Customs not Ready to Accept Third Party Invoicing in FTA Goods

·         Import Consignments Over Third Party Invoicing


[ABS News Service/08.06.2024]

Whitegoods, chemicals, pharmaceuticals and FMCG companies are faced with import delays or higher duties as customs authorities at various ports are holding up import consignments over third party invoicing, people familiar with the matter said.

Multinational companies typically employ third-party invoicing for ease of sourcing and tax optimisation — billing is through a nation other than the country of origin of the exported goods. Third-party invoicing is permitted under free trade agreements (FTAs).

While such invoicing is possible for any import, the maximum instances are seen in the cases of white goods, fast- moving consumer goods (FMCG), and chemicals and pharmaceuticals.

Customs authorities have started closely looking at such imports and have withheld consignments over concerns that FTA provisions are being abused — goods routed through countries with which India has a trade agreement and therefore eligible for lower import duty. They have denied clearance or FTA duty benefits at several ports, including Nhava Sheva, India’s second-largest container port located in Navi Mumbai.

“Clearances have been blocked… it could lead to supply issues,” said a person familiar with the development.

Authorities have sought payment of differential customs duty with interest in the case of a third-party invoice or the full duty, another person said, adding that no reason had been provided for the rejection of re-assessment requests.

Abuse of rules of origin is a key concern for revenue authorities.

To address this, India had in 2020 introduced the Customs (Administration of Rules of Origin under Trade Agreements) Rules that provides for verification of exports from the exporting country on certain grounds.

Invoking these rules, as per a public notice issued at the end of March, customs authorities said information can be sought in cases where there is a reasonable duty evasion concern through third-party invoicing.