23 Jul 2022
The UAE has a long and historical link with the former Empire, and current country, of India. The UAE is strategically situated on the Arabian Peninsula and has access to trade in Europe, Asia, the Middle East, and Africa. The UAE and India's colourful past should not be overlooked when discussing the most fascinating bilateral connections in the globe due to centuries of trade and cultural, traditional, and religious exchange. Trade and business have always been a component of the historic relationship between these two vibrant countries due to the UAE's strategic location between India and the rest of the Middle East. As early as 5,000 years ago, traders in what is now the UAE were actively involved in this Indian Ocean international trade. Indian sailors and fishermen used the winds of the monsoon season to travel to the Arabian Peninsula to trade and sell products. The United Arab Emirates and India have signed the historic Comprehensive Economic Partnership Agreement (CEPA) (UAE). It is a historic agreement because it is the first free trade agreement (FTA) India has signed in ten years and it is the UAE's first comprehensive strategic relationship with any nation. The historic deal was signed on February 18, 2022, and it became operative on May 1, 2022. Oil and gas, petrochemicals, minerals, textiles, agriculture, jewellery and gems, metals, and other important products will all benefit right away from the CEPA, which is expected to increase bilateral trade between the two nations from USD 60 billion to USD 100 billion over the course of the next five years.
Benefits Of the Cepa Treaty
With bilateral trade valued at $59 billion in 2019 and 2020, the UAE is currently India's third-largest commercial partner. Additionally, the UAE is India's second largest export destination, receiving goods worth nearly US$29 billion in 2019 and 2020. In addition, the UAE is the eighth-largest investor in India, having already made an estimated US$ 18 billion in investments, compared to an estimated US$ 85 billion in Indian investments in the UAE. Within five years of its signing, the CEPA is predicted to raise bilateral trade in goods to $100 billion and in services to $15 billion. About US$ 26 billion worth of Indian goods that are subject to a 5 per cent import charge by the UAE is projected to gain from the India-UAE CEPA. UAE is generally offering the reduction of taxes on 97% of its tariff lines, which corresponds to 100% of imports from India. As measured by value, 90% of all of our exports to the UAE would be duty-free as soon as the CEPA went into effect. All labour-intensive industries, including gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, pharmaceuticals, medical devices, and automobiles are included in the UAE's immediate zero-duty market access offer to India. UAE can potentially develop into a hub for acquiring capital goods and intermediates from India for use in exports with added value to other countries. Additionally, for the first time in any Trade Agreement, a separate Annex on Pharmaceuticals has been included to facilitate access to Indian pharmaceutical products, particularly automatic registration and marketing authorization in 90 days for goods approved by developed country regulators such as the USFDA, UKMHRA, EMA, and Japan (PMDA).
Tariff Reductions Granted in The Merchandise Trade Between India and The UAE
Trade in Goods, which is defined as the transfer of tariff concessions at the eight-digit Harmonized System (HS) Code, has been divided into four lists: Immediate Elimination, Phased Elimination, Phased Reduction, including Phased Reduction with Quota, and the Exclusion list. In accordance with the Agreement, the UAE will remove duties on 97 percent of tariff lines (total tariff lines: 7581), which in value terms account for 99 percent of Indian exports to the UAE. This includes the immediate removal of tariffs on 80.3 percent of lines. In addition, 1089 products (14.4 percent of tariff lines) and 180 products (2.4 percent of tariff lines) are in the Phased Elimination process, in which the UAE will gradually reduce the basic customs duty to zero over periods of 5 years and 10 years, respectively, starting from the date that CEPA enters into force. Additionally, the UAE is providing India with a tariff reduction of up to 50% on 35 products (0.5%) that are on the Phased Reduction List. Only 187 goods, or 2.4 per cent of the total lines, have been retained by the UAE. India has 11908 tariff lines with an identical number of items. The Immediate Elimination list includes 7694 articles (or 64.61 percent of the total); imports from the UAE on these would be duty-free as soon as the CEPA went into effect. In phased elimination, the basic customs duty would be eliminated over the course of 5 or 7 years for 2176 products (18.27 percent) and 10 years for 225 products (1.89 percent), respectively, from the day when CEPA entered into force. The UAE has been granted a tariff reduction of up to 50% on 656 products (5.51%) on the Phased Reduction List, with or without a Tariff Rate Quota (TRQ). The remaining 1157 goods (9.72%) have been kept on the exclusion list due to domestic sensitivities.
The Key Product Categories On The India-Uae Cepa's Exclusion List
1157 goods (9.72 percent) have been kept on the exclusion list due to domestic sensitivities. The exclusion category has been maintained for a significant number of products in the following categories:
- Jewellery (except for 2.5 tons Quota for gold jewellery); Dairy products; Fruits, vegetables, and nuts, Cereals; Tea, Coffee, spices; Sugar ;Food preparations (instant coffee/ tea, sharbat, betel nut, pan masala, sugar syrup etc);Tobacco products
- Petroleum products
- Dyes and pigments, Soaps and some cosmetics, Natural rubber, tyres and other rubber products
- Footwear, Processed marble, Toys
- Plastics, Scrap of Aluminium and Copper
- Most Automobiles and automotive components medical equipment’s
- TVs products & picture tubes
Export Opportunities for India Under The Treaty
The UAE serves as a gateway to Europe, numerous other gulf nations, and all of Africa. It also boasts a sizable Indian diaspora and a sizable market for labour-intensive goods that provide jobs, like textiles, gems & jewellery, leather, footwear, and food products. Several products of interest to India as an export have undergone immediate tariff liberalization in the UAE. Upon the CEPA's implementation, 90 per cent of India's exports in value terms will become duty-free right away. The UAE market will grant duty-free access to labour-intensive industries like gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural products, engineering products, pharmaceuticals, medical devices, and automobiles. In total, the UAE is cutting duties on more than 97 per cent of its tariff lines, which represent 99 per cent of the value of Indian exports to the UAE. These could be advantageous for India.
Rules Of Origin for The Non-Originating Product Under the India And UAE
The Agreement contains strict origin requirements for individual products that take into account the need for significant processing. Any goods would be eligible for a preferential tariff under the India-UAE CEPA if value content addition is not less than 40%, using the Free on Board (FOB) value of exports as the base, and all non-originating materials used in the production of the good have undergone a change in tariff classification in the Party at the four- or six-digit level (i.e. a change in tariff heading or tariff subheading) of the Harmonized System. Additionally, the UAE Ministry of Economy will give the certificate of origin to prevent cheating on the requirements for origin.
Is It Possible for Goods from A Nation Other Than The UAE (A "Third Country") To Access The Indian Market Through The UAE And Receive Tariff Benefits Under The India-UAE Cepa?
No, such products are not permitted by the India-UAE CEPA Trade in Goods because to strict origin restrictions that reflect the need for significant processing. Numerous agricultural items have fully acquired specifications as a result of India's insistence. A minimum of 40% value addition and a change in tariff classification, using the Free on Board (FOB) value of exports as the foundation, have generally been required whenever alternative rules have been utilized. For the first time, India forced the UAE to accept the requirement of "melt and pour" as Product Specific Rules for Steel goods when the Indian Steel Industry requested it. This implies that in order to create the first solid-state in the UAE, raw steel would first need to be melted into a liquid form. Additionally, with the CAROTAR regulations in India placing the burden of documentation on the importer and the UAE's Ministry of Economy issuing certificates of origin, there is little likelihood that the strict regulations, which would guarantee significant processing, will be circumvented and under these rules no transhipment. Additionally, the verification procedure is reliable and the exporter must keep the minimal amount of necessary data and appropriate documentation. The Agreement includes safeguards to make sure that no product from a third nation enters the Indian market and receives preferential tariff treatment without being significantly altered.
Special Safeguard Mechanism (SSM)
A permanent safeguard mechanism that has been agreed upon and can be used in the event of an unexpected increase in imports is a ground-breaking aspect of the CEPA. Yes, there is a permanent safeguard mechanism in place to guard against any unexpected import surge brought on by tariff concessions that would seriously harm or threaten to seriously harm domestic business. The MFN applied rate of duty on the relevant good in effect at the time the action is taken or the MFN applied rate of duty on the relevant good in effect on the day immediately preceding the date this Agreement enters into force, whichever is lower, may be increased as a safeguard measure by a Party. Additionally, India has provided tariff concessions in the form of duty reductions of up to 50% or tariff elimination in a phased manner using a Tariff Rate Quota (TRQ) on numerous commodities of relevance to the UAE, including copper, polyethene, and polypropylene. Additionally, these TRQs would shield our domestic industry from any unforeseen import spike.
UAE And Israel Comprehensive Economic Partnership
For the second time in two years, the UAE and Israel confounded expectations by concluding a Comprehensive Economic Partnership Agreement (CEPA). This ground-breaking agreement demonstrates our unwavering conviction that unconventional approaches are the only way to ensure the Middle East's continued peace, prosperity, and stability.
This accord, a logical progression from the Abraham Accords, will establish a new paradigm for the area and speed up prosperity as both countries look past the pandemic and into the promise of a new era. The UAE and Israel's bilateral trade reached a record-high $1.4 billion in 2021, but our economic ties with Israel might reach $5 billion this year and quadruple in another five. As we rethink our economic trajectory as part of the Projects of the 50 programs, our strategic agreement will also aid in the GDP of the UAE being doubled by 2030. The CEPA between the UAE and Israel will lead to a surge of business prospects centred on bytes and boxes. Traditional goods transported between the two countries by trucks, ships, and aeroplanes will have quicker, more seamless market access to Israel. The agreement will simultaneously unleash the Fourth Industrial Revolution, data localization, cross-border data flows, and digital trade's unrealized potential. This accord is for future generations in the Middle East.
Use Pooled Technological Resources
It was carefully crafted to ensure that both countries profit from the development of new technologies in the decades to come, taking into account the strength of our digital industries. It will make sure that we take advantage of innovation, particularly in the fields of digital, space, technology, and renewable energy, as well as increase the resiliency and dependability of regional supply chains. We will establish high-standard, transparent, and helpful rules to create a secure environment for digital trade in all its forms to flourish in order to build stronger digital economies.
Conclusion
The CEPA represents more than simply the beginning of India-UAE relations. Trade agreements with solid foundations and mutual respect for shared interests provide the economies and peoples of both parties with much-needed safety nets in light of the significant disruptions to the global economy caused by the COVID-19 pandemic, the Ukraine crisis, and an increasingly imposing China. The 1990s would not have allowed for many of the actions taken now between India and the UAE. The brisk growth of Indian-Emirati relations during the last ten years indicates that both countries are starting again. It's a step in the right direction for both countries that trade, economics, and stronger interpersonal ties are driving this shift. Orna Barbivay, the Israeli Minister of Economy and Industry has stated that the CEPA would undoubtedly enhance our bilateral relations and will serve as an important growth engine for Israel’s GDP. It would provide for the Israeli industry working with the UAE to enter new markets, form a new partnership, purchase quality raw materials and be exposed to new technologies and research infrastructure. To know more about the legalities and the latest legal updates visit our official website.