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Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 come into force from Sept 21, 2020; 35% value addition proof mandated

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Implementation-of-the-Customs-(Administration-of-Rules-of-Origin-under-Trade-Agreements)-Rules,-2020-with-effect-from-21st-September-2020In exercise of the powers conferred by section 156 read with section 28DA of the Customs Act, 1962 (52 of 1962), the Central Government notifies the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) on August 21, 2020 to protect the domestic industry from misuse of Free Trade Agreements (FTAs), will come into force on September 21, 2020.

  • A period of 30 days is provided to importers and other stakeholders to familiarize them with new provisions. In this regard, the Central Board of Indirect Taxes and Customs (CBIC) has been actively engaging with stakeholders through webinars and other means to guide them.
  • These new rules provide more power to Customs in checking any attempted misuse of the duty concessions under FTAs.

What is FTA?

A Free Trade Agreement (FTA) is a pact between two or more nations to reduce barriers of tariffs, quotas, subsidies, or prohibitions on imports and exports among them.

What are Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020?

These rules supplement the existing operational certification procedures prescribed under different trade agreements viz. FTA, Preferential Trade Area (PTA) Comprehensive Economic Cooperation Agreement (CECA), Comprehensive Economic Partnership Agreement (CEPA). Its key features are as follows:

  • An importer is now required to do due diligence before importing the goods to ensure that they meet the prescribed originating criteria. 
  • The rules provided a list of minimum information which the importer is required to possess.
  • Also, an importer would now have to enter certain origin related information in the Bill of Entry, as available in the Certificate of Origin (CO).

Proof of 35% value addition in origin country mandated to get FTA benefits

With regard to the amendment, Importers will have to provide proof of 35% value addition of goods imported through Free Trade Agreements (FTA) to customs authorities, failing which duty benefits available under the agreement will be denied. 

  • This decision has been taken due to an increase in number of cases where items from non-ASEAN (Association of Southeast Asian Nations) countries were being diverted into India through ASEAN countries with mere packing/repacking, assembly or some minor processes and declaring 35% value addition or wrongly claiming significant transformation in ASEAN member country.
  • It should be noted that India signed the ASEAN FTA in 2009 with 10 nations viz. Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. 

Important Terms:

Bill of Entry: It is a legal document that is filed by importers or customs clearance agents on or before the arrival of imported goods. It’s submitted to the Customs department as a part of the customs clearance procedure.

Certificate of Origin (CO): A certificate of origin (CO) is a document declaring in which country a commodity or good was manufactured. The certificate of origin contains information regarding the product, its destination, and the country of export.

Value-Addition: It is the difference between the price of product or service and the cost of producing it.

Recent Related News:

i.On June 8 2020, CBIC launched a flagship programme, “Turant customs” at Bengaluru and Chennai with technological support for faster clearance of imported goods and for the ease of doing business.

ii.CBIC launched the ‘e-Office’ application in over 500 Central Goods and Services Tax (CGST) and customs offices across India, on 15th June at NewDelhi. The e-Office is a Mission Mode Project (MMP) under the e-Governance of India.

About Central Board of Indirect Taxes and Customs (CBIC):
It is a part of the Department of Revenue under the Ministry of Finance.
Chairman– M. Ajit Kumar