Carotar Rules

By : Neha Dhyani

Updated : Mar 29, 2022, 10:13

The Central Government vide notification No. 81/2020-Customs (N.T.) dated 21st August 2020 has notified the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (Rules) to prescribe the procedure for administration of rules of origin under trade agreements. These rules may be called the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.

What are Carotar Rules?

The Customs Act 1962 provides the statutory framework for collecting taxes on importing goods into India. It authorizes the government to establish a standard customs tariff for imports and exports, chargeable with duty. The Act also empowers the government to make rules to achieve its purposes.

It empowers the Central Board of Excise and Customs (CBEC) to issue orders and instructions for uniformity in the classification and valuation of goods.

Rule 28DA states that the importer or exporter shall be required to provide information concerning rules of origin regarding any goods imported or exported by him. It lays down the procedure for determining the origin of any goods imported or exported from India.

The rules also provide for a Certificate of Origin (COO) issued by an approved agency as evidence to prove the origin of goods.

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What do Carotar Rules entail?

The Rules prescribe provisions relating to:

  • Certification and Verification of Origin
  • Validity Period
  • Treatment of Certificates
  • Appeal

The Ministry of Finance has notified the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 on 21st August 2020, and the rules came into force on 21st September 2020. These rules shall come into force from the date of their publication in the Official Gazette by way of a notification. These rules shall apply to all imports and exports into and out of India.

The authorities have been framed to enable India to administer Rules of Origin under any preferential trade agreement or a similar arrangement entered into by India with any other country or any regional grouping.

How have the Carotar rules affected the free trade agreement in India?

Free trade agreements are treaties that eliminate tariffs and other restrictions on imports between the member countries. The World Trade Organization is the international body that sets general rules for free trade and monitors compliance.

The Carotar Rules are part of the Free Trade Agreement (FTA). These rules will allow importers to claim concessions on imports from FTA partners. The new rules enable exporters and importers to avail themselves of preferential tariff treatment under FTAs/Preferential Trade Agreements (PTAs) with other countries.

The government states that these rules would encourage exports and import substitution, which will help the country's economic growth. It would also provide a level playing field for domestic producers vis-à-vis those who avail of similar privileges under India's bilateral/multilateral trade agreements.

The Rules of Origin are criteria that define whether or not a product has sufficient domestic content to receive preferential tariff treatment under a Free Trade Agreement (FTA).

The Carotar rules aim to reform the whole process of tariff and origin classification. The objective behind this is to address the trade needs by allowing exporters and importers to request an advance ruling which would determine the correct category, rate of duty and customs value for a particular product, or whether a product qualifies for preferential duty treatment under certain agreements or arrangements.

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FAQs on Carotar

Q.1. What are the benefits of Carotar rules?

The Carotar rules aim to:

  • Improve the security of the supply chain
  • Reduce costs associated with customs clearance
  • Reduce waiting times at ports
  • Promote best practices in risk management

Q.2. Who is the authorizing body to regulate and implement the free trade agreements as a precursor to Carotar rules in India?

The Department of Commerce is responsible for negotiating and finalizing trade agreements in India.

Q.3. When did the Carotar rules come into effect in India?

The Carotar Rules came into effect on 21st September 2020 in India.

Q.4. What is the impact of Carotar rules on customs clearance in India?

The Indian government has introduced a new system for customs clearance into the country known as Customs Automated Risk Assessment and Clearance System (CARAC) or Carotar rules. This system has been designed to improve the efficiency of customs clearance and reduce the time taken to clear goods.