Live Mint - 21 June 2023
India, UAE work on trade niggles
By Ravi Dutta Mishra
India and the United Arab Emirates (UAE) are set to begin talks to resolve exporters’ concerns regarding exhaustive details of manufacturing and procurement being sought by customs of both countries to enforce rules-of-origin requirements agreed under the free trade pact last year, two people aware of the development said.
The two nations also decided to boost non-oil trade amid the global downturn in commodity prices following the maiden review of the India-UAE Comprehensive Economic Partnership Agreement (CEPA) last week.
“The rules of origin requirement is putting pressure on Indian exporters. The challenge is that the tariffs in the UAE are not that high, so exporters are weighing whether going through the compliance burden is worth it or not. Exporters have raised these concerns with the commerce ministry," one of the two people said on the condition of anonymity.
Rules of origin requirements are used to determine the country of origin for goods. They establish the eligibility of goods to receive preferential treatment, such as tariff reductions or exemptions, under free-trade agreements.
However, the person explained that “circumvention of rules of origin" is a bigger concern for India as the UAE is a transnational hub. Since India is insisting on strict rules of origin requirements, the UAE is doing the same. “They are asking for a very detailed process of manufacturing that exporters are uncomfortable giving out. So, they are not very comfortable sharing those kinds of intellectual property rights information because if I am detailing the entire flow chart of my manufacturing, I am taking a risk there," the person added.
A second person said this issue was discussed during the India-UAE joint committee meeting on 12 June and has been referred to the sub-committee on rules of origin. “The sub-committee will be making a recommendation to the joint committee by November," the second person added.
The India-UAE CEPA, which came into force on 1 May last year, eliminated duties for 90% of India’s exports to the UAE by value and covered sectors such as gems and jewellery, textiles, leather, and engineering goods. Gems and jewellery, automobiles, cereals, and machinery and mechanical appliances have been the top gainers by value.
“A direct exporter, if he is an aggregator, may not know from where it is coming. So, there is a suggestion that the manufacturer requirement be made optional. So, the committee will examine it. Some merchant exporters are unwilling to give their manufacturer name out of fear as competitors can procure from the same manufacturer. The issues will be sorted out by the committee," the second person added.
Issuing country-of-origin certification to an exporter confirms that the goods have fulfilled specific criteria to qualify as originating from the specific country. While the country of origin may reflect in actual exports with a lag, it serves as a reliable indicator of a pact’s utilization and compliance.
Queries sent to the spokesperson for the commerce ministry and the UAE embassy in India remained unanswered.
The commerce and industry ministry expects India’s exports to the UAE to rise to $50 billion by FY27 from $31.8 billion in FY23.