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Indian FTAs: Rules of Origin (RoOs)



  Sep 04, 2023

Rules of Origin (RoOs) in Indian Free Trade Agreements (FTAs)


Rules of Origin (RoOs) are an essential component of Free Trade Agreements (FTAs) that determine the eligibility criteria for goods to receive preferential treatment under the agreement. These criteria ensure that only goods originating from the FTA partner country enjoy reduced tariffs or other trade benefits. RoOs specific to India in various FTAs vary based on the agreements signed with different partner countries or regions. Each FTA has its own set of RoOs, which are negotiated and agreed upon by both parties.
 

Common Elements of India-Specific RoOs in FTAs:

Change in Tariff Classification: A significant element of India's RoOs is the requirement that goods must undergo a change in tariff classification to qualify for preferential treatment. This means that the goods must be substantially transformed or processed within India, resulting in a change in their classification under the Harmonized System (HS) code.
 
Value Addition Requirement: Some FTAs stipulate a minimum level of value addition that must occur in India for the goods to be considered of Indian origin. This requirement ensures that a significant portion of the product's value is created within India, contributing to local economic development.
 
Specific Processing or Manufacturing Criteria: Certain FTAs may establish specific criteria related to the processing or manufacturing of goods in India. These criteria could include a minimum percentage of local content or adherence to specific production processes that demonstrate substantial transformation.
 
Regional Cumulation: India seeks regional cumulation provisions in certain FTAs, which allow the use of materials and components from other member countries of the FTA to qualify for preferential treatment. This promotes regional value chains, encourages collaboration, and enhances intra-regional trade.
 
Sector-Specific RoOs: Some FTAs may incorporate sector-specific RoOs tailored to specific industries or sectors that are of interest to both India and its FTA partner. These RoOs are designed to address the unique challenges and opportunities within those sectors, promoting trade in those areas.
 

FTA Negotiation and Flexibility:

It is important to recognize that RoOs are negotiated between the parties involved in an FTA and can vary significantly based on their mutual interests and goals. India's approach to RoOs reflects its commitment to optimizing trade opportunities, promoting economic integration, and ensuring that the rules benefit its domestic industries and trade partners alike.
 

Conclusion:

Rules of Origin (RoOs) are a critical component of Free Trade Agreements, defining the eligibility criteria for goods to receive preferential treatment. In India's case, RoOs in FTAs vary based on the specific agreement signed with each partner country or region. These RoOs are tailored to promote economic integration, encourage value addition, and facilitate trade growth while addressing the unique requirements of different industries and sectors


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