All business entities may now use advance rulings before actual trade happens

In addition to the public sector enterprises, now even private entitites may avail themselves of the facility

The World Trade Organisation (WTO) has widened the scope of advance rulings in its recent agreement on trade facilitation following the Bali Summit.

In addition to the public sector enterprises, now even private organisations - corporates or private bodies engaged in import or export may prefer advance ruling before actual trade of goods. This means Indian companies importing from overseas and foreign countries importing from India – be it public limited or private owned are entitled to advance rulings  from  the destinations countries respectively.

Officials said, the trade facilitation agreement has in principle approved this concept  and will be enforced anytime after July 2014.   Accordingly, advance ruling as a concept will be open to any structure of the trading entity.

Advance ruling is a  written statement issued by custom officials of  a country to the importer of goods from that country  clarifying  tariff classification,  valuation, carriers, drawback, entry procedures, country of origin marking and restricted merchandise. This is intended to put an end to the valuation and pricing issues  which often erupt  after import or export is done and eventually land up on dispute settlement mechanism  of the world Trade Organisation.
 
In Indian context, many Indian companies are currently entangled in tariff issues  related to varied treatment of  government subsidies in export and import which eventually affect the pricing of the goods. On the import side, many foreign companies importing to India face stiff charges when valuation of goods gets slapped with extra duties in addition to the actual value- namely, safeguard duties or anti dumping  duties etc.  

At the same time, Customs Department in India offers advance ruling in 2004 but  only for those  foreign companies which want to invest in India  through joint venture or wholly owned subsidiary. After this trade facilitation agreement, the advance rulings will be open to any  foreign entity.

Advance ruling provisions aim to set up a transparent and formal process whereby exporters and importers obtain upon request rulings from Customs administrations prior to the transaction. The ruling thus obtained is legally binding on the Customs authority as well as, in some countries, the trader over a fixed time period.  

According to official sources, a major source of dispute between Customs officials and traders in trade is on treatment attributed to the goods for Customs purposes – determination of the value, classification of goods, and determination of rules of origin. Wrong valuation and classification decisions may constitute a non-tariff barrier to trade  and are also a source for corruption if traders aim to obtain a better treatment of their goods by way of bribery, cites an report published by UNCTAD.

With tariff rates having fallen after the Uruguay Round, trade facilitation has become important in the context of dealing with non-tariff barriers. With more countries becoming part of the global supply chain, goods manufactured in a country are made of components assembled in many countries.