The Finance Act, 2020 introduced Section 28DA of the Customs Act, 1962 (‘Customs Act’) for Administration of Rules of Origin Under Trade Agreements. This provision contains measures for monitoring claim for preferential rate of duty made by importers.

In furtherance thereof, the Government has now introduced Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (‘CAROTAR 2020’) vide Notification No. 81/2020 – Customs (NT) dated August 21, 2020 providing detailed procedural framework for governing preferential duty claims. CBIC has also issued Circular No. 38/2020 – Customs dated August 21, 2020 clarifying various aspects of CAROTAR 2020.

CAROTAR 2020 imposes significant compliance obligations on importers claiming benefits under Trade Agreements ranging from declarations in Bill of Entry to maintenance of records.

Key features of CAROTAR 2020 are summarized as under: 

• Effective date: CAROTAR 2020 will come into effect from September 21, 2020. Importers need to fulfil many compliance obligations prior to this date.

• Declaration on Bill of Entry: Importers would be required to make additional declarations on Bill of Entry for preferential benefit claimed. Corresponding amendments are being made in the format of Bill of Entry for this purpose. The additional declarations to be made on Bill of Entry are:

                       – Declaration that imported goods qualify as originating goods

                      – Certificate of Origin (‘CoO’) reference number and date of its issuance

                      – Originating criteria

                      – Application of accumulation / cumulation

                      – Issuance of CoO by third country (back-to-back)

                      – Transportation of goods directly from country of origin

• Possession of information: Importers need to maintain sufficient information relating to origin of imported goods in Form I before import of goods. This information needs to be maintained for 5 years from date of filing of bill of entry. This information includes:

                       – Production process involved in the manufacturing of imported goods

                       – If imported goods are claimed to be wholly obtained (produced without any non-originating input material), production process involved in such manufacturing

                       – If imported goods are not wholly obtained, then:

                       – Production process for each imported good;

                       – Description of input material used in production of imported goods; and

                      – Nature of originating criteria fulfilled.

• Requisition of information from importers: During customs clearance or thereafter, proper officer can seek information or supporting documents from importer if he has reasons to believe that Rules of Origin are not met. Importer is obligated to furnish such information within 10 working days.

• Requisition of information from Verification Authority: Where proper officer is not satisfied with information provided by importer, he can cross-check veracity of CoO from Verification Authority (i.e. authority in exporting country designated for responding to verification requests).

• Denial of preferential benefit: Proper officer can deny benefit of preferential duty where importer or Verification Authority fails to respond or provides incomplete information regarding origin of product. This benefit can be denied for all identical goods imported from same exporter / producer.

NITYA Comments: Enforcement of CAROTAR 2020 brings stringent measures in force for importers claiming preferential duty benefits. With less than a month’s time for its implementation, importers availing such benefits will need to run against time to undertake all compliances prescribed under CAROTAR 2020.

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