Rules of Origin and the FTAs: Major Issues in India

Abstract

Free Trade Agreements (FTAs) feature heavily in the contemporary global trading system and these are popular form of reciprocal arrangements between nations. Over the past years, an unswerving increase has been observed in the multilateral and bilateral trade agreements contracted by nations and trade blocs around the world. This surge in FTAs is experienced as most nations around the world rely upon these agreements to facilitate trade and investment amongst them. India, like most of the WTO members, has contracted and executed several FTAs. Each FTA provides for rules to determine origin of goods to ensure that benefits of the FTA are extended only to those goods which are originating in a contracting party. Preferential Rules of Origin under the FTAs provide for criteria such as wholly obtained test, minimum value addition test, tariff jump etc. to determine origin of goods. However, due to varying criteria of origin with respect to minimum value addition and tariff jump etc. coupled with lack of standard provisions, for instance, of third country invoicing, under the different rules of origin, there is a lot of confusion and conundrum around the rules of origin in India. This article attempts to provide a brief analysis of various criteria laid down to test origin of goods under rules of origin for FTAs and major challenges faced with respect to these rules in India.