Resolving the conflict in Rules of Origin: Key takeaways from CBIC Circular No. 43/2026-Customs
Introduction
Preferential tariff benefits under Free Trade Agreements (FTAs) are designed to facilitate international trade by reducing customs duties on eligible imports. However, availing such benefits has increasingly been accompanied by rigorous origin verification requirements under domestic Customs law. Over time, importers have faced challenges arising from extensive documentation requirements, demands for confidential supplier information and procedural disputes under the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR).
Recognizing these practical concerns, the Central Board of Indirect Taxes and Customs (CBIC) issued a landmark directive, viz. Circular No. 43/2026-Customs dated 24 September 2026. This Circular settles a long-standing point of friction for Indian importers by clarifying the operational hierarchy between section 28DA of the Customs Act, 1962, CAROTAR and the Rules of Origin negotiated under FTAs. More importantly, it reiterates that domestic verification procedures should operate in harmony with the provisions and objectives of the relevant trade agreement.
Key Relaxations Introduced by Circular No. 43/2026-Customs
The Core Conflict: CAROTAR vs. Trade Agreements
From Procedural Compliance to Treaty-Based Administration
While importers previously faced intense scrutiny through exhaustive requests for cost sheets, manufacturing records and CAROTAR compliance, the present Circular clarifies that domestic procedural requirements cannot override substantive FTA provisions. Moving forward, origin verifications must respect internationally agreed Rules of Origin rather than relying solely on burdensome domestic paperwork.
Form-I is no longer a gatekeeper for FTA benefits
The Circular clarifies that for the India–UK Comprehensive Economic and Trade Agreement (CETA), a valid Origin Declaration serves as the primary proof of origin.
Consequently, Form-I under CAROTAR is no longer required to be filed with the Bill of Entry and cannot be used as a pre-condition to deny preferential tariff benefits. This ensures that substantive treaty benefits are not withheld due to domestic procedural requirements.
Origin verification should be risk-based, not routine
Customs authorities may only request origin-related information (Form-I) if a Bill of Entry is flagged by the Risk Management System (RMS) and the officer suspects non-compliance. This shifts origin verification from a routine requirement to a targeted, risk-based process.
For importers, this change reduces compliance burdens and accelerates Customs clearance while maintaining revenue safeguards.
Commercially sensitive supplier information cannot be demanded from importers
The Circular practically addresses global supply chain realities by recognizing that importers often cannot access confidential data from overseas suppliers.
Key Reliefs for Importers
- Limited information required: Importers must only provide information that is reasonably available from the exporter or producer.
- Protected tariff benefits: Preferential tariff benefits cannot be denied simply because confidential costing or manufacturing data is unavailable.
- Exempted sensitive data: Importers are no longer forced to furnish trade secrets such as detailed cost structures, manufacturing processes, value-content calculations or input sourcing data.
This practical update aligns origin checks with real business needs, cutting down on disputes caused by missing information.
Past adverse findings cannot dictate future outcomes
It is also clarified that adverse origin findings denying preferential tariff treatment cannot automatically apply to future consignments based solely on identical classifications, similar descriptions, the same exporter or similar technical traits.
Customs authorities must allow importers to present evidence and demonstrate compliance with the Rules of Origin. Where material facts differ, each import must be assessed independently on its own merits, while upholding the principles of natural justice.
Our Comments
This Circular seeks to balance revenue protection with trade facilitation. It addresses several practical challenges encountered since the introduction of CAROTAR and provides much-needed certainty regarding the extent of documentation that may be sought from importers.
By emphasizing the primacy of treaty provisions, limiting reliance on procedural deficiencies, and recognizing the commercial realities of international supply chains, the Circular aligns India's Customs administration framework more closely with global trade practices.
In an era where international trade agreements play an increasingly important role in global commerce, the directives serve as an important reminder that effective Customs administration requires not only verification, but also adherence to the spirit and objectives of the underlying treaty framework.
As international trade becomes increasingly integrated, this approach promotes greater consistency, transparency and certainty in the administration of FTA benefits.
This is a highly positive step that gives businesses greater confidence to claim FTA benefits, ensuring that Customs administration respects the spirit of international trade agreements.