Page 121 - SMUGGLING IN INDIA REPORT FOR 2020-2021

CHAPTER 6: FOREIGN TRADE POLICY: MISUSE OF SCHEMES 75
Nature of frauds taking place by misuse of Free Trade Agreements
For misusing the benefits under the FTAs, various modus operandi have been detected, some of which are as under –
• Fraudulently obtaining Country of Origin (COO) certificate or forging the COO certificate;
• Mis-classification of goods to fit in the entries available in the FTA;
• Non-compliance of value addition norms as per Rules of Origin; and
• Using Transhipment ports/Special Economic Zones of the contracting country without goods originating from that country.
The introduction of the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR), in August 2020 has the aim of making a dent in the proliferation of such misuse of FTAs. Recently, a trend has been noticed that some of the importers, who were earlier availing benefit of FTA, have stopped taking such benefits and have started paying duty, despite
the foreign supplier remaining the same. This corroborates possibility of earlier misuse of FTAs by such importers and shows the effectiveness of CAROTAR in controlling this menace. Details about cases of duty evasion for the past five years, on account of misuse of various export promotion schemes, are elaborated in the bar diagram below:
350 5000
300
250
200
150
100
50
4500
4000
3500
3000
2500
2000
1500
1000
500
00 2016-17 2017-18 2018-19 2019-20 2020-21
(Source: National Customs Offence Database - DIGIT)