Govt to tighten rules of origin to stem FTA misuse

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In order to check inflow of cheap and inferior quality goods through imports via the free trade agreements, New Delhi is planning to impose tighter norms. The government has directed the commerce and industry ministry to wield the ‘rules of origin’ broom to sweep out this inflow. Often substandard goods are manufactured in one country and then routed through other countries with which India has a free trade agreement (FTA), according to The Economic Times. “We are evolving a rules of origin template for FTAs and trade remedies for goods coming from other countries to see where they originate and then routed through. The idea is to check circumvention and cheap imports,” The Economic Times quoted an unnamed senior official as saying.

Template for rules of origin is significant since India is negotiating agreements with European Union, the UK, Canada and other countries. India has recently concluded pacts with Australia and the UAE.

Officials said the concern has been raised following some instances of violation of rules of origin under Sri Lanka-India free trade agreement and that between India and the ASEAN which customs authorities pointed out.

Rules of origin stipulate which country the goods in question have been manufactured in. The country where the good in manufactured also form the basis of duty reduction in trade agreements.

The objective of the template under preparation to prevent cheap inflow of goods will lay down details and strict guidelines to be applicable to the manufacture of any good that do not originate in the country with which New Delhi will strike a trade agreement. The overall objective will be to preclude any possibility of goods made in other countries to sneak in taking advantage of loosely defined rules of origin clauses.

Several third world countries are allegedly taking advantage of these trade agreements to ship goods made in other countries with which India does not have an agreement.

The ministry official told the newspaper that the words, phrases and terms used in rules of origin are evolving fast and they are studying how these are used by developed economies.

Safeguard duties and anti-dumping duties constitute trade remedies.

According to the report, the commerce ministry has asked for clarifications from the industry on how much time and money one needs to procure origin certificates. The ministry is also analysing trade pacts between European Union and Canada, and Canada, the US and Mexico to find out how they have benefitted from free trade agreements.