NEW DELHI: The Finance Ministry recently said exemptions specified in Free Trade Agreement (FTA) with regard to Country of origin will prevail in case of conflict between Revenue Department and importer.

The Central Board of Indirect Taxes and Customs (CBIC) informed that the customs field officers should be sensitive to applying CAROTAR and maintain consistency with the provisions of relevant trade agreement or its Rules of Origin, while giving an instruction to Chief Commissioners.

Customs (Administration of Rules of Origin under Trade Agreements) or CAROTAR Rules, came into effect from September 21, 2020.

It empowers the Customs Officers to ask the importer to furnish further information, consistent with the trade agreement, in case the Officer has reasons to believe that the Country-of-origin criteria have not been met. Where the importer fails to provide the requisite information, the officer can make further verification consistent with the trade agreement.

"In the event of a conflict between a provision of these rules and a provision of the Rules of Origin, the provision of the Rules of Origin shall prevail to the extent of the conflict," the CAROTAR rules said.

In the instruction issued on August 17, the CBIC wrote to the Chief Commissioners saying: "The Officers under your charge should be sensitive to applying CAROTAR maintaining consistency with the provisions of relevant trade agreement or its Rules of Origin."

India has inked FTAs with several countries, including UAE, Mauritius, Japan, South Korea, Singapore, and ASEAN members.

Under FTA, the trading partners agree to significantly reduce or eliminate import/customs duties on the maximum number of goods traded between them, besides relaxing norms to promote trade in services and investments.

The 'rules of origin' provision prescribes for minimal processing that should happen in the FTA Country so that the final manufactured product may be called originating goods in that Country.

Under this provision, a country that has inked an FTA with India cannot dump goods from some third Country in the Indian market by just putting a label on it. It has to undertake a prescribed value addition in that product to export to India. Rules of origin norms help contain dumping of goods.