CAROTAR rules in India and India's FTA partners concerns
The the finance ministry of india has recently issued a notification under Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR), mandating documents beyond the usual certificate of origin (COO) to claim tariff benefits under free trade agreements (FTA). It was issued by Following an amendment to India’s 1962 Customs Act in the FY21 budget.
India’s free trade partners have raised concerns at the World Trade Organization (WTO) that its insistence on additional documents to determine the origin of imported goods could raise non-tariff barriers to trade.
Countries such as Japan, South Korea, Indonesia, Malaysia and Sri Lanka have sought clarifications on the new rules during India’s quadrennial trade policy review (TPR) at WTO. India told the countries objecting to the new regulations that the matter cannot be raised at WTO and needs to be bilaterally discussed.
Japan, South Korea, Indonesia, Malaysia and Sri Lanka have called for a review of country-of-origin rules. The CAROTAR rules were implemented in September to strictly verify the rules of origin under FTAs.
The CAROTAR rules were implemented in September to strictly verify the rules of origin under FTAs to guard against misuse of benefits. This has shifted the burden of proof to the importer from the exporter who is often struggling to comply with the new obligations, making the customs clearance process more complex.
South Korea in its objection called for a review of the CAROTAR regulations. “First, we request that India take a critical look at its new regulations on the rules of origin, namely CAROTAR 2020. Korean firms raise increasing concerns which include: an excessive demand for submission of origin-related information; retrospective applications of law; and arbitrary interpretation of the regulation by the customs authorities," it said during India’s TPR.
The CAROTAR 2020 relates to imports under bilateral FTA, which does not fall within the purview of (Trade Policy Review Mechanism) TPRM [the function of the TPRM is to examine the impact of a member’s trade policies and practices on the multilateral trading system]. However, a comprehensive document containing relevant information on the CAROTAR 2020 is available in public domain.
