India Amends Rules To Plug FTA Misuse Importers Worried

(MENAFN- KNN India) New Delhi, Mar 24 (KNN) Amendments to customs rules aimed at tightening checks on goods imported under free trade agreements (FTAs) could make it more difficult for businesses to utilise concessional duties and may increase compliance costs, according to economic think tank Global Trade Research Initiative (GTRI) on Sunday.

The changes would, however, help curb the misuse of FTAs. India has experienced repeated instances where goods originating from non-FTA countries, such as China, have been rerouted through FTA member countries like Vietnam or Singapore to take advantage of preferential duty benefits, GTRI noted.

On March 18, the Ministry of Finance issued a notification introducing amendments to the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR).

The amendment replaces the term 'Certificate of Origin' (CoO) with the broader term 'Proof of Origin' across various rules and forms under the CAROTAR framework.

"This change comes in conflict with several existing FTAs with ASEAN etc where certificate of origin issued by the exporting country is the accepted document," said GTRI Founder Ajay Srivastava, adding that the move could make concessional tariff imports more challenging for businesses.

Electronics, white goods, and auto components often shipped through ASEAN (Association of Southeast Asian Nations) countries are likely to face heightened scrutiny, according to Srivastava.

GTRI has urged the government to publish a detailed framework outlining acceptable proof of origin qualifications and to provide redress mechanisms for importers facing unjustified denials of preferential tariff claims.

The think tank explained that importers would now need to ensure access to comprehensive supporting documents establishing the origin of goods, which is not always feasible, especially when exporters are reluctant to share sensitive trade data such as raw material invoices or production costs.

"The compliance burden will increase, as there is no strict definition of what constitutes adequate proof. If not satisfied, Customs can deny preferential tariffs, effectively imposing full duties and penalties," GTRI stated.

Importers may also be compelled to share sensitive commercial information, raising privacy and confidentiality concerns, while potentially subjecting them to arbitrary or inconsistent treatment.

"This change dramatically increases the compliance burden for importers," Srivastava noted.

He emphasized, "It gives Customs officials the power to demand detailed production records, invoices, and cost breakdown information that many foreign suppliers are unwilling to share due to commercial sensitivities.”

This level of scrutiny could lead to delays at ports, higher legal risks, and greater discretion in Customs enforcement, increasing the potential for harassment and corruption, he suggested.

Furthermore, Srivastava expressed concerns that the amendment may potentially conflict with commitments India has made in various FTAs. "For instance, under the ASEAN-India FTA, the certificate issued by the exporting country was meant to be final," he said.

"The imposition of further requirements by Indian Customs not only goes beyond the agreement but also risks diplomatic fallout," he concluded.

(KNN Bureau)

MENAFN24032025000155011030ID1109350896