07 Feb 2020

Commerce department to examine FTAs

The commercedepartment will examine procedures that are part of India’s existing free tradeagreements (FTAs) in the wake of compliance with rules of origin beingtightened. The Finance Bill has proposed an omnibus process but individualpacts need to be studied to check how the proposed Customs Act amendment cantake effect, officials said.

A new chapter in the Customs Act on administration of rules of origin undertrade agreements gives the government the power to suspend or refusepreferential tariff treatment in case of incomplete information or verificationand non-compliance, respectively. A number of these provisions had only beendetailed via notifications.

The rules of origin are criteria to determine the source country of a product,based on which they either get tariff concessions or are subjected to duties.The move is aimed at preventing abuse of the FTA route using documentspurporting to show that the goods came from a country with which India has atrade pact and taking advantage of lower tariffs.

“The budget has prescribed an omnibus procedure and we will examine every freetrade agreement for their procedures on claiming preferential tariff benefits,”said an official aware of the development.

The Act also empowers Indian customs authorities to question the valuation ofimports under FTAs for up to five years with the government proposing asignificant shift in the domestic framework of rules of origin to tackle largescale imports.

India’s current rules allow importers claiming FTA tariffs and certifyingoffices to retain documents supporting origin certificates for at least fiveyears.

The government has been trying to curb imports through tighter origin norms intrade pacts. India’s trade deficit was $118.1 billion in the April-Decemberperiod, down from $148.2 billion in the year earlier. In FY19, total tradethrough the preferential route, including the Generalized System of Preferences(GSP), was only $32.22 billion.

As per the Act, a certificate of origin submitted by an importer will no longerbe the threshold for availing concessional benefits. Customs authoritiescan ask importers to substantiate and satisfy scrutiny undertaken on thequestion of origin.

“The partner country will have to raise this issue because it affects them,”the official added.

A total of 11.9 million preferential certificates of origin were issued betweenFY06 and FY19 amounting to total trade of $307.04 billion. This is a low numbercompared with India’s total trade and includes generalised system of preferences(GSP) certificates.

Reference:  The Economic Times 
Dated: 07/02/2020 08:22 AM

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