Customs Act Amendments: New Proof of Origin Rules Explained
In recent years, the Indian government has intensified its efforts to ensure compliance with trade regulations and prevent misuse of preferential trade agreements (PTAs). The latest amendments to the Customs Act, 1962, specifically addressing the “Proof of Origin” rules, are a significant step in this direction. Here, we delve into the implications and operational aspects of these new rules.
India is a signatory to multiple PTAs that grant preferential tariff treatment to goods imported from member countries. While these agreements aim to promote trade, they have also been susceptible to exploitation. Importers often submit inaccurate or fraudulent Certificates of Origin (CoO), leading to revenue loss and unfair competition for domestic industries. To address these challenges, the government amended Section 28DA of the Customs Act and introduced the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR). These rules strengthen the scrutiny of origin claims and ensure that preferential tariffs are granted only to genuinely originating goods.
The new Proof of Origin rules place significant responsibility on importers. They are required to exercise “due diligence” in verifying the accuracy and authenticity of the CoO. Importers must ensure that the imported goods meet the origin criteria specified in the respective trade agreements. Along with the CoO, they must submit detailed information, including product details, production processes, and originating criteria. Customs authorities may request additional evidence if they have reason to doubt the origin claims. Customs officers now have the authority to suspend preferential tariff benefits if there is insufficient evidence to substantiate the origin claims. Importers must furnish the requested information within a stipulated timeframe to avoid denial of benefits. Non-compliance with the new rules may lead to penalties under the Customs Act. In cases of fraudulent claims, stringent actions, including prosecution, can be initiated.
The new rules place greater onus on importers to ensure compliance. Businesses importing under PTAs must establish robust mechanisms for verifying supplier-provided CoO and related documents. They must maintain detailed records to substantiate the origin of goods and train their staff on CAROTAR and the specific origin criteria of relevant trade agreements. However, these amendments also raise certain operational challenges. Importers face increased documentation requirements, leading to higher compliance costs. Enhanced scrutiny may result in delays in customs clearance, affecting supply chain timelines. Additionally, some businesses have reported ambiguities in interpreting the origin criteria of specific agreements.
To address these concerns, the government has initiated several measures, including conducting awareness campaigns to educate stakeholders, developing online tools for seamless submission and verification of CoO, and ensuring that requests for additional information are resolved within defined timelines. The new Proof of Origin rules under the Customs Act mark a decisive shift towards greater transparency and accountability in India’s trade ecosystem. While they pose initial challenges, these measures are expected to bolster domestic industries and ensure fair trade practices. Importers must proactively adapt to these changes to leverage the benefits of PTAs while remaining compliant with the law.
