FTA – India and UK
- November 21, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
FTA – India and UK
Subject : Economy
Section: External sector
- Rules of Origin for Medical Devices: Finalizing rules of origin for the medical devices sector is a significant challenge in the proposed Free Trade Agreement (FTA) between India and the UK.
- Importance of the Medical Devices Sector in India:
- India imports about 80% of its medical devices requirements.
- Top exporters of medical devices to India include the US, Germany, China, Singapore, and the Netherlands.
- Ongoing Negotiations:
- Talks are in progress between India and the UK to resolve differences related to rules of origin and customs duty concessions.
- Negotiations encompass both goods and services sectors.
- Issues in the Medical Devices Sector:
- Challenges are present in the rules of origin, and demands for customs duty concessions exist.
- The medical devices sector holds immense potential in India.
- Government Initiatives to Promote Domestic Manufacturing:
- The Indian government has taken steps to promote domestic manufacturing of medical devices.
- Initiatives include the Promotion of Medical Device Parks, National Biopharma Mission, and a Production-linked Incentive scheme for the sector.
- Major Categories of Imported Medical Devices:
- Consumables, disposables, electronics and equipment, implants, IVD reagent, and surgical instruments are the six major categories of medical devices mainly imported into India.
- Rules of Origin in FTAs:
- Rules of origin prescribe the minimum processing that should occur in the FTA country for a product to be considered originating goods in that country.
- This provision prevents the dumping of goods from a third country into the FTA country without sufficient value addition.
Free Trade Agreement (FTA):
Free Trade Agreement (FTA) is a pact between two or more nations aimed at reducing barriers to imports and exports among them. In an FTA, countries agree to facilitate the exchange of goods and services by minimizing or eliminating government tariffs, quotas, subsidies, or prohibitions.
- Trade Policy Concept: FTA is based on the concept of free trade, which stands in contrast to trade protectionism or economic isolationism.
- Goods and Services: FTAs typically cover trade in goods (agricultural or industrial products) and/or trade in services (banking, construction, trading, etc.).
- Other Areas: FTAs may extend to other areas such as intellectual property rights (IPRs), investment, government procurement, competition policy, etc.
- FTAs are pivotal tools in fostering economic cooperation between nations, enhancing trade opportunities, and contributing to global economic growth.
Rules of Origin:
- Rules of origin are criteria used to determine the national source of a product. They are essential as duties and restrictions often depend on the source of imports.
- FTA Specific: Each Free Trade Agreement (FTA) has its own set of rules of origin, defining the conditions a product must meet to qualify for preferential treatment under the agreement.
CAROTAR Rules (2020):
- Introduced by the Indian government in 2020.
- Importers must demonstrate that imported products underwent a value addition of at least 35% in the countries of origin.
- Previously, a country-of-origin certificate sufficed for availing FTA benefits.
Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020)
The CAROTAR, 2020 came into effect on September 21, setting guidelines for enforcing the ‘rules of origin’ concerning preferential rates on imports under free trade agreements.
- The rules aim to provide guidelines for the enforcement of rules of origin, determining the origin of products eligible for preferential rates under various trade agreements.
- Supplementing Existing Procedures:
- CAROTAR, 2020 complements existing certification procedures under different trade agreements like FTAs (Free Trade Agreements), PTAs (Preferential Trade Agreements), CECAs (Comprehensive Economic Cooperation Agreements), and CEPAs (Comprehensive Economic Partnership Agreements).
- Notification and Familiarization:
- Notified by the Department of Revenue on August 21, 2020.
- Importers and stakeholders were given a 30-day period to familiarize themselves with the new provisions.
- Due Diligence by Importers:
- Importers are now required to conduct due diligence before importing goods to ensure they meet the prescribed originating criteria.
- Information Requirements:
- The rules specify a list of minimum information that importers must possess.
- Importers need to enter certain origin-related information in the Bill of Entry, aligning with the Certificate of Origin.
- Preventing Low-Quality Products and Dumping:
- Designed to check inbound shipments of low-quality products and prevent the dumping of goods by a third country through an FTA partner country.
- Prevents a country with an FTA from dumping goods from a third country in the Indian market merely by putting a label on them.
The CAROTAR, 2020 plays a crucial role in ensuring the proper application of rules of origin, preventing trade agreement misuse, and maintaining the quality standards of imported goods. It enhances the transparency and effectiveness of the preferential trade system.