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India and the United Arab Emirates (UAE) are entering into discussions to address concerns raised by exporters regarding the extensive details of manufacturing and procurement required by customs authorities in both countries.
These extensive details are a part of the 'rules-of-origin' requirements outlined in the free trade agreement (FTA) signed last year by the two nations. Additionally, the two nations have decided to enhance non-oil trade amid the global decline in commodity prices. These developments came after the first review of the India-UAE Comprehensive Economic Partnership Agreement (CEPA) last week.
According to a report by Mint, one of the main concerns raised by Indian exporters is the burden of complying with rules-of-origin requirements. These requirements determine the origin country of goods and determine their eligibility for preferential treatment (i.e tariff reductions) under the FTA.
This challenge has risen because UAE tariffs are not significantly high, so exporters are questioning whether it is worthwhile to undergo the compliance burden. Indian exporters have expressed these concerns to the Ministry of Commerce.
The certification of the country of origin confirms that the exported goods meet specific criteria to qualify as originating from a particular country. Although the country of origin may be reflected in actual exports with a delay, it serves as a reliable indicator of utilisation and compliance with the trade agreement.
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An even greater concern for India is the potential circumvention of rules-of-origin requirements since the UAE serves as a transnational hub. Due to India's insistence on strict rules-of-origin, the UAE has also adopted a similar stance.
The same report added that the UAE has requested detailed information about the manufacturing process, which exporters are uncomfortable sharing as it involves disclosing intellectual property rights.
Indian exporters perceive this as a risk and the issue was discussed during the India-UAE joint committee meeting on June 12th and has been referred to the sub-committee on rules of origin. The sub-committee is expected to provide recommendations to the joint committee by November.
The India-UAE CEPA, implemented on May 1st last year, eliminated duties on 90 per cent of India's exports to the UAE by value and covered various sectors, including gems and jewelry, textiles, leather, and engineering goods. Notably, gems and jewelry, automobiles, cereals, and machinery and mechanical appliances have been the top beneficiaries in terms of value.
The Ministry of Commerce's data showed that India's exports to the UAE contracted by 10.2 per cent to $4.82 billion during April-May this financial year against $5.37 billion in the year-ago period. Despite this temporary slowdown, the Ministry and Industry expects India's exports to the UAE to increase to $50 billion by the financial year 2027 from $31.8 billion in the financial year 2023. India's exports to UAE.
