Rules of Origin: A Practical Guide for Indian Manufacturers

UNCTAD estimates that only 50-60% of eligible India-ASEAN trade actually uses AIFTA preferential rates — primarily due to rules of origin non-compliance or non-utilisation. The same underutilisation pattern affects India-UAE CEPA. Understanding RoO is not optional — it is the difference between paying 12% duty and paying 0%.

The three main RoO criteria: (1) Wholly Obtained (WO): product entirely produced in the exporting country — for agricultural products, minerals, live animals born in India. (2) Change in Tariff Classification (CTC): the exported product HS code must change at chapter, heading, or subheading level through processing in India — the most common criterion for manufactured goods. (3) Regional Value Content (RVC): minimum percentage of product value must originate in the FTA country — typically 35-40% for India FTAs.

Worked example — pharmaceutical: An Indian generic pharma company imports Chinese API (HS 2941.10) and manufactures finished tablets (HS 3004.90). The HS code changes from Chapter 29 to Chapter 30 — satisfying a CTH (Change in Tariff Heading) rule. The finished tablets qualify as Indian origin under most India FTA frameworks. However, if the PSR for HS 3004.90 requires synthesis in India rather than mere formulation, the imported API may not confer origin unless the active synthesis step occurs in India.

Documentation requirements: Maintain manufacturing cost records broken down by: imported raw material cost by HS code and origin country, domestic raw material cost, domestic labour cost, factory overhead allocation, and FOB selling price. These records support both the COO application and any customs authority audit.