More instructions on FTA-COO for claiming exemptions

The Jawaharlal Nehru Customs House (JNCH), Nhava Sheva, near Mumbai has issued revised guidelines for verification of certain details when imputers claim clearance at lower or nil rate of customs duty under various exemption notifications giving effect to preferential/free/regional trade agreements (FTA). Other customs houses may follow suit.
 

For availing exemptions under FTAs, the importers have to obtain certificates of origin (COO) from the sellers in accordance with the relevant rules for determination of origin of the goods and produce them before the Customs.  Besides, the importers must be compliant with the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020, which was introduced to prevent misuse of duty concessions under trade agreements by requiring due diligence from importers to verify the originating criteria of imported goods. Still, the assessing officers found certain difficulties and so, to deal with such situations, the JNCH had issued Public notice no.33 dated March 20, 2024. Now those guidelines have given way to revised instructions through Public Notice no. 55 dated June 24, 2024.
 

The latest instructions say that the importer must submit the FTA-COO, indicating the FOB value in the relevant column, along with the third country invoice details. The amount of freight and insurance must also be disclosed, either in the third country invoice or by submitting a freight certificate and insurance receipt. Second, if the third country invoice and the FTA-COO show the same FOB value, the importer must provide an explanation for the identical FOB values mentioned in both the documents.
Third, if the bill of lading issued in favour of the shipper located in the country of origin (exporting country) indicates ‘freight prepaid’ and the freight has been paid by someone other than the shipper indicated on the bill of lading, the importer must submit a freight certificate. Fourth, where the FTA-COO is issued on the basis of third country invoice, the values mentioned in both the documents must be in the same currency. Fifth, where the third country invoice indicates more items than indicated in the FTA-COO, the benefit of FTA will be limited to the items covered in the FTA-COO.  Lastly, where the third country invoice and the FTA-COO indicate different CTH (customs tariff heading) but the product description is the same in both the documents, the importer should self-declare the preferred CTH in the bill of entry. If the product description in the third country invoice and FTA-COO are different, the eligibility for FTA benefits will be examined as per the provisions of the law. The Public Notice also says that the proper officer will give option to the importer for early clearance against bond and bank guarantee, if the importer needs more time to submit information and supporting documents sought by the proper officer. 
 

In the last few years, the Customs have come across a number of instances where the duty exemptions were claimed under FTA notifications on the basis of COO that did not correctly show the origin of the goods. Besides, the government is consciously trying to discourage imports at concessional duty rates under FTA notifications.  So, the importers claiming exemptions on the basis of COO must be aware of the stringent scrutiny from the Customs and take extra care to ensure that they are fully compliant with the relevant rules. 

email: tncrajagopalan@gmail.com