The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020, commonly referred to as CAROTAR, 2020, is a comprehensive framework designed to ensure that imports into India comply with the prescribed ‘country of origin’ norms. Established to safeguard against misuse of Free Trade Agreements (FTAs), CAROTAR came into effect in September 2020. These rules necessitate importers to substantiate that their goods have undergone a minimum of 35% value addition in the country of export to qualify for duty concessions under various FTAs. In an effort to enhance the efficiency of these regulations, the Central Board of Indirect Taxes and Customs (CBIC) has recently directed its field officers to refine the process of verifying certificates of origin in line with CAROTAR.
Understanding CAROTAR 2020
CAROTAR 2020 was introduced as a measure to prevent the wrongful availing of concessional duty benefits by enforcing strict compliance with rules of origin provisions under FTAs. These rules apply to goods imported into India where preferential duty rates are claimed under any FTA. Importers are now mandated to maintain detailed documentation and information to support their claim of origin. This includes not only the certificate of origin but also information about the manufacturing process, supply chain, and domestic value content in the exporting country.
35% Value Addition Requirement
A key component of CAROTAR 2020 is the stipulation that the imported goods must have at least 35% value addition in the country from which they are exported. This means that for an importer to benefit from reduced tariffs under an FTA, the product should not merely be transshipped from a non-member country but should have substantial economic enhancement in the FTA partner country. This requirement aims to promote genuine trade relationships and local manufacturing within FTA member countries.
CBIC’s Role in Streamlining Verification
The CBIC plays a crucial role in the implementation of CAROTAR 2020. It is responsible for overseeing the verification of the certificates of origin provided by importers. This verification process is critical in ensuring that only eligible goods receive duty benefits. To streamline this process, the CBIC has instructed its field officers to adopt a uniform procedure for verification, which includes scrutinizing the information and documents submitted by importers and coordinating with customs authorities in the exporting countries when necessary.
Implications for Importers
Importers are significantly impacted by the enforcement of CAROTAR 2020. They must now exercise due diligence in obtaining and maintaining accurate records that demonstrate compliance with the rules of origin. This includes having a thorough understanding of their supply chain and the specific processes that contribute to the 35% value addition. Failure to provide the necessary proof or furnishing incorrect details can lead to denial of duty benefits and potential legal action.
Enhancing Fair Trade Practices
The introduction of CAROTAR 2020 serves to enhance fair trade practices by preventing the misuse of FTAs. By ensuring that only goods that truly originate from FTA partner countries receive preferential treatment, these rules protect domestic industries from unfair competition and loss of revenue due to illegitimate claims of origin. The move towards stricter verification and enforcement reflects India’s commitment to fair trade and the protection of its economic interests.
In conclusion, CAROTAR 2020 represents a significant step towards strengthening the administration of rules of origin under trade agreements. With the CBIC’s efforts to streamline verification procedures, there is an expectation of increased compliance and a reduction in fraudulent claims. Importers are encouraged to understand and adhere to these new requirements to ensure seamless trade operations and the continued enjoyment of FTA benefits.
