News Feed | 28 Jul 2024
THE INDIAN EXPRESS HIGHLIGHTS | 28 JUL 2024
As India ramps up FTAs, a new system in the works to stop concessions misuse
• The Finance Ministry is creating a new risk management system to prevent international exporters from
breaching value addition norms through incorrect claims under Free Trade Agreements (FTAs).
• The system is important as India continues to sign FTAs that could lead to annual duty exemptions worth
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Rs 75,000 crore to Rs 80,000 crore, and is simultaneously relaxing customs procedures with options for self-
certification.
• Section 28DA of the Customs Act, 1962 may be amended, replacing the 'certificate' of origin with 'proof' of
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origin, allowing self-declaration, which may enable trade with nations that prefer liberal customs norms
but could also heighten risks.
• Countries that accept self-certification rely on their risk management systems for case verification; India
aims to establish a similar guardrail.
• Depending on the trade agreement, not all FTA partners will have the self-declaration option, and trade
negotiators will decide which geographical regions may use this norm.
• Ajay Srivastava of Global Trade Research Initiative (GTRI), states that rules of origin need importers to
adequately prove that goods claiming FTA tariff concessions meet all the criteria, and should also abide
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by the CAROTAR rules, else risk losing the FTA tariff concessions
• There are challenges with compliance to value addition norms, causing exporters to often forgo FTA
concessions and lead to low FTA utilization rates. However, breaches of rules of origin have been observed,
particularly in the India-ASEAN trade agreement.
• S Ramesh of Price Waterhouse & Co warned that deregulation in customs norms requires exporters from
FTA nations to exercise high integrity since concessions worth Rs 75,000 crore to Rs 80,000 crore are given
annually and customs has to ensure benefits are correctly availed.
• An example of a potential breach was pointed out by a GTRI report that showed an unusual 60-fold
increase in silver imports from the United Arab Emirates (UAE), a country that does not produce silver,
possibly indicating a breach in the rule of origin under the India-UAE FTA.
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Related Mains PYQs
UPSC 2009
Critically assess the recent free trade agreement entered into by India with ASEAN.
Related Prelims PYQs
UPSC 2017
'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of
negotiations held between India and
A. European Union
B. Gulf Cooperation Council
C. Organization for Economic Cooperation and Development
D. Shanghai Cooperation Organization
UPSC 2003
Assertion (A): The new EXIM Policy is liberal, market oriented and favours global trade. Reason (R): GATT has
played a significant role in the liberalisation of economy.
A. Both A and R are individually true and R is the correct explanation of A
B. Both A and R are individually true but R is NOT the correct explanation of A
C. A is true but R is false
D. A is false but R is true
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