Over 1,000 copper importers face customs heat for misusing ASEAN FTA duty exemption

The notices demand payment of differential customs duty along with a penalty

More than 1,000 importers have been issued show-cause notices by customs authorities for allegedly availing undue duty exemptions under the ASEAN-India Free Trade Agreement (AIFTA) between 2019 and 2023, sources have told Moneycontrol.

The notices are demanding payment of differential customs duty along with a penalty for imports of copper tubes and pipes that were declared as originating from Vietnam. Authorities have argued that these products do not meet the origin criteria required under AIFTA for duty exemption, despite being cleared at zero percent Basic Customs Duty (BCD) and 18 percent Integrated Goods and Services Tax (IGST) at the time of import.

The enforcement action follows a surge in imports of copper tubes and pipes from Vietnam in recent years. As per the show-cause notices accessed by Moneycontrol, the customs department has alleged that importers made ‘wrong declarations’ by claiming that the copper used to manufacture these goods was sourced from Indonesia or other ASEAN member states, thereby falsely complying with the 35 percent value addition requirement under AIFTA.

“It is also seen that maximum export of copper tubes and pipes is to India, as the export figures are much greater than what is being imported from Indonesia in general,” the notice reviewed by Moneycontrol said. Authorities flagged inconsistencies between Vietnamese export volumes and the volume of copper cathodes sourced by Vietnam from ASEAN countries. Vietnam is not a major producer of copper and is known to source copper cathodes from non-ASEAN countries, the notice added.

Industry representatives have raised strong objections to the retrospective action, pointing at operational challenges in verifying value-addition thresholds under AIFTA. The Bombay Metal Exchange (BME), in a representation to the Finance Ministry, has called the move disruptive and harsh on genuine traders.

“The retrospective demand for customs duty along with penalties has created significant uncertainty among industry participants. Importers have been relying on declarations made by suppliers and it is practically difficult for them to independently verify the 35 percent value addition requirement under AIFTA,” the Bombay Metal Exchange said.

“We urge the government to take a pragmatic view, considering the past practices followed in good faith under the FTA framework. The industry is willing to cooperate on ensuring compliance going forward, but sudden liabilities for previous years could severely impact MSMEs and traders,” the exchange added.

Legal experts too have raised concerns over the legality and fairness of the move.

“This sudden wave of retrospective enforcement under AIFTA strikes at the root of predictability and trust in India’s trade policy framework. For over a decade, Indian importers have relied on Certificates of Origin duly issued and verified through official channels. Now, based on unverified third-party data, importers are being burdened with massive financial liabilities. This not only undermines the sanctity of internationally accepted trade documentation but also violates fundamental principles of natural justice,” said Abhishek A Rastogi, founder of Rastogi Chambers.

“Any such retroactive tax or duty imposition must pass the test of judicial review. The appropriate constitutional remedy in such cases would be to challenge these actions through a writ petition, seeking judicial protection against arbitrary and excessive use of power. A robust and fair dispute resolution process is not only vital for justice but also essential to maintain investor confidence and uphold India’s credibility in global trade,” Rastogi added.

Under the ASEAN-India Free Trade Agreement, goods imported from ASEAN countries are eligible for preferential tariff treatment provided they meet specific Rules of Origin, including a minimum 35 percent regional value content. A valid Certificate of Origin (CoO) issued by competent authorities in the exporting country is mandatory to claim these benefits.

However, Customs has now raised questions on whether the value addition norms were genuinely met and whether the CoOs reflected the true country of origin of the raw materials.