New Regulations for Exporters: Compliance Required for Duty Benefits, DGFT Announces

Exporters aiming to benefit from duty concessions on shipments to the UK must comply with the new regulations introduced under the Developing Countries Trading Scheme (DCTS). According to a recent trade notice issued by the Directorate General of Foreign Trade (DGFT), the United Kingdom (UK) has replaced its existing origin declaration process under the Generalized Scheme of Preferences (GSP) with the UK DCTS, effective from June 19, 2023.

The transition period for this significant change has been extended until December 31, 2023. From January 1, 2024, onward, Indian exporters to the UK are mandated to adhere to the new rules under DCTS to qualify for concessions on their exports, as outlined in the trade notice addressed to the exporters community. It further elaborated that goods meeting the UK DCTS Rules of Origin (RoO) requirements would be eligible to claim a concessional rate of import duty for exports to the UK.

Consequently, fulfilling the origin criteria necessary for satisfying the Rules of Origin to avail tariff concessions on exports from India to the UK must be done through self-certification, the notice added. In line with this, Indian exporters are instructed to utilize the origin declaration wording under the DCTS scheme instead of the origin declaration wording under GSP. Certain labor-intensive sectors such as leather, carpets, chemicals, iron, steel, and textiles were major beneficiaries of the GSP scheme. Notably, the US, European Union (EU), Australia, Japan, and many other developed countries grant unilateral import duty concessions to developing countries under their GSP schemes. Estimates suggest that India’s exports worth USD 2.5 billion were entitled to the GSP benefit in the UK.

India and the UK have been engaged in negotiations for a free trade agreement since January 13, 2021. Fourteen rounds of talks have been completed, and both sides are working towards concluding the negotiations promptly. The Global Trade Research Initiative, an economic think tank, emphasized that Indian exporters must adhere to the new DCTS rules starting January 1, 2024, to avail lower tariffs on exports to the UK. The DCTS benefits 65 developing and least developed countries, including India, but excludes China. These countries enjoy lower tariffs on their exports to the UK provided they meet certain origin rules.

The DGFT trade notice underscores the necessity of using a new method for declaring the origin of goods under DCTS. Key features of DCTS include reduced tariffs on many products from India and a streamlined process to qualify for these lower tariffs with clear origin rules. “Exporters can utilize materials from various DCTS countries (like fabric from India in Bangladeshi apparel) and still access duty-free entry to the UK,” noted Ajay Srivastava, Founder of GTRI. He highlighted that India falls under the “Standard Preferences” category, enjoying benefits but not to the extent of the “Comprehensive Preferences” provided to the poorest countries.

Products from India that exceed a certain export limit to the UK do not benefit from the lower tariffs and are excluded from the scheme. “The new limit is set at 6 percent of the UK’s total imports for most goods, impacting some Indian products like textiles. Consequently, £748 million worth of Indian exports are now subject to regular tax rates instead of preferential rates under DCTS,” he added.