The India–United Arab Emirates Comprehensive Economic Partnership Agreement (“India-UAE CEPA”), which came into force on May 1, 2022, marks a pivotal milestone in the bilateral trade relations between the two nations. As India’s first CEPA with a major Middle Eastern partner, the agreement aims to deepen economic cooperation by reducing or eliminating tariffs, enhancing customs facilitation, and improving market access across a broad spectrum of goods and services. For Indian exporters, this translates into significant customs duty benefits and the potential to scale operations in the UAE and the wider Gulf Cooperation Council (“GCC”) region.
Legal Framework and Scope of the CEPA
Legally, the India-UAE CEPA is a bilateral trade agreement notified under Article XXIV of the General Agreement on Tariffs and Trade (“GATT”), 1994. It finds its domestic legal grounding in India’s Customs Tariff Act, 1975 and relevant subordinate legislation, including DGFT notifications and customs circulars. On the UAE side, the agreement is implemented through the UAE Common Customs Law and regulatory instruments issued by the UAE Federal Customs Authority. The CEPA’s objectives extend beyond tariff liberalisation; it encompasses provisions on services trade, investment, digital trade, dispute resolution, sanitary and phytosanitary (“SPS”) measures, technical barriers to trade (“TBT”), intellectual property, and transparency in customs procedures.
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Customs Duty Benefits for Indian Exporters
From the perspective of Indian exporters, one of the CEPA’s most tangible benefits lies in the phased elimination of customs duties. The UAE has committed to reducing or removing tariffs on nearly 90% of Indian tariff lines, covering approximately 97% of India’s exports to the UAE by value. This preferential treatment particularly benefits sectors such as gems and jewellery, textiles and garments, pharmaceuticals, engineering goods, and agriculture. For example, Indian jewellery exporters can now export gold and diamond products to the UAE at zero customs duty, a substantial competitive advantage in a price-sensitive global market. Similarly, Indian textile manufacturers are seeing greater access to UAE’s retail supply chains due to reduced tariffs on garments, fabrics, and home textiles.
Rules of Origin and Certificate of Origin Requirements
The customs duty benefits under the CEPA, however, are not automatic. Indian exporters must comply with detailed Rules of Origin (“RoO”) set out in the agreement. These rules ensure that only goods substantially originating in India can qualify for preferential treatment. The criteria include goods that are wholly obtained or produced in India (such as agricultural products), and those that have undergone substantial transformation, meeting specific value addition norms and change in tariff classification. A minimum of 40% regional value content is generally required, although this threshold can vary depending on the product. Furthermore, exporters must obtain a Certificate of Origin (“CoO”) from DGFT-authorised agencies in India, which serves as proof of origin and must accompany the consignment to enable UAE customs to grant the applicable tariff concessions.
Streamlining of Customs Procedures
To facilitate the seamless implementation of the CEPA, both countries have agreed to modernise and harmonise their customs procedures. The agreement incorporates commitments on advance rulings for tariff classification and origin, expedited release of perishable goods, post-clearance audits, risk management systems, and electronic submission of documents. Notably, in March 2024, the UAE introduced an online verification portal for Certificates of Origin, a move designed to reduce administrative delays and curb document fraud. These procedural efficiencies are legally binding under the customs cooperation chapter of the CEPA, ensuring that both parties uphold high standards of trade facilitation.
Compliance Considerations for Exporters
From a compliance standpoint, Indian exporters must be vigilant. Beyond obtaining the CoO, exporters are required to maintain verifiable documentation on the origin of materials, production processes, and costing data to support their claims under the CEPA. In the event of customs disputes, the CEPA provides a tiered dispute settlement mechanism beginning with bilateral consultations and, if unresolved, the formation of an ad hoc arbitration panel. Exporters also have recourse to domestic appeal mechanisms in both countries under their respective customs laws.
Recent Legal Developments and Amendments
Recent legal and regulatory updates have further enhanced the CEPA’s implementation. In December 2023, both governments agreed to expand mutual recognition of standards and conformity assessment procedures, particularly in the pharmaceutical and engineering goods sectors. This allows for faster regulatory approvals and reduced testing redundancies. In April 2024, the UAE Federal Customs Authority issued a clarification on the treatment of composite goods and multi-country shipments under the CEPA, helping exporters navigate complex supply chain realities. Moreover, a joint CEPA implementation task force has been formed to receive industry feedback, resolve grievances, and streamline processes in real time. The DGFT, through Trade Notice No. 02/2024, has also provided procedural clarifications on documentation required for sensitive sectors like gems and jewellery, thereby aligning field-level enforcement with the overarching goals of the agreement.
Practical Tips for Exporters
In practice, exporters seeking to benefit from CEPA must ensure meticulous compliance. They should begin by confirming that the HS code of their product is included in the UAE’s tariff concession schedule. Thereafter, accurate documentation of the bill of materials, cost structure, and country of origin of inputs is essential to meet the RoO requirements. Exporters must apply for the CoO in the prescribed format well before shipment and ensure that consignments are shipped directly to the UAE, unless an exception under the agreement permits otherwise. Legal counsel can be instrumental in interpreting grey areas within the RoO or in resolving disputes related to customs valuation, tariff classification, or origin verification.
Conclusion
In conclusion, the India-UAE CEPA offers a transformative opportunity for Indian exporters by significantly lowering trade barriers and enhancing legal predictability in one of India’s top trading destinations. The customs duty benefits, combined with streamlined procedures and robust legal safeguards, can greatly improve market access and cost efficiency for compliant businesses. However, unlocking the full potential of the CEPA requires a proactive legal and operational strategy. Exporters must remain abreast of regulatory updates, adhere to documentation protocols, and seek timely legal guidance to mitigate risks and maximise the benefits available under this landmark trade agreement.
