Govt Replaces ‘Certificate’ with ‘Proof’ in Rules of Origin Regulations

The Ministry of Finance has notified the Customs (Administration of Rules of Origin under Trade Agreements) Amendment Rules, 2025.

The amendment modifies the 2020 Rules under the Customs Act, 1962.

About the Policy Amendment

• Issued by: Central Board of Indirect Taxes and Customs (CBIC).
• Key Change: The term “Certificate” has been replaced with “Proof” in the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.
• Objective: Strengthen the determination of the country of origin for imported goods under Free Trade Agreements (FTAs).
  

Reason for the Change

• Preventing Misuse of FTAs: Aims to stop goods from being rerouted through third countries to evade higher tariffs.
• Targeted Imports: Focuses on imports from China that are being rerouted via ASEAN nations, Sri Lanka, and UAE to exploit concessional tariff benefits.
  

Examples of Misuse Identified

• Electronic and White Goods: Products like mobile phones, set-top boxes, and home appliances from China were falsely routed via Vietnam, Singapore, and Indonesia to claim FTA benefits.
• Textile Industry Fraud: A Vietnam-based company was caught importing finished silk from China, falsely rebranding it as ‘Made in Vietnam’, and exporting it to India under Vietnam’s FTA benefits.

Impact of ‘Proof of Origin’ Requirement

• Enhanced Scrutiny: Customs authorities now have the power to demand additional evidence beyond a certificate of origin.
• Prevention of Trade Fraud: Ensures that imported goods genuinely meet “Rules of Origin” criteria before qualifying for duty exemptions.
• Protection of Domestic Industries: Helps safeguard Indian businesses from unfair competition caused by false origin claims.

About Rules of Origin

• Rules of origin are criteria used to determine the national source of a product.
• Their importance lies in the fact that duties and trade restrictions often depend on the source of imports.

Uses of Rules of Origin

• Trade Policy Implementation: Used for applying anti-dumping duties and safeguard measures.
• Tariff Benefits: Determines if imported goods qualify for most-favoured-nation (MFN) or preferential treatment under Free Trade Agreements (FTAs).
• Trade Statistics: Helps in compiling accurate trade data.
• Product Labelling and Marking: Ensures compliance with origin-based labelling requirements.
• Government Procurement: Regulates sourcing preferences in public sector purchases.

Global Practices in Rules of Origin

• Lack of Uniformity: Different countries adopt varying criteria to determine origin.
• Commonly Used Criteria:
  • Tariff Classification Change: Requires a shift in customs tariff codes due to processing.
  • Ad Valorem Percentage: Specifies a minimum local value-added percentage.
  • Manufacturing/Processing Requirement: Defines a specific production process that must occur domestically.
• No Specific GATT Provision: The General Agreement on Tariffs and Trade (GATT) allows countries to independently determine origin rules for trade purposes.