DECODING INDIA-UAE COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT (CEPA)
A Free trade Agreement (FTA) is a treaty between two/ two or more countries to agree on certain cross-border trade obligations. It makes trade between contracting countries as trouble-free as possible with specified duty exemptions to increase investment and trade flows within integrated economies. After World War II, countries collaborated and created the General Agreement on Tariffs and Trade (GATT) on a multilateral platform, which acts as a guiding document for finalising trade deals.
FTAs can construct the economic framework within which the businesses and governments can operate. A well-designed and comprehensive FTA can provide multiple benefits, including access to the global market, preferential tariffs, and new business opportunities. FTA helps overcome international trade barriers like tariffs and cultural and non-tariff barriers created to provide special privileges to domestic manufacturers. Usually, the following types of FTAs are entered between two/ two or more countries:
· Preferential Trade Agreement (PTA): A Preferential Trade agreement gives a preferential right of entry to specific products to two or more partnering countries, usually by reducing duties on an agreed number of tariff line items. Here a positive list is maintained, i.e., the list of the products on which the two partners have agreed to provide preferential access, sometimes by reducing the tariff rate to zero for some products.
· Free Trade Agreement (FTA): A Free Trade Agreement is more comprehensive than a preferential trade agreement wherein two or more countries agree to provide preferential trade terms and tariff concessions to the partner country. Here a negative list of products and services is maintained by the negotiating countries on which the terms of FTA are not applicable and except that all other goods and services are covered within the framework of FTA.
· Comprehensive Economic Cooperation Agreement (CECA): A Comprehensive Economic Cooperation Agreement is more comprehensive than FTA. CECA cover the regulatory aspect of trade and encompasses an agreement covering the regulatory issues. CECA generally cover negotiation on trade tariff and tariff quota rate.
· Comprehensive Economic Partnership Agreement (CEPA): A Comprehensive Economic Partnership Agreement is much broader and more complicated than CECA. In an equal economic standing, CECA is considered a stepping-stone to accomplishing CEPA. In addition to the tariff reductions, CEPA also covers negotiation on the trade in services and investment with other areas of economic partnership. It may also consider negotiation in trade facilitation, customs cooperation, competition, and IPR.
· Framework Agreement: The framework agreement primarily defines the scope and provisions of the potential agreement between the trading partners. It provides some new discussion areas and sets a period for future liberalisation.
· Early Harvest Scheme: An Early Harvest Scheme (EHS) is a precursor to an FTA/CECA/CEPA between two trading partners. At this stage, the negotiating countries identify certain tariff-liberal products pending the conclusion of actual FTA negotiations. It works as a s t e p t o w a r d s e n h a n c e d engagement and confidence building.
· Global System of Trade Preferences (GSTP): Under the agreement establishing GSTP, tariff concessions are exchanged among developing countries that have signed the agreement.
As a part of 'Atmanirbhar Bharat', India has set itself an ambitious target to grow exports. India has felt the need to strengthen its economic ties with countries worldwide, wildly when free and regional trade agreements are increasing globally to achieve the export target. It has become es sential for India to expand its relationship with suitable trade partners and build its position as a global trade hub.
Some of the vital trade agreements entered by India are:
India and United Arab Emirates (UAE) have been trading partners since the beginning of the early 1950s. UAE has always been one of India's largest and most important trading partners. The CEPA with UAE was inked on 18 February 2022 and is India's first complete free trade agreement to be signed with any country in a decade. The last prominent FTA India signed was with Japan in 2011. The negotiations between India and UAE were concluded in a record span of 88 days, and CEPA was operationalised w.e.f. 1 May 2022.
Key Highlights of India-UAE CEPA:
· Expected to increase bilateral trade between two countries from the current $60 billion to $100 billion in the next five years.
· Zero access duty to 97% of Indian products (accounting for 99% of Indian exports to UAE in value terms) in a phased manner over the next ten years.
· Boost labour-intensive sectors like gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, medical devices, and automobiles.
· Establishes a robust legal frame work on technical regulations, standards , and conformity assessment procedures to ensure the smooth ow of trade in goods.
· Establishes a mechanism for consultations on non- tariff measures that may create barriers to trade
· Contains legal provisions to regulate cross-border trade in services and offers service providers an open and non-discriminatory environment for cross-border trade. Market access to India service providers in UAE in 11 service sectors consisting of 111 sub-sectors: business services, communication services , educational services, financial services, tourism, and travel-related services.
· Provides for Sanitary and Phytosanitary to protect human, animal, and plant life or health and strengthen communication, consultation, and cooperation between two nations. Encourage the development and adoption of science-based international standards , guidelines , and recommendations, and promote their implementation by the two countries.
· Establishes clear rules on Audit, Certification, and Import Checks.
· Ensures that standards, technical regulations , and conformity assessment procedures do not create unnecessary barriers to trade between two nations.
· Contains specific provisions to increase efficiency in customs procedures affecting the movement of cross-border trade, such as issuing customs rulings before import, facilitating cross-border clearance for economic operators, and adopting international best practices of customs management techniques.
· Separate annexure on pharmaceutical products included for automatic registration and marketing authorisation of Indian generic medicines are meeting specified criteria in 90 days in the UAE.
· Establishes a framework to promote consumer confidence in digital trade and foster an environment conducive to advancing digital marketing, including e-commerce and the digital transformation of the global economy. practices of customs management techniques.
· Provides a permanent safeguard mechanism which will protect exporters and businesses of both nations from any unwarranted surge in volumes of any product.
· Strengthens partnership and cooperation frameworks to enable both countries to benefit from the experiences and expertise of the other in managing government procurement.
· Recognition provided for SMEs' role in maintaining dynamism and enhancing the competitiveness of their respective economies.
· Stringent Rules of Origin for strict monitoring of trade flows between two nations to prevent circumvention of products from other countries. The agreed rules are based on compound criteria of change in tariff classification (CTC) of the good plus a minimum percentage value-added.
· Encourages economic cooperation between two nations to liberalise and facilitate trade and investment and foster economic growth. Establish an Economic Cooperation committee to identify new opportunities for future collaboration or capacity-building activities.
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· The incorporation of a separate detailed Chapter on dispute resolution provides an effective and efficient mechanism for settling disputes concerning the interpretation and application of the agreement.
· Encourages mutual investments by establishing the UAE - India Technical Council on Investment to promote, facilitate activities, and identify new investment opportunities.
· Strengthens the protection and enforcement of intellectual property right s to promote technological innovation and to transfer and disseminate technology to the nations' mutual advantage.
India-UAE CEPA is a comprehensive agreement with 18 Chapters covering Trade in Goods, Rules of Origin, Trade in Services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures, Dispute Settlement, Movement of Natural Persons supplying services, Telecom , Customs Procedures , Pharmaceutical products, Government Procurement, IPR, Investment, Digital Trade and Cooperation in other Areas. The CEPA between India and the UAE covers almost all the tariff lines dealt in by India (11,908 tariff lines) and the UAE (7581 tariff lines), respectively.
The Central Government vide Notification No. 39/2022-Cus (NT) dated 30 April 2022 has notified the Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between India and the United Arab Emirates) Rules, 2022, effective from 01 May 2022, which among other things provide.
· Origin Criteria: Provides for origin criteria to be met for claiming preferential treatment under India-UAE CEPA, i.e., wholly obtained criteria or product-specific value addition criteria.
· Wholly obtained products: Provides a list of the products which shall be wholly obtained or produced in the territory of the exporting country.
· Insufficient or non-qualifying operations: Provides the nature of the processes by which a product shall not be considered an originating product.
· De-Minimis: Provides for a situation where non-originating materials, not meeting the required change in tariff classification, shall be considered as originating.
· Transportation: Provides for transportation of the originating products between two countries for claiming preferential treatment.
· Certificate of Origin: Provides for proforma and minimum information to be included in the Certificate of Origin like HS Code, description and quantity of the products, name of the consignee, exporter or manufacturer, and origin criteria.
· Certification Procedure: Provides for the validity of the Certificate of Origin and the period for issuance of the Certificate of origin (before, at or within five working days of the date of exportation).
· Is suing authorities for a Certificate of origin: Provides a list of the issuing authorities designated to issue a Certificate of Origin under these Rules.
· Application for obtaining Certificate of Origin: Provides detailed procedure to be followed and documents/ details to be submitted by the final producer, manufacturer, or exporter of the product to obtain a Certificate of Origin from the issuing authorities of the exporting country.
· Preservation of documents: Provides for the minimum period for which information and supporting documents are required to be retained by the issuing authorities of the Certificate of Origin.
· The obligation of the exporter or manufacturer: Provides for various obligations on the part of the exporter or manufacturer like providing truthful declaration relevant to the determination of origin, maintaining records of minimum information, and supporting documents, and making available records for inspection of origin criteria.
· Denial of Preferential Treatment: Provides for the situation where the Customs Administration of the importing countries may deny preferential treatment in the event of non-meeting of origin criteria.
· Verification of Certificate of Origin: Provides a detailed procedure for determining the authenticity and correctness of the information given in the Certificate of Origin.
· Temporary suspension of Preferential Treatment: Provides for the situation where the preferential treatment may be suspended because of consistent failure by the exporter, manufacturer, or producer to comply with the Rules.
· Third-party invoicing: Permits preferential tariff treatment even in 'Third Party invoicing' where the invoice is not issued by the exporter or producer of the product.
Vide Notification No. 22/2022-Cus., dated 30 April 2022, the Central Government has notified concessional rate of duty for goods imported availing the benefit of India-UAE CEPA, giving effect to the first tranche of the CEPA. It is important to note that the India-UAE CEPA specifically provides applicability to Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (“CAROTAR, 2020”).
CAROTAR, 2020
Chapter VAA and Section 28DA were inserted in the Customs Act, 1962, among other things, providing for a basic level of due diligence on the part of an importer to satisfy that the claimed originating criteria have been met and that mere submission of a Certificate of Origin may not be sufficient.
As required by section 28DA, Central Government notified CAROTAR, 2020 vide Notification No. 81/2020-Cus (NT) dated 21 August 2020. The said Rules aim to supplement the existing operational certification procedures prescribed under different trade agreements and require the following conditions to be fulfilled for availing of benefits under FTAs.
· Declaration: An importer intending to claim a preferential rate of duty under a trade agreement shall be required to make a necessary declaration in the bill of entry that imported goods qualify as originating goods under the respective agreement when filing a statement of entry. Indicate details like tariff notification for preferential rate, Certificate of the original reference number, date of issuance of the Certificate of Origin, originating criteria, and transportation details, in the Bill of Entry.
· Origin-related information: An importer claiming a preferential rate of duty under a trade agreement shall possess knowledge as indicated in Form I (containing basic minimum details for claiming the preferential rate of duty) to the Rule. Supporting document s related to Form importer shall maintain for at least five years from filing the Bill of Entry.
· Requisition of information: In case of doubt concerning origin criteria prescribed in the respective Rules of Origin, Customs authorities may seek necessary information and supporting documents from the importer during Customs clearance or after that. Upon receipt of notification and satisfaction, the claim for a preferential duty rate shall be duly accepted and communicated to the importer. In case insufficient information is provided for the conclusion of the origin criteria prescribed in the respective Rules of Origin, the verification proposal may be forwarded to the nodal officer appointed.
· Rejection of preferential claim by Principal Commissioner or Commissioner of Customs: In case of relinquishment of claim or sufficient evidence for non-meeting of origin criteria, the Principal Commissioner or Commissioner of Customs may, for the reasons to be recorded in writing, disallow the claim of a preferential rate of duty without any further verification.
· Verification Request: The proper officer, through a nodal officer appointed, may request for verification of Certificate of Origin from verification authority in case of doubt regarding the Certificate's authenticity, doubt as to non-meeting of origin criteria, due diligence, etc. Such verification shall be completed within the time line prescribed under respective trade agreements or within sixty days. If the verification authority fails to respond or information provided by the verification authority is sufficient to prove that the origin criterion is not met, the claim for a preferential duty rate shall be denied.
· Rejection of preferential claim for identical goods: Where originating criteria for an exporter or producer do not meet, the Principal Commissioner or Commissioner of Customs may, for the reasons to be recorded in writing, rejects the other claims of a preferential rate of duty, for identical goods imported from the same exporter or producer.
India – UAE CEPA is a ground-breaking agreement in delivering India's strategy to adapt to an increasingly complex and fast-changing environment by strengthening the economy and driving the global post-COVID19 recoveries through international trade. CEPA will not only facilitate the free flow of goods, services, capital, technology, and people but will propel the two friendly nations towards magnificent bilateral and economic relations. India – UAE CEPA has the potential to promote upward mobility throughout the economic value chain, resulting in hundreds of thousands of job opportunities in both countries. CEPA will be a valuable tool in the hands of the Indian industry in achieving the Hon'ble Prime Minister's vision of 'Atmanirbhar Bharat'.