DA Newsflash (FTP): Key Update on clarifications for Free Trade Agreements (FTAs) between India and UAE, and India and ASEAN

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The Central Board of Indirect Taxes and Customs (CBIC) has recently issued two significant instructions, Instruction No. 21/2024-Cus (16.10.2024) and Instruction No. 23/2024-Cus (21.10.2024), providing crucial clarifications for Free Trade Agreements (FTAs) between India and UAE, and India and ASEAN. Here's a summary of these updates along with insights from our team:

Clarifications on India-UAE CEPA: Addressing COO and Duty Refund Issues

The CBIC's guidelines address challenges arising from the India-UAE Comprehensive Economic Partnership Agreement (CEPA), focusing on Certificates of Origin (COO) and related benefits:

1. COO Issuance - Retrospective Flexibility: Rule 15(11) under CEPA allows retrospective issuance of COOs for up to 12 months post-shipment, under exceptional situations, giving more leeway for importers to claim preferential benefits even after initial import.
2. Refunds for Excess Duties: According to Rule 21(3), a refund for excess duty paid is permissible if a product was eligible for preferential treatment but the benefit wasn't claimed initially. If the COO is submitted later, the upload requirement in E-Sanchit is waived, ensuring that eligible refunds are not restricted due to technicalities.
3. Handling Minor Errors in COO: Minor discrepancies (such as typos) in a COO will not invalidate it if they don’t affect the document’s accuracy or authenticity as per Rule 15(13). This ensures that procedural errors do not hinder trade benefits.

Clarifications on Import Processes Under ASEAN-India FTA: Focus on Third-Party Invoicing

The new guidelines also focus on import procedures under the ASEAN-India FTA, particularly when using third-party invoicing:

1. Acceptance of Third-Party Invoices: Third-party invoicing is a recognized practice under ASEAN-India FTA, and the COO remains valid regardless of the invoice's origin. This clarification ensures that the trade agreement's benefits are accessible without complications in customs valuation.
2. Verification Protocols: Customs officers can request additional information if there are doubts regarding the origin of the goods. If not satisfied, they must escalate the issue to the FTA Cell for verification. This process follows CAROTAR 2020 regulations and the stipulations of the relevant FTA.
3. Confidentiality and Currency Flexibility: The importer is not required to disclose confidential details of third parties under CAROTAR. Additionally, there's no need for the value in invoices or COOs to be in a specific currency, allowing flexibility in trade documentation.
4. Preferential Duty Denial Process: Customs officers must not reject preferential duty claims without conducting a proper verification process. Allegations regarding artificial value-addition require substantiated evidence, maintaining fairness in the assessment process.
5. Issuance of Speaking Orders: If there are concerns regarding compliance with origin criteria, customs must issue a speaking order after following due process. This ensures transparency and adherence to natural justice principles.

DA Insights:

These recent clarifications underscore CBIC's efforts to streamline trade operations and enhance clarity for importers. The updates, especially concerning retrospective COO issuance and validation of third-party invoicing, show a clear intention to reduce trade barriers while ensuring robust compliance.

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