Govt to review rules of origin requirement in FTAs for certain sensitive items

The government on Saturday said it will review an important provision of free-trade agreements -- rules of origin -- for certain sensitive products such as electronics.

Finance Minister Nirmala Sitharaman in her Budget Speech said it has been observed that imports under free-trade agreements (FTAs) are on the rise.

Undue claims of FTA benefits have posed threat to the domestic industry and such imports require stringent checks, she said.

In this context, the minister said suitable provisions are being incorporated in the Customs Act.

"In the coming months, we shall review rules of origin requirements, particularly for certain sensitive items, so as to ensure that FTAs are aligned to the conscious direction of our policy," the minister said.

The 'rules of origin' provision prescribes for the minimal processing that should happen in the FTA country so that the final manufactured product may be called originating good in that country.

Under this provision, a country that has inked an FTA with India cannot dump goods from some third country in the Indian market by just putting a label on it. It has to undertake a prescribed value addition in that product to export to India. Rules of origin norms help in containing dumping of goods.

India has inked FTAs with several countries including Japan, South Korea, Singapore, Asean, and Malaysia.

Under such agreements, two trading partners significantly reduce or eliminate import duties on maximum number of goods traded between them.

The minister has introduced a change in Section 28DA of Customs Act that pertains to procedures regarding claim of preferential rate of duty.

According to an industry expert, the change has provided specific obligations to importers and prescribing them for time-bound verifications of such imports.