Rule of origin
- May 30, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Rule of origin
The directorate general of foreign trade has tweaked the import policy of major paper products from ‘free’ to ‘free subject to compulsory registration under the Paper Import Monitoring System
The local paper industry has been raising issues of dumping of paper products in the domestic market by way of under-invoicing, entry of prohibited goods by fake declaration, re-routing goods through other countries in lieu of trade agreements.
Customs officials have long suspected that Chinese firms may be diverting their supplies of various products to India through Asean nations, abusing rules of origin, to illegally take advantage of duty-free market access under the free trade agreement.
Dumping is said to occur when the goods are exported by a country to another country at a price lower than the price it normally charges in its own home market.
This is an unfair trade practice which can have a distortive effect on international trade.
Imposition of Anti-dumping duty is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. In the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods. It is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
The use of anti-dumping measures as an instrument of fair competition is permitted by the World Trade Organisation.
Rule of Origin:
Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports. Mentioning Countries of origin in the Bill is relevant for regulating various areas of customs.
Rules of origin are used:
- to implement measures and instruments of commercial policy such as anti-dumping duties and safeguard measures;
- to determine whether imported products shall receive most-favoured-nation (MFN) treatment or preferential treatment;
- for the purpose of trade statistics;
- for the application of labelling and marking requirements; and
- for government procurement.
Non-preferential rules of origin
Non-preferential rules of origin are those which apply in the absence of any trade preference — that is, when trade is conducted on a most-favoured nation basis. Not all countries apply specific legislation related to non-preferential rules of origin. However, some trade policy measures such as quotas, anti-dumping or “made in” labels may require a determination of origin and, therefore, the application of non-preferential rules.
Preferential rules of origin
Preferential rules or origin are those which apply in reciprocal trade preferences (i.e. regional trade agreements or customs unions) or in non-reciprocal trade preferences (i.e. preferences in favour of developing countries or least-developed countries).
The rules of origin which apply under reciprocal trade preferences or regional trade agreements must conform with the general disciplines of Annex II of the Agreement on Rules of Origin. In addition, the GATT and the Agreement on Trade Facilitation contain some provisions related to origin requirements.
Law in India:
- Finance Act of 2020, introduced Section 28DA under the Customs Act, 1962 as an enabling provision for administration of Rules of Origin under trade agreements.
- Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 -provide specific provisions and outline a roadmap for governance of claims made under the trade agreements by the importers of goods in India. Further the onus of maintaining the requisite documents and checking the correctness & accuracy of the Countries of origin is through reasonable care has been placed on the importer.
Rules of origin and WTO:
Article 1 of the WTO Agreement defines rules of origin as those laws, regulations and administrative determinations of general application applied to determine the country of origin of goods except those related to the granting of tariff preferences.
Thus, the Agreement covers only rules of origin used in non-preferential commercial policy instruments, such as MFN treatment, anti-dumping and countervailing duties, safeguard measures, origin marking requirements and any discriminatory quantitative restrictions or tariff quotas, as well as those used for trade statistics and government procurement. It is, however, provided that the determinations made for purposes of defining domestic industry or “like products of domestic industry” shall not be affected by the Agreement.
The agreement aims at long-term harmonization of rules of origin, other than rules of origin relating to the granting of tariff preferences, and to ensure that such rules do not themselves create unnecessary obstacles to trade.
The agreement sets up a harmonization programme, to be initiated as soon as possible after the completion of the Uruguay Round and to be completed within three years of initiation.