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India Australia ECTA

Overview of India Australia Economic Cooperation and Trade Agreement [ECTA]

The recently announced India-Australia Economic Cooperation and Trade Agreement, or India-Australia ECTA, will be the topic of our discussion.

This agreement addresses a wide range of issues, including duty-free access to Indian export goods, service collaboration, work permits for students, chances for Indian chefs and yoga instructors, etc.

According to Union Minister Shri Piyush Goyal, it is anticipated that in the next five to six years, the existing bilateral trade of 31 billion dollars might increase to 45 to 50 billion dollars.

On this page, we'll examine the deal from the standpoint of Indian exporters of commodities to see how it will help them grow their businesses in Australia. You can find out everything you need to know on this page, including: Is the Agreement in your best interests? Which goods are acceptable? What are the guidelines or history? How do you submit an application for CoO under this FTA? How do I apply? What kinds of documentation are needed? What are the exporter's responsibilities? Etc. Therefore, let's begin.

1. India Australia Free Trade Agreement Benefits?

We are all aware that FTA grants Indian export items preferential tariff access in the importing nation.

The recently announced India-Australia ECTA is one such FTA. The Ind-AUS ECTA was ratified in April 2022 and went into effect on December 29, 2022.

Why is this FTA so significant, then? - The India Australia Economic Cooperation and Trade Agreement will grant duty-free access to over 96% of India's exports to Australia by value as of the agreement's start date. Additionally, the remaining product lines will gradually gain duty-free access over the next five years.

This trade agreement will primarily benefit the majority of textiles and apparel, some agricultural and fisheries products, leather, footwear, furniture, sporting goods, jewellery, machinery, electrical goods, railway waggons, and some pharmaceutical and medical products.

On the other hand, Australia is a source of raw materials, intermediates, minerals, and other items that are very helpful to the Indian industry because, if our raw materials are less expensive, then the final product will also be less expensive in the global markets. Thus, both countries stand to benefit from this arrangement.

2. India Australia Free Trade Agreement Products List?

The list of all such products, broken down by HS code, is provided in ANNEX 2A of the Australian Schedule. The PDF file's link is provided below:

https://commerce.gov.in/wp-content/uploads/2022/06/02A-2-Schedule-Australia.pdf is the link to ANNEX 2A: The Schedule of Australia.

The HS Code, the Product Description, the Base Rate, and the Staging category are all listed here. There are two types of staging, A and B5.

Staging Category A indicates that there will be no import taxes in Australia starting on December 29, 2022.

Let us understand this by way of an example, please see the table below -

HS Code Description Base rate Staging category
6302.12.10 Curtains 5% A
7208.10.00 FLAT-ROLLED PRODUCTS OF IRON OR NON ALLOY STEEL, -In coils, not further worked than hot-rolled, with patterns in relief 5% B5

In this table it can be seen that “Curtains”, which currently has an Import duty of 5%, will immediately become 0 from 29th December 2022.

And “Flat rolled products” under chapter 7208 which currently has an Import duty of 5%, will be reduced in equal installments i.e. 4%, 3%, 2% and so on and it will eventually become zero by the end of 5 years.

3. What are the Rules of origin criteria?

Therefore, the section on rules of origin is crucial. A product shall only be deemed to be of Indian origin if it was produced totally in India or if it was entirely produced in India utilising non-originating materials (i.e. imported materials).

We shall each be understood through an example.

What is meant by "wholly obtained in India" are goods that are totally produced or grown in India. Fruits and vegetables cultivated in India are an example of such products that are frequently used.

The first requirement is therefore rather straightforward and unambiguous.

Regarding the second criterion, a product will be regarded as coming from India if its tariff classification changes at Chapter Level [CC], which corresponds to the first two digits of the HS, Tariff Heading Level [CTH], which corresponds to the first four digits, Tariff Subheading Level [CTSH], which corresponds to the first six digits, AND/OR if it meets the QVC [Qualifying Value Content] criterion. This will be covered in more detail in the section on product-specific rules.

In other words, if your export product is not entirely obtained, you must review the Product Specific Rules listed in Annex 4B to see if it qualifies for the India Australia ECTA advantage.

Let's now talk about the Rules of origin that are specific to products.

4. Product Specific Rules of Origin

Let us understand these rules by way of 3 Examples

The Image shows that for the above products to qualify for the duty free access benefit, it should be Wholly Obtained [WO] in India.

Pasta of various varieties, an export product in this case, will only be eligible for ECTA incentives if its CC has changed. In other words, the first two digits of all imported raw materials (non-originating materials) are different from the first two digits of the finished export product. This indicates that all non-originating materials utilised in the production of the good have experienced a change in tariff classification at the two digit level.

Therefore, in this case, the export product, imitation jewellery, will be eligible for the ECTA benefit if it meets both criteria, namely CTSH + QVC 1.5%, which means that the first six digits of all imported raw materials [Non-originating materials] differ from the first six digits of the final export product AND QVC of not less than 1.5% using the build-up method or build-down method.

It should be noted that not all of the goods' PSRs have been contacted yet; this process will continue. Therefore, if your export items are not protected by the product-specific rule of origin, you should utilise the general rule shown in the image below to assess whether the goods originated in India:

If the invoice contains a lot of export products, the VA for each export item should be determined separately. It's possible that some of your products don't meet the PSR requirements; in that case, you must include this in your paperwork and ECTA advantages for such products shouldn't be claimed.

Additionally, please consult to Subparagraphs 5, 6, 7 and 8 of Article 4.6 under Chapter 4 - Rules of origin in order to appropriately determine the QVC value.

5. Article 4.8 - De Minimis

Now, it does occasionally happen that you use five or six non-original resources to create a finished result. However, one or two of your non-originating materials cannot meet the requirements of the CTSH, CTH, or CC rule of change in tariff classification.

In these circumstances, Article 4.8 of Chapter 4's Rules of Origin may be helpful. It claims that

If the total cost of all such non-originating materials for export products falling under Chapters other than 50 to 63 is less than 10% of the FOB Value of the export goods, those goods will be regarded to be domestically produced.

Additionally, all export goods falling under Chapters 50 to 63 must be considered to be of domestic origin if the combined weight of all non-domestic content does not exceed 10% of the export good's overall weight.

6. How & Where to apply For Certificate of Origin [CoO] under India Australia ECTA - Free Trade Agreement?

The shared digital platform for CoO is where applications for CoO under CEPA are to be submitted. It is a required online procedure.

The application must be submitted within five days of the export date.

The typical set of documents needed are:

  1. Digital Signature
  2. Exports a copy of the invoice
  3. Packing Checklist
  4. Bill of Lading
  5. Shipping Statement.

Once the application is done the CoO is issued within one to two working days.

7. Who are We and Why Choose Us.

We at Afleo Group are a team of DGFT & Customs Experts with strong backgrounds in Exim Consultancy & International Logistics [Freight Forwarding] with a combined experience of more than 10 years. We can represent your case for all actions relevant to the Country of Origin and have it cleared without any hassles thanks to our extensive expertise and experience in this subject.

So please contact us with any needs you may have, and our team will be pleased to assist you.

Frequently Asked Questions

Frequently Asked Questions

It is a mandatory requirement for conducting imports and exports from our country.

It can be done online after obtaining registration with the ICEGATE portal.

It can be checked online by visiting the ICEGATE portal.

The dealer gets a 7-digit code as proof of his registration with the Reserve Bank of India after opening a current account with a registered authorised dealer. The importer or exporter AD code is this seven-digit number.

It facilitates direct crediting of incentives and rewards to the bank account. Additionally, it aids in realising export revenues or permits the return of funds used for imports.

No, an IEC holder may only have one AD code bank account registered for one Port location.

Yes, it is required for importers. The importer will be unable to file the bill of entry at customs without an AD code.