Page 174 - CW E-Magazine (5-9-2023)

Special Report Special Report

It is crucial to understand that HS
FTAs at risk: Harmonised system revisions complicate revisions do not seek to amend the

rules of origin underlying ROOs; rather, they aug-
ment the complexity of rule appli-
cation. Customs offi cials necessitate
ailure to synchronise rules of formed within this territory, or meet a RAFAEL CORNEJO goods to be categorised according to
origin with HS revisions can designated threshold of value-added Founding Director the current HS version, while ROOs
Famplify the scope for errors contribution. Origen Digital mandate their classifi cation in the
and fraudulent activities, distorting the version that defi nes the FTA’s rules.
objectives of FTAs. Substantial transformation SURENDAR SINGH Failure to synchronise ROOs with HS
The concept of substantial trans- Associate Professor revisions can amplify the scope for
Free trade agreements (FTAs) play formation stands as the most applied FORE School of Management errors and fraudulent activities, dis-
a vital role in global trade by expand- principle. It stipulates that a good New Delhi torting the intended application of the
ing market access through the reduc- undergoes a change in its tariff classifi - Email: drsurendarsingh@gmail.com agreement.
tion or elimination of tariffs among cation as a result of its production within JEREMY HARRIS
participating nations. These agree- the FTA territory. This classifi cation Economist Distorted trade dynamics and origins
ments substantially reduce the cost of process involves the utilisation of the Inter-American Development Bank within FTAs
goods and services for both consumers Harmonised Commodity Description Washington, D.C Our recent article, “Examining Dis-
and businesses, fostering heightened and Coding System (referred to as HS), tortions in Rules of Origin Resulting
trade and spurring economic growth. whereby ROOs can specify the requi- The Harmonised System Com- from Harmonised System Revisions: 2002 (four revisions behind). Although FTAs. This issue is pervasive on a global
It is important to recognize that FTAs site extent of alteration in this classifi - mittee (HSC), convened by the WCO A Case Study of India’s Select Free not all HS alterations signifi cantly im- scale, with substantial portions of trade
are intricate arrangements that wield cation between inputs sourced from and comprised of representatives from Trade Agreements,” offers an in-depth pact rule application, our fi ndings indi- under FTAs prone to misapplication of
signifi cant infl uence over the eco- non-FTA members and the goods traded member nations, spearheads the evolu- analysis of the implications stemming cate that products potentially affected ROOs. Governments’ failure to main-
nomies involved. under the agreement. This is impera- tion and upkeep of the HS. This sys- from the 2002 HS revision on rules of comprise 48% of India’s bilateral trade tain alignment between the rules and
tive to ensure eligibility for tariff-free tem serves as a critical instrument in origin within India’s FTAs with Japan with Korea and 16% of trade with the corres-ponding HS version is an
Rules of origin treatment. international trade, furnishing a shared and Korea. Japan. endemic concern, one that cannot be
Within the realm of FTAs, the deter- framework for classifying goods and excused based on its prevalence across
mination of goods’ eligibility for pre- HS Coding system promoting equitable and effi cient trade Neither of these agreements has Japan and Korea are not solitary in- various nations.
ferential tariffs is established through The HS undergoes updates every fi ve practices. Regular updates to the HS been updated to refl ect HS changes; the stances in India’s FTA landscape. The
the application of rules of origin years under the auspices of the World ensure its alignment with the latest Japan FTA adheres to the 2007 HS ver- challenge of correctly applying ROOs [The article fi rst appeared in Policycir-
(ROOs). These ROOs comprise a set of Customs Organisation (WCO). This glob- developments in the global economy, sion (three revisions outdated), while when they remain unchanged amidst cle, an independent media platform owned
criteria that a product must fulfi l to be ally recognised system classifi es goods accommodating emerging technolo- the Korea agreement aligns with HS HS revisions is not unique to India’s by Peninsula Media LLP.]
classifi ed as originating within the FTA for customs purposes and is employed by gies, shifts in trade patterns, and inter-
territory. The specifi c regulations gov- more than 200 countries and territories to national accords. Chemical Weekly | Import-Export Data
erning ROOs differ based on the FTA facilitate the categorisation of goods for
and the nature of the product in ques- import, export, and statistical tracking. Potential pitfalls of FTAs Market Surveys | Directories
tion. To qualify for preferential tariffs, The HS is periodically revised to refl ect Alterations to the Harmonised Sys-
goods must either be wholly produced shifts in techno-logy, trade dynamics, and tem have a direct impact on rules of Business Forums | Expositions
in the FTA region, substantially trans- international agreements. origin within FTAs. ROOs predicated
on tariff classifi cation modifi cations The only organisation in India catering exclusively to the needs of the entire chemical industry
are defi ned with reference to specifi c
HS versions. Revisions to the HS can
reshape the classifi cation of inputs and Contact:
outputs under the same code. If traders SEVAK PUBLICATIONS PVT. LTD.
and customs authorities do not correctly
apply the rules using the relevant HS 602-B, Godrej Coliseum, K.J. Somaiya Hospital Road,
version, this may render compliance Behind Everard Nagar, Sion (E), Mumbai 400 022.
with certain regulations either more
manageable or more arduous, contingent Phone: +91-22-24044471 / 72
on the sourcing practices of the
Mr. Rafael Cornejo Mr. Surendar Singh Mr. Jeremy Harris Email: admin@chemicalweekly.com
producer.

174 Chemical Weekly September 5, 2023 Chemical Weekly September 5, 2023 175

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