Rules of origin: Stricter regime soon to screen FTA benefits

The concessional Customs duties, including zero duty, under free-trade agreements (FTAs) would be available to importers only if they can prove that products have undergone value addition of at least 35 per cent in the countries of origin, Finance Ministry sources said. With more stringent rules coming into effect from September 21, an exporter’s certificate for ‘country of origin’ alone, which was sufficient earlier, will not be admissible.

A broad range of imports, including of mobile phones, set-top boxes, camera and various white goods, will come under stricter scrutiny as the government will enforce tougher customs rules to curb abuse of its FTAs with trading partners by unscrupulous elements. In many cases, the FTA partner countries have been claiming to have produced the goods in question without having the necessary technological capacity for the required value addition.

Customs officials have long suspected that China may be diverting its supplies to India through Asean nations, abusing rules of origin, to illegally take advantage of duty-free market access under FTA. Given the latest border skirmish between India and China, the diversion may surge, they fear. The department has detected fraudulent claims under FTA to the tune of Rs 1,200 crore.