India's new rules to trace the country of origin came under fire at
the trade policy review (TPR) at the World Trade Organisation when India's free trade partners raised questions over the new rules.
Countries including Japan, Indonesia, South Korea and Malaysia inquired about the background and the objective of the new rules formed under Customs Administration of Rules of Origin under Trade Agreements Rules (CAROTAR) which came into force on September 21, 2020.
After an amendment in the Customs Act 1961, the finance ministry issued a notification for the CAROTAR rules which shifts the onus on the importer to verify the country of origin beyond receiving the usual Certificate of Origin (COO) to claim tariff benefits under the Free Trade Agreement (FTA) and to possess sufficient origin related information.
Before the new regulations came into force, the verification of origin in cases of doubt was made through nodal authorities in the respective country. However, the new regulations provide that the Indian customs officer can now ask for further documentation proving the country of origin from the importer first.
"If the importer provides sufficient information to customs, as and when asked for in terms of CAROTAR, 2020, the verification from partner country will not be initiated and the matter can be concluded quickly," said the government's brochure explaining the new regulations.
The government's rationale behind the new rules is to restrict the misuse of FTA by fraudulent traders who mis-declare the country of origin in order to avail undue duty concessions.
According to the documents released by the WTO, South Korea asked India to explain the factual background of the newly-made regulation and alleged that it may increase the cost of applying preferential tariffs and act as an obstacle to the use of trade agreements.
“Wouldn’t the rules increase the cost of applying preferential tariffs and act as an obstacle to the use of trade agreements?," it asked.
Indonesia also asked for the objective of the new measure and said that CAROTAR might create barriers to the import. It further asked whether the Indian government can guarantee "there will be no information leak under the CAROTAR scheme".
India's response to most of the questions relating to CAROTAR was, "The question raised pertains to the bilateral FTA, which does not fall within the purview of TPRM [the function* of the TPRM is to examine the impact of a Member's trade policies and practices on the multilateral trading system]. However, a comprehensive document containing relevant information on the CAROTAR 2020 is available in public domain."