APRIL 30, 2020

By Adv. Vijay Shekhar Jha & Adv. Prem Kandpal

1.Introduction

AS per International Chamber of Commerce - "A Certificate of Origin (hereinafter will be referred as "CO") is an important international trade document that certifies that goods in a particular export shipment are wholly obtained, produced, manufactured or processed in a particular country. They declare the 'nationality' of the product and also serve as a declaration by the exporter to satisfy customs or trade requirements. ¹"

Recently, definition of 'Certificate of Origin' was added to the Customs Act, 1962 in the form of Explanation to Section 28DA [inserted by the Finance Act, 2020] as per which CO has been defined in the following manner:

"certificate of origin means a certificate issued in accordance with a trade agreement certifying that the goods fulfil the country of origin criteria and other requirements specified in the said agreement;"

COs are of immense importance as they are sought by customs, banks, private stakeholders and importers/ exporters for several purposes. Its importance can be easily understood from the fact that for customs clearance procedures, all around, the world its requirement is sine qua non. Moreover, it is indispensable while determining the duty that will be imposed on the imported goods. ² Further, it is also essential to determine whether goods can be legally imported/ exported.

There are two types of COs that are generally issued ³:

- Non-Preferential COs - These COs certify that the goods being imported are subject to no preferential treatment.

- Preferential COs -These COs certify that goods being imported are subject to reduced tariffs/duties or are entitled to exemptions when they are exported by countries with whom importing country has entered into a Free Trade Agreement ("FTA")/Regional Trade Agreement("RTA")

If it weren't for COs, importing country would never know whether to extend the benefits of FTA/RTA to the goods being imported or not. Therefore, the certification of the origin of goods plays a critical role in the international trade between countries.

Here, it will be pertinent to note that in majority of the cases, the importer is only required to get this certificate issued from local Chamber of Commerce of the exporting country. However, in some cases, the custom authorities may insist the importer to get GSP (generalized system of preference) issued by export council agencies of the respective exporting country. While issuing certificate of origin, a copy of commercial invoice is also attested by the said authorities.

2. Customs Tariff Act, 1975 and CO

Relevance of Certificate of Origin can be found in Section 5 of the Customs Tariff Act, 1975, which reads as under:

SECTION 5. Levy of a lower rate of duty under a trade agreement.

(1) Whereunder a trade agreement between the Government of India and the Government of a foreign country or territory, duty at a rate lower than that specified in the First Schedule is to be charged on articles which are the produce or manufacture of such foreign country or territory, the Central Government may, by notification in the Official Gazette, make rules for determining if any article is the produce or manufacture of such foreign country or territory and for requiring the owner to make a claim at the time of importation , supported by such evidence as may be prescribed in the said rules, for assessment at the appropriate lower rate under such agreement.

(2) If any question arises whether any trade agreement applies to any country or territory, or whether it has ceased to apply to India or any foreign country or territory, it shall be referred to the Central Government for decision and the decision of the Central Government shall be final and shall not be liable to be questioned in any court of law.

Thus, we see CBIC issue different rules pursuant to FTAs/RTAs which India enters with other country/ies. For-example- "Customs Tariff (Determination of Origin of Goods under Preferential Trade Agreement between the Government of Members States of the Association of South-East Asian Nations (ASEAN) and the Republic of India) Rules, 2009" (hereinafter "2009 Rules") was issued pursuant to AIFTA (FTA entered between India and ASEAN member states). If, any goods which falls in the purview of AIFTA and fulfilling "origin criteria" as set out in the FTA, is imported in India, Customs Authorities, as per Notification No. 46/2011-Customs dated the 1st June, 2011, at the time of importation, will ask the importer for CO and some other documents as has been set out in 2009 rules and if shown by importer (information in the CO and other documents being to the satisfaction of Custom Officer concerned), then, as per the Section 5 of the Customs Tariff Act, 1975 he (importer) will be allowed to avail the benefits of the AIFTA.

3. Certificate of Origin and Customs Act,1962

Recently, Finance Act, 2020 has added chapter VAA to the Customs Act,1962, which sets out "ADMINISTRATION OF RULES OF ORIGIN UNDER TRADE AGREEMENT". In this chapter Section 28DA is of particular importance as it sets out the procedure for the importers for claiming preferential rate of duty under concerned FTA. As this chapter has been added in response to increase in the offence like laundering of money and tax evasion committed by importers, we see the procedure of claiming preferential rate of duty under concerned FTA has become very stringent vis-à-vis scrutinising the compliance of "origin criteria" under the concerned FTA and inspecting the veracity of the Certificate of Origin. For the sake of convenience, summary of Section 28DA has been discussed below:

"(A) In terms of any trade agreement, an importer making claim for preferential rate of duty shall:

(i.) make a declaration that goods qualify as originating goods for preferential rate of duty under such agreement;

(ii) possess sufficient information as regards the manner in which country of origin criteria, including the regional value content and product specific criteria, specified in the rules of origin in the trade agreement, are satisfied;

(iii) furnish such information in such manner as may be provided by rules;

(iv) exercise reasonable care as to the accuracy and truthfulness of the information furnished.

(B) The fact that the importer has submitted a certificate of origin issued by an Issuing Authority shall not absolve the importer of the responsibility to exercise reasonable care.

(C) Where the proper officer has reasons to believe that country of origin criteria has not been met, he may require the importer to furnish further information, consistent with the trade agreement, in such manner as may be provided by rules.

(D) Where importer fails to provide the requisite information for any reason, the proper officer may:

(i) cause further verification consistent with the trade agreement in such manner as may be provided by rules;

(ii) pending verification, temporarily suspend the preferential tariff treatment to such goods:

Here point that is to be noted is that on the basis of the information furnished by the importer or the information available with him or on the relinquishment of the claim for preferential rate of duty by the importer, the Principal Commissioner of Customs or the Commissioner of Customs may, for reasons to be recorded in writing, disallow the claim for preferential rate of duty, without further verification.

(E) Where the preferential rate of duty is suspended under above-mentioned situation, the proper officer may, on the request of the importer, release the goods subject to furnishing by the importer a security amount equal to the difference between the duty provisionally assessed under section 18 and the preferential duty claimed:

It should be noted that the Principal Commissioner of Customs or the Commissioner of Customs may, instead of security, require the importer to deposit the differential duty amount in the ledger maintained under section 51A.

(F) Upon temporary suspension of preferential tariff treatment, the proper officer shall inform the Issuing Authority of reasons for suspension of preferential tariff treatment, and seek specific information as may be necessary to determine the origin of goods within such time and in such manner as may be provided by rules.

(G) Where, subsequently, the Issuing Authority or exporter or producer, furnishes the specific information within the specified time, the proper officer may, on being satisfied with the information furnished, restore the preferential tariff treatment.

(H) Where the Issuing Authority or exporter or producer, as the case may be, does not furnish information within the specified time

or

the information furnished by him is not found satisfactory,

the proper officer shall disallow the preferential tariff treatment for reasons to be recorded in writing:

The provision of sending another request has also been stated in this provision wherein, in case of receipt of incomplete or non-specific information, the proper officer may send another request to the Issuing Authority stating specifically the shortcoming in the information furnished by such authority, in such circumstances and in such manner as may be provided by rules.

(I) Unless otherwise specified in the trade agreement, any request for verification shall be sent within a period of five years from the date of claim of preferential rate of duty by an importer.

(J) Section 28DA(10)gives overriding power to the concerned Proper Officer handling the whole case in which he may choose to refuse the preferential tariff treatment without verification in the following circumstances, viz:

(i) the tariff item is not eligible for preferential tariff treatment;

(ii) complete description of goods is not contained in the certificate of origin;

(iii) any alteration in the certificate of origin is not authenticated by the Issuing Authority;

(iv) the certificate of origin is produced after the period of its expiry, and in all such cases, the certificate of origin shall be marked as "INAPPLICABLE''.

(K) Unless sufficient information is furnished to show that identical goods meet the country of origin criteria, the proper officer may reject the preferential tariff treatment to the imports of identical goods from the same producer or exporter where the verification under this section establishes non-compliance of the imported goods with the country of origin criteria."

4. Certificate of Origin and Handbook of Procedures ("HbP")-Vol 1.

Chapter 2 of the HbP deals with "General Provision regarding Exports and Imports". At Para 2.21 of the HbP Certificate of Origin has been explained as

"Certificate of Origin (CoO) is an instrument to establish Origin (CoO) evidence on origin of goods imported into any country. There are two categories of CoO viz. (1) Preferential and (2) Non preferential"

At Para 2.21.1, HbP states following:

"Preferential arrangement/scheme under which India is receiving tariff preferences for its exports are:

- Generalised System of Preferences (GSP)

- Global System of Trade Preferences (GSTP)

- SAARC Preferential Trading Agreement (SAPTA)

- Asia-Pacific Trade Agreement (APTA)

- India-SriLanka Free Trade Agreement (ISLFTA)

- Indo-Thailand Free Trade Agreement

- India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA)

- India-Korea Comprehensive Economic Partnership Agreement (CEPA)

- India-Japan Comprehensive Economic Partnership Agreement (IJCEPA)

- Asean-India Free Trade Agreement (AIFTA).

These Preferential arrangements/agreements prescribe Rules of Origin which have to be met for exports to be eligible for tariff preference.

In the same Para HbP states "Authorised agencies on charging a fee as prescribed by them provides services relating to issue of Certificate of Origin, including details regarding rules of origin, list of items covered by an agreement, extent of tariff preference, verification and certification of eligibility.

-  Export Inspection Council ⁴ (EIC) is agency authorized to print blank certificates."

In the same Para HbP further states following:

- Generalised System of Preferences (GSP)

"It is a non-contractual instrument by which industrialized (developed) countries unilaterally and based on non-reciprocity extend tariff concessions to developing countries. Presently following countries extend tariff preferences under their GSP Scheme:

(i)USA (ii) New Zealand (iii)Belarus (iv)EU (v)Japan(vi)Russia (vii)Canada (viii) Norway (ix)Australia (only to LDCs) (x)Switzerland (xi)Bulgaria.

Normally, Customs of GSP offering countries require information in Form 'A' (prescribed for GSP Rules of Origin) duly filled by exporters of beneficiary countries and certified by the authorized agencies.

-  List of agencies authorized to issue GSP Certificate of Origin is given at Appendix 4A to the Hand Book of Procedures vol.I

-  Global System of Trade Preference (GSTP)

Under GSTP, tariff concessions are exchanged among developing countries who have signed agreement. Presently 46 countries are members of GSTP and India has exchanged tariff concessions with 12 countries on a limited number of products.

-  Export Inspection Council (EIC)-is sole agency authorized to issue Certificate of Origin under GSTP.

-  SAARC Preferential Trading Agreement (SAPTA)

SAARC members namely India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka and Maldives offering tariff concessions among SAARC countries

-  List of agencies, authorised to issue CoO under SAPTA are notified under Appendix - 4B

-  Asia-Pacific Trade Agreement (APTA)

APTA offers liberalization of tariff and non-tariff barriers in order to expand trade in goods in Economic and Social Commission for Asia and Pacific (ESCAP) region. Presently, Bangladesh, Sri Lanka, South Korea, India and China are exchanging tariff concessions under APTA.

-  List of Agencies authorized to issue Certificate of Origin under APTA is given in Appendix 4B to the Hand Book of Procedures vol.I

-  India-Sri Lanka Free Trade Agreement (ISLFTA)

This Free Trade Agreement is between India and Sri Lanka which offers tariff concession by the Governments of both countries.

-  Export Inspection Council is sole agency to issue Certificate of Origin under this agreement.

-  India Afghanistan Preferential Trade Agreement

This preferential trade agreement is between Governments of India and Afghanistan.

-  Export Inspection Council is the sole agency to issue Certificate of Origin under this Agreement.

-  India - Thailand Frame work Agreement for Free Trade Area

India and Thailand have signed protocol to implement Early Harvest Scheme under India-Thailand Free Trade Agreement offering tariff preferences for imports on items of Early Harvest Scheme only to those products which satisfy Rules of Origin criteria notified by the Department of Revenue, Ministry of Finance vide notification no 101/2004-Customs dated 31.08.2004.

-  Export Inspection Council is the sole agency to issue Certificate of Origin under this protocol.

-  India- Malaysia Comprehensive Economic Cooperation Agreement (IMCECA)

This Comprehensive Economic Cooperation agreement is between Government of India and Malaysia.

-  Export Inspection Council is the sole agency to issue Certificate of Origin under this Agreement, with effect from 1st July 2011.

-  India-Korea Comprehensive Economic Partnership Agreement (CEPA)

The Government of India and the Republic of Korea have signed the Comprehensive Economic Partnership Agreement (CEPA) to liberalize and facilitate trade in goods and services and expand investment between the Countries.

-  Export Inspection Council is the sole agency to issue Certificate of Origin under this agreement.

-  India-Japan Comprehensive Economic Partnership Agreement (IJCEPA)

The Government of India and the Government of Japan have signed the Comprehensive Economic Partnership Agreement (CEPA) to increase investment opportunities and strengthen protection for investments and investment activities between the Countries.

-  Export Inspection Council is the sole agency to issue Certificate of Origin under this Agreement."

At Para 2.21.2, HbP elucidates about Non-Preferential Agreement , which has been reproduced as under:

"Government have also nominated certain agencies to issue Non Preferential Certificate of Origin in accordance with Article II of International Convention Relating to simplification of Customs formalities,1923. These Certificate of Origins evidence origin of goods and do not bestow any right to preferential tariffs.

-  List of agencies authorized to issue Non Preferential Certificate of Origin is given in Appendix 4C to the Hand Book Procedures vol.I.

Exporters desiring Non-preferential Certificate of Origin may apply any agency enlisted in Appendix 4C to Hand Book of Procedures vol.I with following documents:

a. Details of quantum/origin of inputs/consumables used in export product.

b. Two copies of Invoices

c. Packing List in duplicate for invoice concerned

d. Fee not exceeding Rs.100 per certificate as may be prescribed by agency concerned.

The agency concerned would ensure that goods are of Indian origin as per general principles governing rules of origin before granting Non Preferential Certificate of Origin. The Certificate would be issued as per format given in Annexure II to Appendix 4C to the Hand Book of Procedures. It should be ensured that no correction/re-type is made on the Certificate.

[The authors are Associates at ASAV Attorneys & Advisors LLP and the views expressed are strictly personal.]

¹Certificate of Origin, available at- https://iccwbo.org/

²ibid

³ibid

⁴ "The Export Inspection Council (EIC) is the official export-certification body of India which ensures quality and safety of products exported from India. EIC was set up by the Government of India under Section 3 of the Export (Quality Control and Inspection) Act, 1963 to ensure sound development of export trade of India through quality control and inspection and matters connected therewith. The role of EIC is to ensure that products notified under the Export (Quality Control and Inspection) Act 1963 are meeting the requirements of the importing countries in respect of their quality and safety.

The Export Inspection Council is located at Delhi and is headed by a Chairman. The Executive Head of the Council is the Director of Inspection & Quality Control who is responsible for day to day functioning of the Council. The assurance to quality and safety is provided through either a consignment wise inspection or a quality assurance / food safety management based certification through its field organization. The Export Inspection Agencies (EIAs) located at Mumbai, Kolkata, Kochi, Delhi and Chennai with a network of 30 sub offices backed by the state of art, NABL accredited laboratories at various places. EIC provides mandatory certification for various Food items namely fish & fishery products, dairy product, honey, egg products, meat and meat products, poultry meat products, animal casing, Gelatine, Ossein and crushed bones and feed additive and pre-mixtures while other food and non-food products are certified on voluntary basis. With more than four decade experience in the field of inspection, testing and certification of food items as per importing country's requirements, EIC is the only organization in India having global acceptance."