The Customs Department has started engaging the industry to sensitize them about the new verification norms that are to come into effect on 21st Sept. As a precursor, to avoid hassles it has directed that all the importers must satisfy the mandatory rule of 35 percent value addition in the origin country to claim duty exemption under the Free Trade Agreement (FTAs).
In the Union Budget 2020, the government amended the custom law and issued new rules last month to curb the misuse of customs duty concessions under FTAs. The domestic industry has been urging the government to take strict action to curb such irregular imports done by flouting FTA provisions.
In August, The Department of Revenue was notified the ‘Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020’ which would “come into force on September 21, 2020”. The new norms have been framed with a view to checking inbound shipments of low-quality products and dumping of goods by a third country routed through an FTA partner country.
Sources said that to put it simply, the new rules require the importer to take reasonable care to satisfy himself that the goods being imported and claiming FTA benefits meet the 35 percent value addition in the country of export.
Mere a certificate by the exporters would not suffice. If importers are not able to satisfy the customs that good have been manufactured with at least 35 percent value addition, FTA benefits would be denied.
India has inked FTAs with several countries, including Japan, South Korea, Singapore, and ASEAN members. Under such agreements, two trading partners significantly reduce or eliminate import/customs duties on the maximum number of goods traded between them.
Finance Ministry sources said that investigation into FTA imports in last few years revealed that the rules of origin, under respective FTAs, were flouted. In a number of cases, it was discovered that items from Non-ASEAN countries were being diverted into India through ASEAN countries with mere packing/repacking, assembly or some minor processes and declaring 35 percent value addition or wrongly claiming significant transformation in ASEAN member country.
Major imports to India come from 5 ASEAN countries namely Indonesia, Malaysia, Thailand, Singapore and Vietnam. The benefit of concessional customs duty rate applies only if ASEAN member country is the country of origin of goods. This means that goods originating from China and routed through these countries will not be eligible for customs duty concessions under ASEAN FTA.