Manufacturers need to be more competitive

The New Year gift from the finance ministry is a series of Customs exemption notifications reducing the Basic Customs Duty (BCD) on import of goods originating from South Korea, Singapore, Malaysia, Thailand, Pakistan and Sri Lanka. The Rules of Origin for imports from South Korea and specified South East Asian Nations have also been notified. These duty reductions are in accordance with the Preferential/Free Trade Agreements signed earlier by the commerce ministry.

Imports of South Korean items listed in 104 entries of notification number 151/2009 dated December 31, 2009, will attract ‘nil’ duty subject to production of certificate of origin issued in accordance with the conditions specified in the non-tariff notification number 187/2009 dated December 31, 2009. Out of these, 11 entries cover Chapter 90 items, 33 entries cover Chapter 85 items and 22 entries cover Chapter 84 items. This means that more than two-thirds of the items, now subject to ‘nil’ duty under the notification giving partial effect to India-South Korea Comprehensive Economic Co-operation Agreement (Ceca) are capital goods. Besides, items covered under 952 entries listed in the notification number 152/2009 dated December 31, 2009, will attract BCD at rates specified against each entry.

The notification number 153/2009 dated December 31, 2009, lists 1,575 entries. Items covered by these entries of Malaysia, Singapore and Thailand origin will attract lower BCD. The concessions are available subject to Rules of Origin requirements specified in the non-tariff notification number 189/2009 dated December 31, 2009. The exemptions are granted in accordance with the Preferential Trade Agreement between the governments of member states of the Association of Southeast Asian Nations (Asean) and India. As other Asean countries ratify the agreement, the notifications may be amended to include goods of their origin also.

The notification number 10/2008 dated January 15, 2008, has now been amended through the notification number 150/2009 dated December 31, 2009, reducing the duty rates on Singapore origin items covered by 532 entries. To claim the exemption, Origin Certificate as per Rules specified in non-tariff notification number 59/2005 dated July 20, 2005, will have to be produced before the Customs.

Giving further effect to the South Asian Free Trade Agreement, the notification number 149/2009 dated December 31, 2009, has amended the notification number 68/2006 dated June 30, 2006, reducing the duty rate to 8 per cent on items covered by 254 entries. Similarly, notification number 67/2006 dated June 30, 2006, has been amended though the notification number 148/2009 dated December 31, 2009, reducing the duties on items covered by 127 entries. The Certificate of Origin have to be in accordance with the rules specified in non-tariff notification number 75/2006 dated June 30, 2009.

All the above notifications come into effect from January 1, 2010, signifying substantial moves towards duty free regime with the neighbouring countries and the east Asian countries. In due course, progressive duty reductions will make sourcing from these countries even more attractive.

It is not that only the procurement managers have opportunities to identify sources in these countries that can meet their requirements and enable them cut costs by way of lower duties. Even the marketing managers will have easier access to markets in these countries. Over a period, India’s trade with these countries is set to grow significantly due to such duty reductions.

Indian manufacturers will have to get more competitive to cope with cheaper imports due to duty rate reductions. Past trends indicate that many of them may prefer to ask for anti-dumping duties on imports from these countries.

Email: tncr@sify.com