Free Trade Agreements Advisory

Indian Free Trade Agreement advisory focuses on converting preferential duties into actual savings and getting past the customs inspection of all the claims. In India, the FTAs with ASEAN, Japan, Korea, Singapore, Malaysia, UAE, Australia and SAFTA countries include the application of concessional duties, which must be claimed according to the rules of origin prescribed by the respective agreements and the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR) issued under Section 28DA of the Customs Act, 1962 since 21 September 2020. There is a need for performing an origin due diligence not only for having a certificate of origin, but also for exporting originable products.

FTA Advisory in India: Key Facts at a Glance

Legal Framework and Authorities Involved

The framework has three layers. First, each trade agreement an FTA, CECA, CEPA, ECTA or PTA prescribes its own rules of origin: change-in-tariff-heading tests, regional value content thresholds such as the common 35% plus CTSH criterion, process rules and cumulation provisions. Secondly, Section 28DA of the Customs Act, 1962 (inserted through Finance Act, 2020) mandates possession of origin information for claims of preferential rates and denial of benefit in case of non-compliance. Thirdly, CAROTAR, 2020 is an implementing regulation for Section 28DA. It lays down conditions of declaration, due diligence of importers according to Rule 4, verification procedure according to Rules 5 and 6 and Form I as self-assessment form. The guidelines in implementation will be CBIC Circulars and Port Notifications, while on the exporter side, DGFT will issue certificates.

India's Trade Agreements and Preferential Routes

• Regional Trade Agreements: The ASEAN-India Trade in Goods Agreement (AIFTA) and SAFTA, wherein there exist different negotiation models for determining country membership within the respective frameworks.

• Bilateral CECAs and CEPAs: Important agreements made with Singapore, Malaysia, South Korea, and Japan, all of which have their specific rules of origin.

• More recent & Expanded Bilateral Agreements: The India-UAE CEPA, India-Australia ECTA, India-Oman CEPA, India-UK FTA, and India-New Zealand FTA, all offering broader market access through preferential provisions covering trade in goods and services.

• PTAs and Limited Scope Agreements: India-Chile PTA, India-MERCOSUR PTA, the India-Sri Lanka FTA, and India-Nepal Treaty-based Agreements. More comprehensive mechanisms dealing with export-import policies including schemes, authorizations and procedures will be provided by us through our foreign trade policy advisory.

• Frameworks under new negotiation process: The PTA and FTA Frameworks under current negotiations and/or final ratification will be made eligible only after official notifications; claims for preferences must never be made before notifications take effect.

• Each agreement has its own schedule of tariffs, origin criteria and certification requirements. A certain commodity may qualify under one agreement but not another.

Importer and Exporter Obligations

• Importers claiming a preferential rate must declare the tariff notification, produce the certificate of origin and enter its details in the bill of entry under CAROTAR Rule 3.

• Rule 4 due diligence: The importer should have origin information to validate the claim — supplier declaration, bills of materials, manufacturing documentation — prior to filing.

• Form-I serves as a guide to self-assessment; it is not filed along with the bill of entry filing.

• The responsibility lies with the importer: In case of doubt, the proper officer first seeks information from the importer (Rule 5) and then from the partner country (Rule 6).

• The exporters should see that the product fulfills the criterion of origination, maintain production documentation, value-added documents, and acquire the certificate from the concerned authority prior to export.

• Both the parties need to maintain their documentation during the audit period since the verification may take place years later.

Documents for Preferential Claims

Document expectations vary by agreement and product; origin worksheets should be built against the specific rule, not a generic template.

Claiming Preferential Duty: Practical Process

1. Check that there is an applicable agreement and that it applies to your product: Confirm the coverage of product, partner country, and trade agreement, and determine the applicable tariff notification.

2. Test the rules of origin: Check whether your product satisfies the required originating criteria: tariff heading change, regional value content, or process criterion.

3. Obtain the certificate of origin: Obtain it from the designated agency along with evidence of manufacture either prior to or concurrently with shipment.

4. Use origin benefits properly: State the notified, certificate information, and originating criteria on your bill of entry, keeping a copy of Form-I.

5. Maintain the due diligence file: Keep your declarations by the suppliers, calculation of value content, and all relevant correspondence.

6. Answer origin queries: In case of an origin inquiry under Rule 5, respond immediately with your due diligence file; Rule 6 country origin verification occurs in cases of doubt.

Benefits and Limitations

• Duty Savings: Where genuine, preference rates bring considerable savings in landed cost.

• Competitive prices for exporters: origin certification gives the advantage of concessional duty rates for Indian exports to partner countries.

• The benefit is conditional, not automatic — a defective claim converts a saving into a demand, with interest.

• Origin verification entails cost: for every preferential import item, an origin file has to be developed and managed.

• Some agreements are different in terms of their scope and exclusions; thus the benefit has to be checked product by product.

• The risk of origin verification does not end after the issuance of certificates. Importers building durable compliance credentials may also consider Authorised Economic Operator status

Preferential and Non-Preferential Certificates Compared

Ongoing Compliance and Audit Readiness

However, preferential claims continue to be subject to verification even after clearance. The importer must maintain an ongoing file for each agreement and product combination of Form-I self-assessment based on updates on suppliers or formulations, supplier declarations being up-to-date and value content computations adjusted on cost changes. In a Rule 5 information request, the time available for responding is very short and the quality of the file will determine whether the claim will be sustained; if there is any doubt about the validity of the claim, the verification under Rule 6 involving the issuing authority from the partner country can last several months. The exporters also have to contend with the same problem but in reverse – certification of items which then fail verification could lead to consequences in the partner country and harm reputation among Indian buyers.

Risks and Typical Errors

• Considering the certificate of origin as enough: Section 28DA puts responsibility on the importer to be diligent, and claims will not be recognized when there’s insufficient information.

• Wrong agreement selection: claiming under an inapplicable agreement instead of the one whose criteria the goods actually meet.

• Unverified regional value content accepting supplier assertions without bills of materials or cost evidence.

• Missing certificate information on the bill of entry, which creates a procedure that denies the validity despite true origin.

• Exporters issuing certificates on products containing disqualified components, making exporters and importers vulnerable to failed verification.

• Ignoring amendments to agreement schedules and origin annexes mid-cycle.

• Where imports come from related foreign suppliers, origin claims interact with transfer-pricing and valuation scrutiny — see our Special Valuation Branch registrations.

How SKMC Global Can Assist

• Assessing FTA applicability and duty-savings potential product-by-product across India's agreements

• Testing rules of origin — tariff-heading change, regional value content and process rules — against actual bills of materials

• Guiding importers on CAROTAR Rule 3 Declaration, Rule 4 Due Diligence File, and Form-I Self-Assessment

• Guiding exporters on origin documentation and certificate issuance through the designated agencies

• Advising on claim disputes, duty demands and recovery proceedings, alongside related trade-compliance matters

Certificates of origin are issued by designated government agencies and origin determinations rest with customs authorities SKMC provides advisory, documentation and audit-response support only.