The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) to come into force 

The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) to come into force 

Part of: GS Prelims and GS-II – Policies and interventions; International Relations

In news

• The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020), will come into force from 21st September 2020. 
• It was notified on 21st August 2020.
• The new rules will make the importer to correctly ascertain the country of origin, properly claim the concessional duty and assist customs authorities in smooth clearance of legitimate imports under FTAs.

Key takeaways

• Importers will have to ensure that imported goods meet the prescribed ‘rules of origin’ provisions to avail concessional rate of customs duty under Free Trade Agreements (FTAs).
• Importers have to prove that imported products have undergone value addition of at least 35% in the countries of origin.
• Earlier, merely a country of origin certificate, issued by a notified agency in the country of export was sufficient to avail the benefits of FTAs.
• Customs officials suspect that China diverts its supplies to India through ASEAN nations by abusing rules of origin so that it illegally takes advantage of duty-free market.

Do you know?

• Major imports to India come from five ASEAN countries — Indonesia, Malaysia, Thailand, Singapore and Vietnam.
• The domestic industry will be protected from misuse of FTAs.

Important value additions

• Free Trade Agreement (FTA) with ASEAN means goods coming from these countries will face zero or less customs/import duties at our borders. 
• The name of the document which shows that goods are coming from a particular country is called “Certificate of Origin”. 
• Country will be treated as Origin/Originating country through “Rules of Origin”. They vary between country to country and FTA to FTA.

Three cases regarding Rules of origin:

• Goods totally produced/manufactured in ASEAN: “Certificate of Origin” will mention that goods originated from ASEAN and they will get preferential/zero duty.
• Inputs purchased from China, value addition happened in ASEAN and then goods are reaching into India: Goods will be considered originating from ASEAN, if the value addition in China is less than 60%. 
• Some value addition happened in ASEAN, then goods/inputs purchased by China and then entering into India: It will always be treated as goods originating from China and they will not get benefits under ASEAN FTA.