India and the UK have been negotiating a free trade agreement since 2021. (Representational)
Exporters seeking to avail duty concessions on shipments to the UK will have to adhere to the new British rules under the Developing Countries Trading Scheme (DCTS).
In a trade notice, the Directorate General of Foreign Trade said that the United Kingdom (UK) has replaced its existing origin declaration process under Generalized Scheme of Preferences (GSP) with the UK DCTS effective from June 19, 2023.
The transition period for this change was extended until December 31, 2023.
"Starting from January 1, 2024, onwards, Indian exporters to the UK are required to adhere to the new rules under DCTS to avail concessions on their exports to the UK," the trade notice to the exporters community said.
It added that goods that meet 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, the origin criteria necessary for satisfying the Rules of Origin to avail tariff concessions on exports from India to the UK must be filled in through self-certification," it added.
Accordingly, it said, Indian exporters are directed to use origin declaration wording under DCTS scheme, in place of origin declaration wording under GSP.
Certain labour-intensive sectors such as leather, carpets, chemicals, iron amd steel and textiles were the major beneficiaries of the GSP scheme.
The US, European Union (EU), Australia, Japan and many other developed countries grant unilateral import duty concessions to developing countries under their GSP schemes.
As per estimates, India's exports worth USD 2.5 billion were entitled for the GSP benefit in the UK.
India and the UK have been negotiating a free trade agreement since January 13, 2021. As many as 14 rounds of talks have been completed and both sides are aiming to conclude the negotiations at the earliest.
Economic think tank Global Trade Research Initiative said that Indian exporters need to follow the new DCTS rules starting 1st January 2024 to get lower tariffs on their exports to the UK.
The DCTS benefits 65 developing and least developed countries, including India, but not China. These countries enjoy lower tariffs on their exports to the UK, provided they meet certain origin rules.
The Directorate General of Foreign Trade (DGFT) Trade notice, it said, highlights the need to use a new way of declaring the origin of goods under DCTS.
The key features of DCTS, it said, include reduced tariffs on many products from India, and an easier process to qualify for these lower tariffs with clear origin rules.
"Exporters can use materials from various DCTS countries (like fabric from India in Bangladeshi apparel) and still get duty-free access to the UK," GTRI Founder Ajay Srivastava said.
He said that India is in the "Standard Preferences" category, enjoying benefits but not as much as the "Comprehensive Preferences" given to the poorest countries.
Products from India that exceed a certain limit in exports to the UK don't get the lower tariffs and are removed from the scheme.
"The new limit is set at 6 per cent of the UK's total imports for most goods, affecting some Indian products like textiles. As a result, £748 million worth of Indian exports are now taxed at the regular rate instead of the preferential rate under DCTS," he added.