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Tax Alert: Rules of Origin under Trade agreements

26 August 2020

Guidelines regarding the implementation of section 28DA of the Customs Act, 1962 and CAROTAR, 2020 in respect of rules of origin under trade agreements (FTA/PTA/CECA/CEPA) and verification of Certificates of Origin

CBIC has introduced new regulations under section 156 read with section 28DA Customs Act, 1962 related to Rules of Origin under Trade agreements. These rules may be called the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020). The CAROTAR 2020 shall come into force on 21 September 2020, to provide sufficient time for transition and to ensure that the prescribed conditions are compiled with.

Broad framework

The new provisions are covered under the following broad heads:

  • Preferential tariff claim
  • Origin related information to be possessed by importer
  • Requisition of information from the importer
  • Verification request
  • Identical goods
  • Miscellaneous


  • The section and rules aim to supplement the operational certification procedures related to implementation of the Rules of Origin (RoO), as prescribed under the respective Trade agreements (FTA/PTA/CECA/CEPA).
  • CBIC circular aims to provide procedure for sending verification request to the verification authorities in exporting countries in terms of trade agreements under section 28DA and CAROTAR, 2020, and further guidelines for implementation of aforementioned section and rules.

Grounds of verification

The CAROTAR, 2020 and Rules of Origin notified for a trade agreement, broadly provide the following grounds for verification:

  • In case of a doubt regarding the genuineness of the Certificate of Origin (CoO) such as any deficiency in the format of the certificate or mismatch of signatures or seal when compared with specimens on record.
  • In case of a doubt on the accuracy of information regarding origin, i.e. where a doubt arises on whether the product qualifies as an originating good under the relevant RoO.
  • Verification could also be undertaken on random basis as a measure of due diligence. For this purpose, factors such as the quantum of duty being foregone, the nature of goods vis-à-vis the Country of Origin, commodities that are prone to misdeclaration of Country of Origin, compliance record of the importer etc., may be given regard while selecting CoO for random verification

Information requirements

Section 28DA makes it incumbent upon an importer to possess sufficient information as regards the manner in which Country of Origin criteria, including the regional value content and product specific criteria, specified in the RoO in the trade agreement, are satisfied. CAROTAR, 2020 has provided a form, containing list of basic minimum information which an importer is required to obtain while importing goods under claim of preferential rate of duty. Therefore, in case there is a doubt with regard to origin of goods, information should be first called upon from the importer of the goods, before initiating verification with the partner country.

Responsibility of the importer

Section 28DA of the Customs Act, 1962 further states that mere submission of a CoO shall not absolve the importer of the responsibility to exercise reasonable care to the accuracy and truthfulness of the information supplied. In case of failure of the importer to do so, the fact should be informed to Risk Management Centre of Customs (RMCC) through a written communication for the purposes of enabling compulsory verification of assessment of all subsequent import consignments. However, the compulsory verification of assessment should be discontinued once the importer demonstrates that he has established adequate system of controls to exercise reasonable care as required under the Customs Act, 1962;

Procedure for ascertaining the correctness of a claim of preferential rate of duty

CBIC has specified the related procedures as follows:

  • For ascertaining correctness of a claim of preferential rate of duty under a trade agreement, information may be sought from the importer during the course of customs clearance or thereafter. Likewise, a verification request may be made to an exporting country during the course of customs clearance of imported goods or thereafter. While the Customs Act, 1962 provides that information may be sought within a period of five years from the date of claim of preferential rate of duty by the importer, this time limit is subject to any other time limit as may be specified for this purpose under the trade agreement.
  • Further, it has also highlighted
    • The format of CoO as per RoO under various trade agreements, the period of validity, manner of obtaining the certificate and the procedure for verification of origin.
    • Communication of the authorised signatory details by the partner country through agreed channels.
    • Facility of an online repository on ICES for storing signatures/seals to facilitate comparison by the assessing officers and alternate procedure for reference to CBIC for verification
    • Mode of circulation of copies of specimen signatures and seals by DRI for the benefit of non-EDI customs locations
    • Designation of Director (ICD), CBIC as the nodal point for taking-up verification of origin with partner countries
    • Methods/steps to help reduce time taken in communication of requests for verification of preferential country of origin
    • Procedure and timelines either to restore preferential claim or issue notice for denying the claim in terms of section 28DA, read with section 28 of the Customs Act, 1962

BDO Comments

Importers availing the preferential duty rate under the trade agreement are required to conduct a health-check of the documentation/process/policies/procedures followed and devise/implement the best practices for sourcing appropriate information/data required for compliance of the CAROTAR 2020 and Section 28DA and satisfy the Customs Authorities. With the new system in place, the importers cannot merely rely on CoO alone to claim concessional customs duty.

Source: [Notification no:81/2020-Customs (N.T.) & Circular no:38/2020 dated 21 August 2020]