Unique Features of Rules of Origin in the India-EFTA Trade and Economic Partnership Agreement (TEPA) Compared to Other Indian FTAs

The Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA) states; Iceland, Liechtenstein, Norway, and Switzerland, represents a significant milestone in India’s trade diplomacy. Signed in March 2024 and entering into force on October 1, 2025, TEPA aims to boost bilateral trade, investment, and economic cooperation by reducing tariffs on a wide range of goods and services. One of the standout elements of this agreement is its Rules of Origin (RoO) framework, outlined in Chapter 3 of the agreement. RoO are the criteria used to determine the national source of a product, ensuring that only goods genuinely originating from the partner countries benefit from preferential tariffs.

What makes TEPA’s RoO particularly unique compared to many of India’s other Free Trade Agreements (FTAs), such as those with ASEAN, Japan, Korea, Australia, or the UAE, is its emphasis on flexibility, trader-friendliness, and operational efficiency. Traditional Indian FTAs often feature rigid, bureaucratic RoO that prioritize strict compliance over ease of use, leading to higher administrative burdens and underutilization of preferences. In contrast, TEPA draws inspiration from modern, business-oriented models (similar to those in EU or EFTA’s own agreements), incorporating innovative provisions that reduce compliance costs, enhance supply chain flexibility, and provide robust safeguards. This article delves into these unique aspects, salient features, and their benefits for Indian traders, based on the agreement’s text. Where relevant, I’ve integrated explanations of how these features align with and are influenced by international standards, particularly Annex K of the Revised Kyoto Convention (RKC), which provides a global framework for simplifying and harmonizing RoO procedures. India’s accession to the RKC in 2019 has driven domestic reforms that underpin TEPA’s progressive approach. Additional context includes comparisons to other Indian FTAs, key terms, potential implications for SMEs, and linkages to broader trade facilitation measures.

Influence of International Standards- WCO’s Annex K of the Revised Kyoto Convention (RKC)

Before diving into TEPA’s specifics, it’s worth noting the foundational role of Annex K of the RKC in shaping these RoO innovations. The RKC, administered by the World Customs Organization (WCO), sets global benchmarks for customs procedures, with Annex K specifically addressing RoO for preferential and non-preferential trade. It emphasizes simplification, transparency, minimal documentation, and efficient verification to facilitate trade while curbing fraud.

Although TEPA does not explicitly cite Annex K, its provisions are deeply aligned with RKC principles, such as diverse proof options, cumulation, time-bound verifications, and de-minimis tolerances. This integration stems from India’s RKC commitments, reflected in domestic tools like CAROTAR 2020 and the 2025 ‘Proof of Origin’ framework (effective March 18, 2025), which mandate risk-based audits and digital submissions. EFTA states, all RKC parties, likely influenced these features during negotiations. As RKC Annex K revisions (ongoing since 2018, targeting 2026) progress, TEPA’s RoO Sub-Committee could incorporate updates, ensuring adaptability. This RKC backbone makes TEPA’s RoO not just innovative but globally harmonized, boosting predictability for Indian traders in international supply chains.

Unique Features of TEPA’s RoO Compared to Other Indian FTAs

TEPA’s RoO stand out for their multifaceted approach to proof of origin, cumulation, logistics, and verification—elements that are either absent or less comprehensive in most of India’s prior FTAs. For instance, agreements like the India-ASEAN FTA or India-Korea CEPA typically rely on a single or dual proof mechanism, often requiring mandatory certification by designated authorities, which can delay shipments and increase costs. TEPA, however, introduces a more diverse and user-centric system, drawing from RKC’s emphasis on flexibility and minimal burdens.

1. Four Co-Existing Proof-of-Origin Pathways (Rare in India’s FTAs)

Unlike the majority of Indian FTAs, which limit options to one or two methods (e.g., agency-issued Certificates of Origin in India-Japan EPA), TEPA allows four parallel pathways for proving origin, valid for 12 months each. This multiplicity reduces dependency on any single system and accommodates different exporter profiles, from large corporations to small enterprises. Echoing RKC Annex K’s promotion of diverse, low-documentation proofs (Standards 4-6), including self-certification for low-risk cases, the pathways are:

1. EFTA Origin Declaration by Approved Exporter: Exporters authorized under EFTA’s system can self-declare origin on commercial documents like invoices. This is similar to self-certification schemes in advanced FTAs but is streamlined for EFTA exporters.
2. EFTA EUR.1 Movement Certificate: A traditional certificate issued by EFTA customs authorities, akin to those used in EU trade deals, providing a formal endorsement for compliance.
3. India Agency-Issued Certificate of Origin: Issued by designated Indian bodies (e.g., Export Inspection Council or Chambers of Commerce), this aligns with standard practices in other Indian FTAs but co-exists with alternatives.
4. Self-Declared Certificate of Origin by Indian Exporters: Indian exporters can self-certify origin, a feature that’s emerging in newer Indian agreements like India-Mauritius CECPA but remains rare overall. This empowers exporters to bypass third-party certification, speeding up processes.

This quartet is unprecedented in India’s FTA landscape, offering redundancy and choice that minimize bottlenecks. An additional relevant point: TEPA encourages digital submission of these proofs, aligning with India’s Digital Public Infrastructure initiatives like DigiLocker and RKC’s push for modernization, which could further reduce paperwork, a forward-looking element missing in older FTAs.

2. Diagonal Accumulation Across All Parties

TEPA permits ‘diagonal cumulation,’ where inputs (materials or processing) from any EFTA state or India can count toward the originating status of the final product, regardless of where the last substantial transformation occurs. This is a step up from the bilateral cumulation common in FTAs like India-UAE CEPA, where cumulation is limited to the two direct parties. Diagonal cumulation creates regional value chains, allowing Indian manufacturers to source components from, say, Swiss precision engineering firms and Norwegian raw materials, treating them as ‘originating.’ This provision is particularly unique as it’s not standard in India’s Asian-focused FTAs, which often lack such broad integration due to geopolitical sensitivities. It aligns with RKC Annex K’s support for cumulation (Standard 7) to accommodate global supply chains.

3. Explicit Permission for Non-Party Invoicing

In a trader-friendly move, TEPA allows invoices issued by third-country entities (non-parties) without invalidating the origin claim, as long as the goods meet RoO criteria. This contrasts with stricter rules in agreements like India-Australia ECTA, where invoices must typically come from the exporting party to avoid fraud risks. By permitting non-party invoicing, TEPA accommodates global trading practices, such as when a multinational headquartered outside the parties handles billing, consistent with RKC’s tolerance for third-country elements if non-manipulation is proven.

4. Flexible Direct Transport Rules

TEPA’s direct transport provisions allow goods to transit through or be warehoused in third countries without losing preferential status, requiring only simple evidence of non-manipulation (e.g., seals or documentation). This eases global logistics compared to rigid ‘no-transit’ clauses in some older FTAs like India-Sri Lanka FTA, where any third-country involvement could disqualify preferences. An added nuance: TEPA specifies that splitting consignments during transit is permissible if documented, enhancing flexibility for containerized shipping, a detail that supports India’s growing role in international supply chains and reflects RKC’s anti-fraud controls with trader benefits.

5. Trader-Friendly Verification Service Level Agreements (SLAs)

Verification processes in TEPA are time-bound, authenticity checks must be confirmed within 45 working days, and full verifications concluded within 10 months. This predictability is a rarity in Indian FTAs, where timelines are often vague or extended (e.g., no fixed SLAs in India-ASEAN FTA), leading to prolonged disputes. TEPA also includes a structured denial and appeal framework, ensuring transparency, directly operationalizing RKC Annex K’s mandates for timely cooperation and risk-based audits (Standards 9-11).

6. Accounting Segregation for Fungible Materials

Exporters can use inventory management methods (e.g., FIFO, average costing) instead of physical segregation for identical or interchangeable materials. This provision, absent in many Indian FTAs, reduces storage costs and operational complexity for industries like chemicals or textiles, in line with RKC’s support for practical inventory methods (Standard 5).

7. Steel Safeguard with ‘Melt and Pour’ Requirement

Several Product-Specific Rules (PSRs) mandate that steel products must be melted and poured within the parties to qualify, curbing trans-shipment from non-parties (e.g., China). This safeguard is tailored to protect sensitive sectors, unlike broader PSRs in FTAs like India-Korea, and benefits Indian steel mills by ensuring fair competition, balancing RKC’s facilitation with fraud prevention.

8. PSR Valuation Flexibility

When PSRs use ex-works price, exporters can opt for FOB valuation with a 5 % point adjustment to the Value of Non-Originating Materials (VNM) threshold. This adaptability addresses pricing variances and is more lenient than fixed valuation methods in other FTAs, supporting RKC’s emphasis on flexibility.

Salient RoO Features in a Nutshell

Beyond the unique elements, TEPA includes standard yet well-implemented features that enhance usability, many of which are RKC-aligned:

1. De-Minimis Tolerance: Up to 10% of FOB/ex-works value for non-originating materials, capped by PSRs—higher than the 7-8% in some FTAs like India-Japan, per RKC tolerances.
2. Import at Claim, File Proof Later: Claims can be made at import, with proofs submitted later per domestic laws, reducing entry delays.
3. Low-Value/Personal-Use Waivers: Exemptions for small shipments or personal items, promoting e-commerce.
4. Record-Keeping: Exporters and importers must retain documents for 5 years, aligning with global standards (RKC Standard 8).
5. Transit/Start-Up Relief: Goods in transit at entry-into-force can claim preferences retroactively within 9 months, easing transition—a provision not always present in other FTAs.
6. Governance: A Sub-Committee on RoO meets at least biennially to issue guidelines, providing ongoing support and adaptability, mirroring RKC’s call for customs dialogue.

An additional relevant feature: TEPA integrates with the WTO Trade Facilitation Agreement, allowing for advance rulings on origin, which Indian customs can issue to provide pre-shipment certainty, boosting confidence for exporters and amplifying RKC effects.

Why These Features Benefit Indian Traders

TEPA’s RoO, bolstered by RKC principles, are designed to lower barriers and maximize utilization rates, which hover around 30-40% in many Indian FTAs due to complexity.

1. Lower Compliance Friction and Faster Shipments: Multiple proof options, post-import proof submission, and non-party invoicing streamline operations, potentially cutting clearance times by 20-30% compared to rigid FTAs.
2. Wider Sourcing Flexibility: Diagonal accumulation, de-minimis, and accounting segregation allow cost-effective sourcing, benefiting SMEs in sectors like electronics and pharmaceuticals.
3. Operational Predictability: Defined SLAs, appeals, and the sub-committee minimize disputes and provide a forum for clarifications.
4. Sector Safeguards: The ‘melt and pour’ rule stabilizes steel trade, protecting domestic industries while enabling compliant exports.

Overall, these elements could increase India’s exports to EFTA (projected to reach $100 billion in 15 years) by making preferences more accessible. For SMEs, which form 90% of Indian exporters, the self-declaration, waivers, and RKC-driven digital tools are game-changers, reducing reliance on intermediaries.

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by Dr. Joshua Ebenezer, Principal Consultant - NuCov FaciliTrade.