Trade agreements and certificates of origin

A trade agreement lowers or removes duty on goods made in the partner country. India calls the bigger ones free trade agreements (some are named CEPA, CECA or ECTA) and the smaller ones preferential trade agreements. The lower duty is the preferential rate; without it, goods pay the normal MFN rate.

It works both ways. As an exporter, your buyer may pay less duty at home. As an importer, you may pay less duty in India on goods from a partner country.

Two conditions apply every time. The product's code must be in the agreement's schedule, and the goods must really come from the partner country. The proof is a certificate of origin or, under some agreements, a declaration by the exporter.

Rules of origin decide when goods count as made in a country. DGFT's Handbook of Procedures names the usual tests:

• Wholly obtained: grown, mined, caught or born there.
• Change in tariff classification: imported inputs are worked on until the product falls under a different HS heading from the inputs.
• Value addition: enough of the value is added in the country, worked out as the agreement says.
• More than minimal operations: simple steps such as repacking, labelling, sorting or simple mixing usually do not make goods originate.

Each agreement sets its own rules, often product by product. The same product can qualify under one agreement and fail under another.

• A preferential certificate claims the lower rate under one named agreement. Each agreement has its own format and its own rules on when the certificate is issued and how long it is valid.
• A non-preferential certificate only shows the goods are Indian. A buyer, a bank or the buyer's customs may ask for one, but it gives no lower duty.

DGFT's rules say authorised agencies must accept applications and issue certificates only on its Trade Connect platform, trade.gov.in. Preferential certificates come from the agencies listed in Appendix 2B of the Handbook, such as the Export Inspection Council, each for its own agreements and products. Non-preferential ones come from the agencies in Appendix 2E, and the preferential agencies can issue them too.

Under India's agreements with the EFTA countries and the UK, an exporter can also declare origin itself instead of going to an agency.

1. 1Check that the buyer's country gives your HS code a lower rate under the agreement, and by how much.
2. 2Check that your product meets that agreement's rule of origin. Keep a cost sheet with the HS code, value and origin of every input.
3. 3Apply on trade.gov.in to an authorised agency, using the same invoice number as on your shipping bill.
4. 4Send the buyer the electronic certificate. If it has a mistake, do not alter it: ask the agency for a replacement (in-lieu) certificate.
5. 5Keep your records. The buyer's customs can ask India to verify a certificate long after the goods have arrived.

When you import under an agreement, section 28DA of the Customs Act and CAROTAR 2020, the Customs (Administration of Rules of Origin under Trade Agreements) Rules, set out what you must do.

1. 1Check the proof of origin before you file. Customs can refuse the lower rate without any verification if it is incomplete and not in the agreement's format, has an alteration the issuing authority did not authenticate, has expired, or covers goods the agreement does not.
2. 2In the bill of entry, declare that the goods qualify, give the tariff notification for each item, and enter the proof's reference number, date and origin criterion.
3. 3Hold the information CAROTAR's Form I asks for: how the goods meet the rule of origin. You do not file it with the bill of entry, but if customs asks, give it within ten working days.
4. 4Keep the supporting documents for at least five years from the date of the bill of entry.