Certificate of origin

A Comprehensive Economic Partnership Agreement (CEPA) or Comprehensive Economic Cooperation Agreement (CECA) is different from a traditional (FTA) Free Trade Agreement in two ways.

Firstly, CEPA or CECA are more comprehensive and ambitious than an FTA in terms of coverage of areas and the type of commitments. While a traditional Free Trade Agreement focuses mainly on goods; a CECA/CEPA is more ambitious in terms of a holistic coverage of many areas like services, investment, competition, government procurement, disputes etc.

Secondly, CEPA/CECA looks deeper at the regulatory aspects of trade than a Free Trade Agreement. It is on account of this that it encompasses mutual recognition agreements that cover the regulatory regimes of the partners. An MRA recognises different regulatory regimes of partners on the presumption that they achieve the same objectives.

Countries negotiate Free trade Agreements for a number of
reasons:
• By eliminating tariffs and some non-tariff barriers Free trade Agreement partners get easier market access into one another’s markets. Countries negotiate FTA’s for a number of
reasons.
• Exporters prefer Free trade Agreement’s to multilateral trade liberalization because they get preferential treatment over non- Free trade Agreement member country competitors. For Instance in the case of ASEAN, ASEAN has a Free trade Agreement with India but not with Canada. ASEAN’s custom duty on leather shoes is 20% but under the Free trade Agreements with India it reduced duties to zero. Now assuming other costs being equal, an Indian exporter, because of this duty preference, will be more competitive than a Canadian exporter of shoes. Secondly, Free trade Agreement’s may also protect local exporters from losing out to foreign companies that might receive preferential treatment under other FTAs.

• Possibility of increased foreign investment from outside the Free trade Agreement. Consider 2 countries A and B having a Free trade Agreement. Country A has a high tariff and large domestic market. The firms based in country C may decide to invest in country A to cater to A’s domestic market. However, once A and B sign a Free trade Agreement and B offers a better business environment, C may decide to locate its plant in B to supply its products to A.
• Such occurrences are not limited to tariffs alone but it is also true in the case of non-tariff measures. Especially when a Mutual Recognition Agreement (MRA) is reached between countries A and B. Some experts are of the view that slow progress in multilateral negotiations due to complexities arising from a large number of countries to reach a consensus on polarizing issues, may have provided the impetus for FTA’s.
Possibility of increased foreign investment from outside the Free trade Agreement. Consider 2 countries A and B having a Free trade Agreement. Country A has a high tariff and large domestic market. The firms based in country C may decide to invest in country A to cater to A’s domestic market. However, once A and B sign a Free trade Agreement and B offers a better business environment, C may decide to locate its plant in B to supply its products to A.
• Such occurrences are not limited to tariffs alone but it is also true in the case of non-tariff measures. Especially when a Mutual Recognition Agreement (MRA) is reached between countries A and B. Some experts are of the view that slow progress in multilateral negotiations due to complexities arising from a large number of countries to reach a consensus on polarizing issues, may have provided the impetus for FTA’s.

India has preferential access, economic cooperation and Free Trade Agreements (FTA) with about 54 individual countries. India has signed bilateral trade deals in the form of Comprehensive Economic Cooperation Agreement (CECA) / Comprehensive Economic Partnership Agreement (CEPA) / Free Trade Agreement / Preferential Trade Agreements (PTAs) with some 18 countries. India is a late & cautious, starter in concluding comprehensive PTA covering substantially all trade with some of its trading partners.

Country of origin / Rules of origin (ROO) are the criteria needed to determine a product for purposes of international trade. Their significance is derived from the fact that duties & restrictions in several cases depend upon the source of imports. Rules of origin are used:

⚫ to implement measures and instruments of commercial policy such as antidumping duties and safeguard measures;

⚫ to determine whether imported products shall receive most- favored-nation (MFN) treatment or preferential treatment;

⚫ for the purpose of trade statistics;

⚫ for the application of labeling and marking requirements; and

⚫ for government procurement.

The criteria in the (ROO) rules of origin sets out specific & detailed conditions on the level of processing that an imported item from a non Free Trade Agreement partner country must undergo in the Free Trade Agreement partner country (or other eligible countries in the region) before being eligible to be called an originating product of a Free Trade Agreement partner country. Some of the common standards used are:-
⚫ change in tariff class (this could be at the tariff chapter, tariff
heading or tariff sub heading level)
⚫ regional value addition
⚫ substantial processing or manufacturing by excluding some
minimal operations.

The authorized agencies in India for issuing the certificate of origin are listed in Appendix 35 of the Handbook of Procedures Vol-1 under the Foreign Trade Policy.

These are:

The four methods of supply-

Method 1: Cross border supply (supply from the territory of a Party into the territory of the other Party). For Instance an architect can send his architectural plan through electronic means; a lecturer can send teaching material to students in any other country; a doctor sitting in France can advise his patient in India through digital means. In all these cases, trade in services takes place and this is equal to cross-border movement of goods.

Method 2: Consumption abroad (consumption in the territory of a Party by the service consumer of the other Party). For Instance a tourist using hotel or restaurant services abroad; a ship or aircraft undergoing repair or maintenance services abroad.

Method 3: Commercial presence (by a service supplier of a Party, through commercial presence in the territory of the other Party). In this case, the service supplier establishes a legal presence in the form of a representative / branch office / joint venture/ subsidiary in the host country & starts supplying services. For Instance a bank opens its branch in another country.

Method 4: Presence/movement of natural persons (by a service supplier of a Party, through presence of natural persons of a Party in the territory of the other Party). For Instance Independent service suppliers (e.g. doctors, engineers, individual consultants, accountants, etc.) who provide services in another country. However, GATS covers only temporary movement & not citizenship, residence or employment on a permanent basis in the foreign country.