What’s in the news?

• The Ministry of Finance has notified The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) which will come into force from September 21.

What is it?

• Under the new rules, the customs department will reject benefits of import duty relief on any shipment from India’s free trade partner countries in South East Asia if Indian importers are not in a position to show that the product has undergone 35% of value addition in the exporting country.
• The idea is to ensure that importers do due diligence on their shipments so that goods originating from China and routed through India’s free trade partner countries do not get customs duty concessions under the ASEAN free trade agreement (FTA).

Significance of the new rules

• India has inked FTAs with several countries, including Japan, South Korea 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.
• ASEAN (Association of Southeast Asian Nations) FTA allows imports of most items at nil or concessional basic customs duty from the 10-nation bloc. Major imports to India come from five ASEAN countries — Indonesia, Malaysia, Thailand, Singapore and Vietnam.
• The benefit of concessional customs duty rate applies only if an 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 the ASEAN FTA.
• India adopted new rules after discovering that items from non-Asean countries, such as China, were being diverted into India through these trade partner countries with mere repacking or minor processes and declaring 35% value addition to wrongly claim treaty benefits. 

Reference:

1. https://www.livemint.com/news/india/onus-placed-on-importers-to-curb-chinese-goods-coming-via-fta-countries-11600426918232.html