Onerous obligations on importers under new Customs rules

The finance ministry has notified the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR), with a view to strengthen the provisions for checking misuse of exemptions for imports under various trade agreements. It will come into force from September 21. 

India has trade pacts with many nations from whom imports are allowed at concessional or nil duty rates, subject to the condition that the goods originate in those countries. Each agreement is given effect through specific Customs exemption notification and specific Rules for Determ­ination of Origin (ROO) of the goods. The origin criteria are not uniform. 

The essential condition in these notifications is that for claim of exemption, the importer must produce a Certificate of Origin (COO) issued by the designated authorities in the exporting country. In case the Customs doubt the genuineness of the COO, they can cause necessary verifications to be done through the designated aut­horities in the exporting country.  

Early this year, enabling provisions for administering the preferential tariff treatment under trade agreements were introduced by inserting Section 28DA in the Customs Act, 1962. The new section provides for certain obligations on the importers, prescribes time-bound verification from exporting country in case of doubt, suspension of preferential treatment, clearance of goods under provisional assessment during verification and denial of preferential treatment in certain situations. The said Section 28DA and CAROTAR supplement the ROO. 

The new provisions require an importer claiming preferential rate of duty to furnish certain declarations in the bill of entry that include the origin criteria. He must possess prescribed information to demonstrate the manner in which the origin criteria, including the regional value content and product specific criteria, specified in the ROO are satisfied, and submit the same to the proper officer on request. He must keep all supporting documents related to the prescribed information for at least five years from date of filing of bill of entry and submit the same to the proper officer on request. He must exercise reasonable care to ensure accuracy and truthfulness of the prescribed information.

The new CAROTAR streamlines the procedures for seeking verification of COO. The Customs must first ask the importer to furnish necessary information regarding the manner in which the origin criteria was arrived at and examine the same before routing the verification request through a nodal officer to the COO issuing authority. It specifies the timelines for the COO issuing authority to respond and the situations where the preferential treatment can be denied for the shipment in question, subsequent imports of the importer from same source or even identical products. It allows release of goods against provisional assessment against security for the full amount of the difference between normal duty and duty at the preferential rate.  

The importers claiming preferential duty rates can best protect their interests by calling for the prescribed information like the origin criteria and the manner in which it was determined from suppliers. It will still be tough for them to meet the onerous condition to ensure accuracy of the information. Some importers might prefer to ask for indemnity from the suppliers that may be difficult to get. Many parties to the trade agreements may see the new requirements as restrictive trade practice. 


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