Last updated: December 7th, 2022 11:46 AM

CAROTAR 2020 Rules

Central Board of Indirect Taxes and Customs has introduced new regulations under section 156, read with section 28DA Customs Act, 1962, related to Rules of Origin under Trade agreements. These rules will be called the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020). The CAROTAR 2020 aims to supplement the operational certification procedures related to implementing the Rules of Origin (RoO) as prescribed under the respective Trade agreements (FTA/PTA/CECA/CEPA).

Section 28DA of the Customs Act

Section 28DA was inserted in the Customs Act, 1962, vide clause 110 of the Finance Act, 2020. The new section, among other things, provides for a basic level of due diligence on the part of an importer to satisfy himself that the claimed originating criteria have been met and that mere submission of a Certificate of Origin may not be sufficient. For this purpose, the importer is required to possess adequate origin-related information. In case of doubt, the first point of the query into the origin of goods will now be the importer, shifting from G2G to the B2G model. Section 28DA further provides for verification of origin from foreign authorities, temporary suspension of preferential treatment, and situations under which a claim can be denied or a certificate can be rejected.

CAROTAR rules

• An importer must do due diligence before importing the goods to ensure they meet the prescribed rules of origin' provisions.
• A list of minimum information the importer must possess has also been provided in the rules, along with general guidance.
• Also, an importer will have to enter specific origin-related information in the Bill of Entry, as available in the Certificate of Origin.

Benefits of CAROTAR to Importers

The new Rules will support the importer in correctly ascertaining the country of origin, properly claiming the concessional duty, and assisting Customs authorities in the smooth clearance of legitimate imports under FTAs. The new rules would strengthen the hands of the Customs in checking any attempted misuse of the duty concessions under FTAs.

CAROTAR, 2020 - Key Features

The Key Features of CAROTAR 2020 are as follows:

• The extent of information expected to be possessed by an importer is defined. 
• The importer must keep origin-related information specific to each Bill of Entry for a minimum of five years from filing the Bills of Entry. 
•  Mandates inclusion of specific origin-related information in Bills of Entry. 
• Provides for scenarios wherein verification from the exporting country can be initiated. 
•  Sets timelines for receiving data from verifying authorities where the same is not offered in Trade Agreements. 
• Sets timelines for finalizing decisions based on information obtained from importer/verifying authorities. 
• Action may be taken on the import of identical goods when it is determined that goods do not meet originating criteria

Rule 3 of CAROTAR - Information required for import declaration (Bill of Entry)

CAROTAR, 2020 mandates specific origin related details to be entered in the Bill of Entry, as available in the Certificate of Origin:

• Certificate of an origin reference number
• Date of issuance of a certificate of origin
• Originating criteria
• Details of accumulation/cumulation 
• Details of the certificate of birth if a third country issue it
• Details of goods transportation (Whether they were transported directly from the country of origin)

Note: These additional fields in the Bill of Entry format are available from 21.09.2020.

Rule 4 of CAROTAR- Origin-related information to be possessed by the importer

CAROTAR, 2020 requires an importer to possess sufficient information about the origin of goods, where preferential tariff treatment is claimed. A flow chart has been provided to help importers navigate the rules of origin and identify the key elements that should be checked with the exporter. In the case of identical goods from the same exporter, the process of making inquiries with the exporter need not be repeated for each bill of entry, unless there is any change in the process of manufacturing.  Knowledge of this process helps the importer to identify any issue at an early stage. This will enable an importer to independently assess the authenticity of the original claim made by an exporter. 

Form I of CAROTAR, 2020

CAROTAR, 2020 has provided a form 1 to help importers. The Form focuses on the process through which a good has attained origin i.e if goods are produced entirely from inputs from that country or also included inputs from a third country. The Form containing a list of basic minimum information that an importer is required to obtain while importing goods under a claim of a preferential rate of duty. Therefore, in case there is a doubt concerning the origin of goods, the information should be first called upon from the importer of the goods, before initiating verification with the partner country.

Rule 4 of CAROTAR - Customs officer requisitions of origin details from Importers

If the origin declared in a COO is doubtful, the customs officer will ask the importer about the relevant origin details before seeking verification from the partner country. The cross-border confirmation of origin is currently conducted through the nodal authorities in respective countries and follows timelines prescribed in the separate trade agreements, which sometimes extend to months. However, if the importer provides sufficient information to customs, as and when asked for in terms of CAROTAR, 2020, the verification from the partner country will not be initiated and the matter can be concluded quickly Note: the information in Form 1 is not required to be submitted with every bill of entry and needs to be presented only when an inquiry is made by a customs officer

Responsibility of the Importer

Section 28DA of the Customs Act, 1962 further states that mere submission of a Country of Origin will not absolve the importer of the responsibility to exercise reasonable care to the accuracy and truthfulness of the information supplied. In case of failure of the importer to do, the fact will be informed to the Risk Management Centre of Customs (RMCC) through written communication to enable compulsory verification of assessment of all subsequent import consignments. However, the compulsory verification of assessment should be discontinued once the importer demonstrates that he has established an adequate system of controls to exercise reasonable care as required under the Customs Act, 1962;

Rule 6 of CAROTAR

If a customs officer requisitions information in terms of rule 5, but the importer is unable to produce, it, the officer will initiate overseas verification in terms of rule 6. In such cases, the preferential tariff treatment may be suspended until the conclusion of verification, and goods may be assessed provisionally with bond and security as stated in the rules. verify assessment of all subsequent bills of entry filed by the importer with the claim of preferential duty as stated in rule 8(1).

Rule 7 of CAROTAR - Identical goods

If it's determined that goods originating from an exporter or producer do not meet prescribed origin criteria, this outcome will apply to identical goods from the same exporter or producer.

Rule 8 of CAROTAR – Verification of all bills of entry

If the importer fails to produce origin related information and documents sought, or it is established that he is not doing due diligence, then in addition to initiating verification with other countries, the officer is also required under rule 8(1) to verify the assessment of all subsequent bills of entry. However, the importer demonstrates that he is taking reasonable care through adequate record-based controls, the compulsory verification of assessment will be discontinued

Procedure for Ascertaining the correctness of a claim of a preferential Rate of Duty

CBIC has specified Procedure for ascertaining the correctness of a claim of a preferential rate of duty as follows: For ascertaining the correctness of a claim of a preferential rate of duty under a trade agreement, information may be sought from the importer during customs clearance or thereafter. A verification request will be sent to an exporting country during customs clearance of imported goods. The Customs Act of 1962 provides that information will be sought within five years from the importer's claim of a preferential duty rate.

Procedure to Seek Exemption under an FTA

As required earlier, an importer must seek an FTA exemption when filing the Bill of Entry. Some additional basic details now need to be entered in the Bill of Entry. These details are available in the COO.  Hence, CAROTAR does not mandate the submission of additional documents when filing the Bill of Entry. In case of any doubt about the origin, the customs officer will raise a query to the importer before initiating verification with a foreign administration, which takes substantial time. The questions to the importer will be based on the Form notified in CAROTAR, 2020. The importer will be provided ten days to submit the information, and within 15 days of receiving a response, he will be informed about the outcome. If any additional information is required, the customs with the authorities in the exporting country will follow the verification route. Where it is established that goods from an exporter do not meet the originating criteria, the preferential benefit may be rejected for identical goods imported from the same exporter. The official notification about the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) is as follows: