Origin laws may put textiles in negative list

The textiles ministry has asked the commerce and industry ministry to keep textiles-related items on the negative or the sensitive list for bilateral free trade agreements until clear-cut rules of origin are adopted. The move aims at ruling out any circumvention.

The rules of origin are formulated to ensure that products imported under trade agreements have a certain percentage of domestic inputs and have gone through a certain level of processing. This is done to protect the domestic industry.

"Textile is extremely sensitive in terms of rules of origin since it is difficult to prove the origin of the fabric once it has been processed. In fact, under the committee on rules of origin at the World Trade Organisation, nearly 80 per cent of the tariff lines being discussed pertained to textiles. We want to ensure that there is clarity on the issue before textiles are included in the PTAs and FTAs," an official told Business Standard.

The ministry had also raised the issue of Customs officials at ports not being equipped enough to deal with the differential tariffs under different rules of origin.

"Port officials can no way know the difference in the rules of origin applicable to Thailand, and Singapore with other member countries of the Association of Southeast Asian Nations (Asean) since both these countries are members of the Asean as well," an official said.

The government is negotiating different terms under the rules of origin with different countries based on comparative advantages. For instance, the interim rules of origin with the Asean has 40 per cent value-addition with no change in tariff heading, while Singapore and Thailand have 40 per cent value-addition with change in tariff heading at the four digit level.

On the other hand, the agreement with member countries of the Mercusor "" the Latin American trading bloc "" has a 60 per cent value-addition norm.

"A more liberal rules of origin with any one country will increase the possibility of goods being brought into India from other countries through that country," an official said citing the instance of Nepal where products imported from China were being routed to India.

In case of textiles, even the conversion to yarn amounts to a 10 per cent value-addition with change at the two-digit tariff heading, the official said.

The ministry has mooted the idea of examining the rules of origin adopted by countries like the United States, which has value addition-specific rules of origin, and those for product, process and content.

The commerce and industry ministry is in the process of preparing a Cabinet note to seek a directive on adopting a general rules of origin that can be applied to all countries with which it is proposing to have bilateral trade arrangements.

Each of the bilateral agreements being negotiated has a negative list of products on which no tariff concession is given. India is at present finalising the negative list of items with Thailand. New Delhi has already operationalised the early harvest scheme with Bangkok under which 82 products have been given tariff concessions in the first phase.