information regarding all the territories into which the goods are intended to be temporarily imported, the description of the goods which are intended to be imported, as well as the conditions of such import.

Each Association belonging to a guaranteeing chain must be approved by the Customs authority of the Contracting Party country in whose territory it is established. The national customs authority must provide the Association approval to issue the carnets as well as to undertake to provide guarantee for possible default.

2. Security Guarantee

The main purpose of a Carnet is to provide duty-free import of goods into custom territories. For this, Guaranteeing Associations provide guarantee to the customs authorities that in case of any breach of conditions under which duty-free import was allowed, or failure to re-export the goods, all duties and taxes will be paid in full to the customs authority of that country. So, if the person carrying the carnet defaults or fails to re-export his goods out of that country within the stipulated time, the Guaranteeing Association will be liable to reimburse the customs authority of the country where he defaulted. This liability of the Association shall not exceed the amount of duties payable by more than 10%. All goods that are not re-exported, whether by reason of getting stolen, destroyed, or lost are subject to all applicable duties and taxes.

To cover this liability, a security guarantee amount has to be paid by the Carnet-holder to the Guaranteeing Association. This security guarantee, which may be in the form of Bank Guarantee/Cash/DD/Credit Card/Electronics Funds Transfer/Banker’s Cheque, acts as collateral and will be drawn upon to reimburse the guaranteeing association in event duties are owed.

The security amount paid by the individual/business has to be of an amount equivalent to the highest rate of duties and taxes applicable to the goods in any country of destination, and transit (if applicable), plus a further 10% of the amount.

3. Conditions for availing benefit under ATA System

The purpose of the ATA System is promotion of international trade via making temporary importation process for goods used in international trade fairs and exhibitions easier and less cumbersome. However, in order to get these carnets issued, there are certain requirements that need to be fulfilled such as:

• The Carnet is issued in accordance with the Customs Convention on ATA Carnet and is guaranteed by FICCI. It is usually issued for a period of one year. Goods exported on Carnet must be re-imported to India within the period of its validity. They cannot under any circumstance be sold.
• The goods to be imported must conform entirely with the description, quality, quantity and value mentioned in the Carnet duly certified by the Customs authorities in the country of exportation. This keeps under check any illegal trading of the sampled goods in the foreign country, which were imported temporarily only for the purposes of being exhibited. This reduces the threat to the local markets of the foreign country as well. Once a Caret is issued, no subsequent addition of goods, amendment, substitution or overwrite is allowed on it.
• The goods imported temporarily must be re-exported within the stipulated time specified on the Carnet. If the Carnet holder fails to re-export within that time, the Guaranteeing Association (in India’s case FICCI) will have to pay customs duty of the amount as leviable on the goods as on date of their clearance.
• ATA Carnets are issued and accepted only by countries that are signatories to the ATA Convention. Thus, it becomes the Carnet-holder’s responsibility to ensure that the customs office at the foreign country of departure/entry is authorized to accept ATA Carnets.
• Also, ATA Carnet only provides for duty-free entry of goods, but if there are any additional customs regulations in any of the countries the holder intends to visit, like, requirement of an import license/permit for controlled goods for instance, he must ensure that that those are diligently observed.

If all the above requirements are satisfied, after payment of a nominal processing fee a Carnet shall be issued by the national issuing authority, which in India’s case is FICCI.

4. Period of re-exportation

The period fixed for re-exportation of goods is different from the overall validity of the Carnet. The validity period of the Carnet is fixed by the Guaranteeing & Issuing Associations and the time of issuance of the Carnet. The time allowed for re-exportation of the goods from a particular country where they are temporarily imported, however, is decided by the Customs Authority of that country on presentation of those goods with the Carnet. So the validity will be fixed, but the time for re-exportation will be different in each country. The goods will have to be re-imported back to the home country and the Carnet returned to the Issuing Authority within the validity period.

5. Settlement of Disputes between contracting Parties

If there is a dispute between regarding interpretation of the ATA Convention, parties in dispute should first endeavor to reach a settlement amongst themselves by negotiation. If such negotiations fail, the issue would be considered at a meeting of the Contracting Party states to which the parties in dispute belong, and recommendations to resolve the dispute will be made at such meeting.

BENEFITS OF THE ATA SYSTEM

The carnet system was introduced to provide a standardized international customs document that streamlines the temporary importation process thereby facilitating International Trade. It is thereby beneficial to all parties involved, trading community as well as the customs authorities. It reduces unnecessary compliance burden for all. Salient features of this system would be:

1. Simplified Customs Procedures: ATA Carnets streamline customs procedures, making it easier for travelers and businesses to temporarily import and export goods. The single unified document, standard for all countries, reduces the paperwork and simplifies the clearance process for both importation and re-exportation. During the validity of the Carnet (which is generally 1 year), goods can be temporarily imported into custom territories of as many Carnet territories and as often as the holder of the carnet wishes, all under the cover of the same document. This is helpful in situations like for example a trader wants to exhibit samples of his goods to potential buyers in multiple countries in the course of the same journey. He could eliminate the time and tedious procedures for clearance of the same goods in each of those countries.

2. Less Administrative work; increased safety: From the Customs Authorities’ point of view as well, tis system reduces compliance burden and unnecessary paperwork for them without compromising on safety, since payment of duties in case of default is guaranteed by the Guaranteeing Association. This guarantee is automatic, and the authorities need nt check its validity each time.

3. Self-Policing System: Further, this temporary duty-free importation of foreign goods into the jurisdiction of the country does not really pose any risk to that country’s revenue, since the goods issued under the Carnet are only imported for the purpose re-exportation out of the country and cannot be sold in that country at all. The ATA System is ‘self-policing’ in this respect, because if the Carnet holder fails to re-export the goods within time or is found contravening any of the conditions of import under the Carnet, duties become payable in full with respect to those goods.

4. Duty and Tax Relief: Goods covered by an ATA Carnet are exempt from payment of import duties and taxes, provided they are re-exported within time and not sold in the country. This reduces the financial burden on businesses since they don’t have to clear goods at each frontier. This becomes particularly helpful in situations like for example when a musician’s band is touring, he could save a lot of time and unnecessary paperwork he would otherwise have to go through in clearing his equipment and instruments at each country he visits.

5. Reduced Bureaucracy: The use of ATA Carnets reduces bureaucratic hurdles and financial guarantees, making it more efficient for individuals to travel with goods to promote their businesses. For the period of validity of the ATA carnet (which is usually a long period, but cannot be exceeding one year), the goods can be temporarily imported using the same carnet in the Customs territories of as many Contracting Parties, and as often, as the carnet holder wishes during the specified period. This become helpful in situations like for example where there are several countries lying between the countries of exportation and importation. With the Transit voucher in the Carnet, an individual will not have to clear his goods and pay duties in each of these countries in between.

6. Uniformity: The ATA Carnet system is recognized by a large number of countries, providing a consistent and standardized approach to temporary importation across borders- meaning- less confusion. The practical advantage of this system is reflected by the increasing number of contacting parties to the convention. Currently, there are 79 signatory countries to the convention. 

CONCLUSION

In conclusion, the ATA Carnet system has played a crucial role in simplifying customs procedures for businesses engaged in international trade. It has been very helpful in making the global marketspace accessible to all. It provides for simplified customs procedures, reduced administrative burden on all parties involved, and provides duty relief. The system facilitates the movement of goods across borders for promotion of international trade while safeguarding domestic markets. As the world continues to globalize, the ATA Carnet system remains a vital asset for small businesses, looking to expand their international presence. In a globalizing world where international trade is essential for economic growth, the ATA system facilitates harmonious trade and international economic cooperation.

REFERENCES

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