Call for safeguards
Even in the categories of textiles, Change in Tariff Heading would not provide adequate safeguard against third country circumvention.
The industry is more than convinced that Change in Tarirr Sub Headin g, even with certain moderate levels of local sourcing, would not provide any comfort to the industry.

G. Srinivasan

New Delhi, Feb. 26

The Indian textile industry has pleaded for special rules of origin (ROO) provisions with maximum coverage under the Product Specific Rules (PSR) category while framing ROO under the India-ASEAN Free Trade Agreement, especially when textile products are being removed from negative list for grant of duty-free entry into the country in the FTA framework.

Sources in the industry told

Business Line

here that in response to the views sought by the Research and Information System (RIS) for the developing countries being undertaken on behalf of the Union Government to examine the need of PSRs under the India-ASEAN FTA for certain products to protect domestic interests, the industry has told the RIS to insist upon the Government to only consider CTH (Change in Tariff Heading) and not CTSH (Change in Tariff Subheading) as the criteria for conferring origin. They apprehend that if the Government relents to accept CTSH plus any percentage as value addition, it would have serious impact on the domestic industry. It argued that CTSH does not involve substantial transformation in a variety of situations and could not form the substantive basis for conferring special concessions through such rules of origin under FTAs/Preferential Trading Agreements/Regional Trading Agreements (RTAs).

The industry further warns that even in the categories of textiles, CTH would not provide adequate safeguard against third country circumvention. For instance operations such as converting unbleached fabrics into bleached fabrics, dyeing of unbleached or bleached fabrics and printing of unbleached/bleached fabrics into printed fabrics might involve a CTSH change whereas the value addition might vary significantly; and therefore susceptible to manipulation. Hence, these operations have to be excluded from conferring Origin as they are trivial ones and do not result in any substantial transformation. It might be noted that the textiles ROO provisions in the ASEAN FTA clearly state that dyeing; printing or coating of fabrics would not confer any origin.

As the industry is more than convinced that CTSH even with certain moderate levels of local sourcing would not provide any comfort to the industry, it proposes a few operations, which entail substantial transformation and conferring origin.

These include, among others, chemicals/petrochemicals are converted into synthetic fibres or synthetic filament yarns, fibres/yarns are converted into fabrics/made-ups and fabrics are converted into garments (and not made-ups).

There are operations such as the one where synthetic fibres are converted into yarns (spun yarns, blended yarns) where a change in tariff heading occurs.

(This article was published in the Business Line print edition dated February 28, 2006)
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