India-UK Free Trade Agreement: New Rules of Origin Take Effect from July 15, 2026

The Central Board of Indirect Taxes and Customs (CBIC) has notified Notification No. 62/2026-Customs (N.T.) dated July 3, 2026, published as G.S.R. 560(E), establishing the Customs Tariff (Determination of Origin of Goods under Comprehensive Economic and Trade Agreement between India and the United Kingdom) Rules, 2026. Issued under Section 5(1) of the Customs Tariff Act, 1975, by the Department of Revenue, Ministry of Finance, these rules take effect on July 15, 2026.

The notification is a critical component of the broader India-UK Free Trade Agreement that took effect in July 2026. While the FTA covers market access, investment, intellectual property, and digital trade, this notification addresses the origin determination framework: the mechanism by which goods qualify for preferential customs duty rates.

Background of the India-UK CETA

The India-UK Comprehensive Economic and Trade Agreement (CETA) represents a landmark in bilateral trade relations. After years of negotiations, the agreement creates a preferential trade framework that reduces or eliminates customs duties on a wide range of goods. Rules of origin are the backbone of any preferential trade agreement, determining whether a product genuinely originates from a partner country and is therefore eligible for tariff concessions.

Without a robust origin determination framework, preferential agreements risk exploitation through transshipment or trade deflection, where goods from non-partner countries are routed through a partner merely to claim lower duties. Notification No. 62/2026-Customs (N.T.) addresses this concern by establishing detailed criteria, procedures, and verification mechanisms, reflecting India's approach to balancing trade liberalization with the protection of domestic manufacturing interests, a consideration also evident in other recent regulatory frameworks.

What the Rules of Origin Cover

The framework defines what constitutes an "originating good" under the India-UK CETA. A good is considered originating if it satisfies one of three primary criteria. First, goods that are "wholly obtained" in India or the United Kingdom, such as agricultural produce, minerals extracted from the soil, or products manufactured entirely from originating materials. Second, goods produced exclusively from originating materials, even if those materials underwent multiple processing stages within the partner country.

Third, and most significantly for manufacturers, goods that meet the Product-Specific Rules (PSRs) set out in Annex 3A of the agreement. The PSRs provide product-by-product criteria specifying the minimum level of processing or value addition required for goods incorporating non-originating materials. The rules also establish provisions for cumulation, allowing producers in one country to use materials originating from the other partner country without losing originating status, and set out de minimis thresholds and minimal operations that do not confer originating status.

How Goods Qualify for Preferential Treatment

To claim reduced or zero customs duty, goods must satisfy one of three qualification methods. The first is change in tariff classification (CTC), where goods qualify if non-originating materials have undergone sufficient transformation to result in a different tariff heading or subheading in the Harmonized System.

The second method is minimum qualifying value content (QVC), requiring that a specified percentage of the product's value must originate from the partner country. The QVC threshold varies by product and is detailed in the PSRs. Manufacturers must maintain detailed records of material costs, production expenses, and transaction values. The documentation requirements are comparable to those under other tax compliance frameworks.

The third method is specific production process, where certain products must undergo a defined manufacturing operation within the partner country. For documentary compliance, the Department of Commerce issues certificates of origin for Indian exports, while CBIC verifies origin claims for imports. Exporters must obtain a valid certificate before claiming preferential tariff rates. This is especially relevant for businesses that have recently undergone corporate registration and are entering the export market.

Verification and Compliance Framework

The notification establishes a verification framework empowering customs authorities to scrutinize origin claims. Officials may initiate verification if they have reasonable doubt about originating status, through requesting documentation, seeking information from the United Kingdom's competent authority, or conducting on-site visits with the exporting party's consent.

During verification, the importing country may suspend preferential treatment and apply the Most Favoured Nation (MFN) duty rate. If the claim is upheld, preferential rates are restored and excess duty refunded. If rejected, MFN rates apply permanently, with potential penalties for false declarations. Record-keeping obligations require exporters, importers, and producers to maintain all relevant documentation for a prescribed period, similar to obligations across India's corporate compliance landscape.

Anti-circumvention provisions target practices such as minimal operations (simple packaging, labelling, or mixing) that do not confer genuine originating status. The rules also address transit requirements: goods must be transported directly between India and the United Kingdom, or through a permitted third country without undergoing any processing beyond what is necessary to preserve them. Businesses structuring cross-border commercial contracts involving the India-UK trade corridor must account for these requirements.

Key Takeaways

Notification No. 62/2026-Customs (N.T.) establishes the legal framework for determining the origin of goods under the India-UK CETA, effective July 15, 2026. Goods must qualify as "originating" through change in tariff classification, minimum qualifying value content, or specific production process. Product-Specific Rules in Annex 3A provide item-by-item criteria that exporters must review. The Department of Commerce issues certificates of origin for Indian exports, while CBIC verifies import claims.

Customs authorities have broad verification powers, including the ability to suspend preferential treatment during investigations. Businesses engaged in India-UK trade, as well as those operating under other recent compliance frameworks, should review their supply chains, sourcing arrangements, and documentation practices to ensure compliance with the new rules before claiming preferential tariff treatment.