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2020 ] RULE OF ORIGIN PROVISIONS : A MOVE TOWARDS PROTECTIONISM! A57

The legal requirement for indicating origin on goods emanates either
from the domestic laws of a country or through the trade agreements that a
country enter with other countries like bilateral, sub-regional or regional agree-
ments. In the Indian context, one of the most important arrangements is the
South Asian Association for Regional Cooperation (SAARC) formed in 1985.
Subsequent to which, in 2006 a preferential trading agreement, The South Asian
Free Trade Area Treaty, was formed by the members of SAARC. Under this
agreement, SAARC members are to bring their duties down to 20 per cent for the
goods specified in the agreement except the goods which are listed as sensitive in
each country.
The relationship between India and other SAARC member countries is
historical. India’s trade with Bangladesh, Bhutan, Maldives, Nepal and Sri Lanka
are governed by the bilateral treaties. All these agreements, may it be regional or
bilateral agreements are accompanied by Rules of Origin. To avail the benefits of
these preferential treatments a specific requirement is imposed to indicate the
country of origin on goods which are imported to and exported from the mem-
ber countries of this agreement.
Indian Legal Regime on ROO
The Customs duty in India is governed by the Customs Act, 1962 and the
Customs Tariff Act, 1975. One of the objectives of Customs duty is the prevention
of illegal import and export. As per Section 5 of the Customs Tariff Act, 1975, the
Central Government is given the power to issue notification regarding rules for
determining whether any article is originated from any foreign country among
whom India has entered into a trade agreement imposing a lower Customs duty
rate. In the Customs Tariff (Determination of Origin of Goods under the Agree-
ment on SAARC Preferential Trading Arrangement) Rules, 1995 certain goods
are specified to which the preferential concessions are accorded. In order to avail
the preferential concession, the goods are to be supported by a Certificate of
Origin indicating the origin of those goods to make them eligible for customs
duty concessions.
A similar requirement can also be seen in the Customs Act, 1962. As per
Section 11 of the Customs Act, the Central Government is empowered to issue
notifications imposing conditions on the importation of goods specified in the
notification.
Rules of Origin and Trade Preferences
Preferential rules of origin define the conditions that a product must sat-
isfy to be deemed as originating in a country that is eligible for preferential ac-
cess to a partner’s market not simply transshipped from a non-qualifying coun-
try or subject to only minimal processing. In practice, the greater the level of
work that is required by the rules of origin, the more difficult it is to satisfy those
rules, and the more restrictive the rules are in constraining market access relative
to what is required simply to prevent trade deflection. This is particularly true
for small, less diversified developing economies. The higher the amount of do-
mestic value added that is required by a value added rule, the more difficult
compliance will be, since there will be less scope for the use of imported parts
and materials. A rule of origin that prevents the use of imported flour in the pro-
duction of pastry products such as biscuits, for example, will be very restrictive
for countries that do not have a competitive milling industry. With regard to re-
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