In a critical legal clarification for preferential imports, the Central Board of Indirect Taxes and Customs (CBIC) has clarified that bilateral trade agreement rules of origin supersede domestic CAROTAR, 2020 requirements, meaning Form-I declarations will not be mandatory where treaties specify their own documentation standards. Concurrently, the Directorate General of Foreign Trade (DGFT) has cracked down on non-compliant metal scrap clearances by summarily delisting 15 Pre-Shipment Inspection Agencies (PSIAs). For Indian importers, customs brokers, and manufacturing supply chains, these two moves demand immediate attention: preferential duty documentation must be realigned to treaty provisions, while all open purchase orders for imported un-shredded metallic scrap must be cross-referenced against the updated list of authorised inspection bodies to prevent vessel discharge rejections at destination ports.
CBIC Rules of Origin: FTA Supremacy Over CAROTAR Clarified
Importers availing preferential customs duty tariffs have frequently faced operational friction since the rollout of the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR). Customs formations at major gateways—particularly JNPT, Mundra, and Chennai—frequently demanded extensive Form-I origin declarations, cost breakdowns, and supplier-sensitive production data, even when consignments were accompanied by valid, treaty-prescribed Certificates of Origin (COO) issued by designated authorities.
According to a report from A2Z Taxcorp LLP, the CBIC has unequivocally clarified that specific trade agreement provisions prevail over domestic rules. Under the clarification, where an agreement specifies its own documentation framework—such as origin certifications under upcoming and existing comprehensive trade pacts—the domestic mandate of filing Form-I alongside every clearance is not obligatory unless substantive suspicion or an alert exists.
This establishes clear procedural boundaries:
- Primacy of the Treaty: The terms negotiated under international trade pacts legally override generic domestic procedural requirements laid down in CAROTAR.
- Reduction in Information Overreach: Assessing officers cannot routinely withhold assessment, demand manufacturing secret formulas, or demand full origin breakdowns if the exporter’s COO strictly complies with the bilateral mechanism.
- Burden of Proof: While importers must still maintain basic due diligence regarding originating criteria (Wholly Obtained or Value Addition rules), the default burden of furnishing exhaustive operational audits prior to out-of-charge is curbed.
Brokers and trade desks handling shipments under trade agreements should ensure their filing teams stop pre-emptively volunteering burdensome proprietary documentation unless formally requisitioned via a speaking query under verified grounds.
DGFT Delists 15 Pre-Shipment Inspection Agencies for Scrap
On the enforcement front, metal recyclers, foundries, and scrap importers face immediate operational risk. A report from Business Standard indicates that the DGFT has deregistered 15 Pre-Shipment Inspection Agencies (PSIAs) due to persistent procedural lapses and irregularities in issuing Pre-Shipment Inspection Certificates (PSICs).
Pre-shipment inspection is a statutory, zero-tolerance requirement for clearance of un-shredded metallic scrap (heavy melting scrap, cast iron, aluminium, brass, and copper scrap) under Appendices 2H and 2I of the Foreign Trade Policy. These certifications guarantee that consignments are entirely free of arms, ammunition, mines, shells, cartridges, radioactive materials, or explosive substances.
The consequences of this delisting are severe for active orders:
- Invalid Out-of-Charge: Any PSIC generated by a delisted agency post-notification is rendered null and void by Indian Customs.
- Port-Side Detention: Containers arriving at discharge ports without a valid, accredited PSIC will face severe scrutiny, mandatory 100% scanning/stripping, possible seizure by the Special Intelligence and Investigation Branch (SIIB), and hefty demurrage and detention charges while awaiting re-inspection or re-export.
- Audit of In-Transit Shipments: Any bill of lading cut for scrap currently on the water must be audited immediately against the certificate issuance date and the delisting date of the issuing agency.
Buyers must instruct overseas yards and international metal consolidators to immediately suspend engagement with the delisted inspection agencies and shift contracts to DGFT-accredited PSIAs maintaining clean standing.
Other Trade Updates in Brief
- Sugar Export Restrictions Extended: In a widely anticipated move to maintain domestic price stability and adequate buffer stocks, the government has extended the blanket prohibition on sugar exports through September 2026, as confirmed by News On AIR. Mills, blenders, and export houses with unfulfilled overseas quotas cannot register fresh contracts until further notice.
- Western Ports Certified as Mega Ports: The Ministry of Ports, Shipping and Waterways has designated Kandla, JNPA, and Mundra as national mega ports according to The Hindu, prioritising them for major port-led green fuel infra and automated clearance corridors.
WCL Perspective
Across our operational desks at JNPT, Mundra, and Kandla, the CAROTAR clarification provides much-needed leverage during daily customs assessments. Our clearance teams are actively updating reference templates to cite the CBIC circular against unwarranted Form-I queries on trade-agreement consignments, expediting out-of-charge timelines for client supply chains. Meanwhile, our Gandhidham and Ahmedabad teams are currently running high-priority audits on all open scrap files entering Kandla, Mundra, and inland depots at TKD and Sabarmati to ensure no containers are gated in with void PSICs. We strongly advise importers handling un-shredded metals to share draft documentation with our origin-liaison desk prior to vessel loading.
For immediate assistance auditing pending preferential import documentation or reviewing supplier inspection certifications, contact the WCL desk at +91 91602 11111 or email webq@wclogistic.in.