India is contemplating stricter origin regulations in order to scrutinise the influx of cheap and substandard imports from third countries that exploit New Delhi’s free trade agreements (FTAs).
The Ministry of Commerce and Industry is exploring certain criteria that have been utilised in trade agreements established by developed nations.
According to a media report, the ministry is examining the evolving terminologies employed in the rules of origin, particularly those frequently used by developed countries. The objective is to prevent circumvention and the entry of inexpensive imports.
Various conditions, including minimal operations, de-minimise or tolerance, accumulation, accounting segregation, transitional arrangements, and absorption or rollover principles, are being considered. Some of these conditions are already incorporated into India’s FTAs.
Accounting segregation can serve as a criterion for products of the same kind, possessing commercial quality and technical and physical characteristics that cannot be distinguished from one another for origin purposes. The absorption or roll-up principle permits intermediate products to maintain their originating status when utilised in subsequent manufacturing operations.
The ministry has requested industry details regarding the time and cost involved in obtaining origin certificates. It is also studying the Canada-EU and US-Canada-Mexico trade agreements to comprehend how these countries have benefited from FTAs.
The stricter rules will also facilitate the imposition of trade remedies, such as safeguard duties and anti-dumping duties, to regulate imports.
Although rules of origin can be straightforward, as is the case with most of India’s FTAs based on wholly obtained criteria or the 35 per cent value-added method, they can also be intricate. This complexity arises due to variations in the rules for different products within a specific agreement and across multiple agreements.
Rules of origin essentially establish the parameters for determining the source of a good and form the foundation for duty reduction or restrictions in a trade agreement.
Duty concessions in a trade agreement are exclusively granted to goods that are “made in” the exporting country.
The rules of origin outline the criteria that must be met for goods to attain origin status in the exporting country. These criteria typically revolve around factors such as domestic value addition and substantial transformation.
Customs authorities have flagged several instances of rules of origin violations under the India-Asean FTA and India-Sri Lanka FTA.
An advanced template for origin rules is crucial, especially as India recently signed trade pacts with the UAE and Australia, and is currently negotiating similar agreements with the UK, EU, Canada, and other countries.
In May, India’s imports declined by 6.6 per cent year-on-year, amounting to USD 57.1 billion compared to USD 61.13 billion.
