Customs Act, 1962 Section 28da — Procedure regarding claim of preferential rate of duty

Overview

Section 28DA of the Customs Act, 1962 outlines the specific procedures an importer must follow when claiming a preferential rate of duty under a trade agreement. It ensures that only goods genuinely originating from countries with whom India has such agreements benefit from reduced import duties, while also placing responsibility on importers to verify origin and provide accurate information.

Who Does This Apply To?

This section primarily affects importers seeking to avail preferential tariff treatment under any trade agreement between India and another country/territory/economic union. It also affects proper officers of Customs responsible for verifying the origin of goods and administering the preferential tariff treatment. The section additionally touches upon the role of issuing authorities in other countries responsible for issuing Certificates of Origin.

How It Works

The process under Section 28DA is as follows:

• Importer's Responsibility: An importer claiming a preferential rate of duty must:
  • Declare that the imported goods qualify as originating goods under the relevant trade agreement.
  • Possess sufficient information demonstrating how the country of origin criteria, including regional value content and product-specific rules, are met.
  • Furnish all required information in the manner prescribed by rules.
  • Exercise reasonable care to ensure the accuracy and truthfulness of the furnished information.
• Certificate of Origin (COO) is not enough: Even with a valid COO, the importer still bears the responsibility to exercise reasonable care in ascertaining the origin of the goods.
• Verification by Customs Officer: The proper officer can request further information if they suspect the country of origin criteria are not met, consistent with the trade agreement. The rules will define the manner for submitting this information.
• Failure to Provide Information: If the importer fails to provide the requested information, the proper officer may:
  • Initiate further verification consistent with the trade agreement (details in rules).
  • Temporarily suspend the preferential tariff treatment.
• Suspension & Provisional Assessment: If preferential tariff treatment is suspended, the importer may request release of the goods by providing:
  • A security (amount equal to the difference between the duty provisionally assessed under section 18 and the preferential duty claimed), OR
  • The difference in duty in their ledger account maintained under Section 51A, as directed by the Principal Commissioner or Commissioner of Customs.
• Communication with Issuing Authority: Upon suspension, the proper officer must inform the Issuing Authority of the reasons and seek specific information needed to determine the goods' origin.
• Restoration of Preferential Treatment: If the Issuing Authority, exporter, or producer provides satisfactory information, the proper officer may restore the preferential tariff treatment.
• Disallowance of Preferential Treatment: If no information is received or the information is unsatisfactory, the proper officer must disallow the preferential tariff treatment, recording the reasons in writing. An incomplete response can trigger a second request to the Issuing Authority.
• Time Limit for Verification: Unless the trade agreement specifies otherwise, verification requests must be sent within five years of the importer's claim for preferential duty.
• Refusal without Verification: Preferential treatment can be refused without verification in specific cases (e.g., ineligible tariff item, incomplete description, unauthenticated alteration, expired COO).
• Rejection of Identical Goods: If verification reveals non-compliance with the country of origin criteria, preferential tariff treatment can be rejected for identical goods from the same producer/exporter, unless sufficient information proves their compliance.

Important Conditions & Exceptions

• Reasonable Care: Importers must exercise reasonable care in determining the origin and accuracy of provided information.
• Verification Scope: Customs verification is limited to information consistent with the relevant trade agreement.
• Incomplete Information: Customs may send a second request to the Issuing Authority specifying shortcomings in the original response.
• Refusal without Verification: The section lists specific circumstances (incomplete or invalid certificates, ineligible tariff items) where verification is not necessary before denying preferential rates.

Practical Example

ABC Importers claims a preferential rate of duty on electronic components imported from Vietnam under the ASEAN-India Free Trade Agreement. They submit a Certificate of Origin. However, the Customs officer notices that the description of goods on the COO is vague, simply stating "Electronic Parts." The officer requests further information from ABC Importers to specify the nature of the components, their manufacturing process in Vietnam, and the origin of the raw materials. ABC Importers fails to provide satisfactory details within the given timeframe. Consequently, the Customs officer disallows the preferential rate and levies the full applicable duty, stating the reason for disallowance in writing.

Key Amendments

No major amendments since enactment.