Ruling to check on undue FTA claims
The Government has introduced the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) with effect from 21 September 2020 with a focus to prevent undue claims of Free Trade Agreement (FTA) benefits that have posed threat to the domestic industry.
The amendment puts a larger onus on the importers to establish that the goods imported are of the origin of a particular country, according to interpretation by Dhruva Advisors LLP on 3 Oct 2020.
The provisions amongst other things require that the importer submit cost statement, details of production process etc. for the goods being imported, which needs to be obtained from the supplier (exporter).
The importer needs to establish that reasonable due diligence in the verification of data has been carried out.
Dhruva has highlighted Some of the key Industry concerns.
Supplier issues:
• At what stage such documents should be obtained from the supplier and how should it be verified. What happens if the supplier is unwilling to provide the requisite documents?
• Supplier unwilling to give information, but is agreeable to directly provide the Form to the Customs authorities citing confidentiality? How will the importer establish the correctness?
• Additional data requirement for consignments in the future
• Contractual protection in case of any default by the supplier qua the information provided
Dealing with tax authorities
• Level of documentation required may differ from authority to authority
• Will submission of improper details constitute fraud/suppression by the importer?
• Delay by Customs authorities in verification/finalization of the provisional assessment? Duty paid pending assessment and refund?
However, practically, the importers are facing severe challenges in getting such information from the supplier, as these are confidential, says Dhruva.
It elaborates:
Section 28DA of the Customs Act, 1962 provides for the broad framework of the procedure to be followed by importers for claiming a preferential rate of duty sanctioned under Free Trade Agreements:
• Provisions place greater onus and obligation on importers in order to ensure that the imported goods satisfy the Rules of Origin criteria and are deserving of preferential rate;
• Authorities have greater powers, with the provisions providing for temporary suspension of the preferential treatment given to goods pending verification, or even disallowance of the claim on the basis of information furnished by the importer, without further verification;
• Power to deny and or reject preferential tariff treatment on import of identical goods from the same producer and exporter;
• Request for verification by the Customs authorities can be sent within a period of five years from the date of claim of a preferential rate of duty.
• The Customs (Administration of Rules of Origin under Trade Agreement) Rules, 2020 have been notified vide Notification No. 81/2020 – Customs (N.T.), dated 21 August 2020, to prescribe the detailed procedure for claiming the benefit
Procedure to claim preferential tariff
• Importer to make the following declarations on the bill of entry (‘BoE’):
– Goods imported are originating goods
– The Notification under which the preferential rate is claimed
– Details of the Country of Origin Certificate – (‘CoO’) [reference number, date of issuance, originating criteria etc.]
• Prior to imports, importer to be in possession of the following details to be maintained in Form I
The method used for determining the origination criteria for e.g. de minimis, accumulation and cumulation, value content, CTC rule, process rule etc.
Description of originating materials and components used in production of imported goods. #taxes #banks #financial #imports #trade /fiinews.com
