COO – India-Sri Lanka Free Trade Agreement (ISFTA): Enabling Enhanced Bilateral Trade
Introduction
India and Sri Lanka share a unique economic partnership steeped in history, culture, and geographic proximity. The India-Sri Lanka Free Trade Agreement (ISFTA), which came into force in March 2000, serves as a framework to enhance bilateral trade by reducing tariffs and promoting the exchange of goods and services.
Central to availing the tariff concessions under ISFTA is the Certificate of Origin (COO). This certification authenticates the origin of exported goods and certifies their eligibility for preferential duty rates in the importing country.
This blog explores the essence of ISFTA, explains the critical role and necessity of COO within the agreement, highlights the many benefits it offers to exporters and importers, examines challenges faced in COO issuance and compliance, and concludes with actionable insights on leveraging ISFTA advantages.
What is ISFTA and COO?
India-Sri Lanka Free Trade Agreement (ISFTA)
ISFTA is a bilateral trade agreement designed to liberalize trade in goods between India and Sri Lanka with a focus on removing tariffs and non-tariff barriers. Key features include:
- Broad tariff concessions on over 10,000 tariff lines, including raw materials, intermediate, and consumer goods.
- Increased market access for Indian and Sri Lankan exporters, particularly in textiles, agriculture, chemicals, rubber, and machinery sectors.
- Mechanisms for dispute resolution, safeguard measures, and trade facilitation.
ISFTA’s goal is to strengthen economic ties, expand trade volumes, and create win-win opportunities for businesses in both nations.
Certificate of Origin (COO) under ISFTA
A Certificate of Origin (COO) is a legal document issued by authorized export agencies (such as the Export Inspection Council in India) certifying that exported goods comply with ISFTA’s rules of origin and qualify for concessional tariff treatment.
- COO certifies goods are wholly obtained, produced, or substantially processed in the exporting country as per ISFTA annexed origin rules.
- It serves as proof at customs for preferential tariff application.
- Accurate completion and timely issuance of COO are mandatory for customs clearance at discounted duty rates.
Why is COO Necessary under ISFTA?
Accessing Preferential Tariff Concessions
Customs administrations require an authentic COO to grant tariff reductions under ISFTA. Goods lacking valid COO face regular customs duties, increasing costs and reducing competitiveness.
Ensuring Compliance with Origin Rules
COO ensures adherence to ISFTA’s criteria defining origin, preventing illegal transshipment from third countries and safeguarding the integrity of trade preferences.
Facilitating Efficient Customs Clearance
Proper COO submission speeds up customs procedures, lowers shipment hold-ups, minimizes inspection delays, and streamlines logistics.
Enhancing Export Credibility
COOs build buyer and lender confidence, enabling smoother trade finance and commercial dealings.
Key Benefits of ISFTA and COO
Preferential Tariff Rates
Reduction and elimination of tariffs on thousands of tariff lines expand market accessibility, making Indian goods more competitive in Sri Lanka and vice versa.
Growth in Bilateral Trade Volume
ISFTA has contributed to a significant increase in two-way trade since its implementation, supporting sectors like textiles, spices, pharmaceuticals, and machinery.
Encouraging Export Diversification
COO-backed preferential access allows businesses to explore new product lines and export destinations within the ISFTA framework.
Easing Market Entry for SMEs
By reducing tariffs and simplifying trade processes via COO, ISFTA facilitates entry and growth of small and medium-sized enterprises in international markets.
Complementary Economic Relations
The agreement complements India’s regional strategy and Sri Lanka’s export objectives by fostering trade-led economic growth and cooperation.
Challenges in COO Issuance and Compliance
Complex Rules of Origin and Documentation
Exporters must meet specific origin criteria, including value addition and product-specific rules. Documenting compliance requires detailed analysis and records.
Administrative Delays and Process Complexity
Issuance may be delayed by time-consuming verification, coordination between multiple agencies, or incomplete documentation, affecting export timelines.
Awareness and Training Deficits
Many exporters remain unaware of COO procedures or ISFTA benefits, limiting the use and understanding of its advantages, particularly among SMEs.
Maintaining Correct Product Classification
Errors in product HS Codes or mismatches with ISFTA schedules can lead to rejection of COO applications, complicating customs clearance.
Record-Keeping and Audit Preparedness
Exporters must retain detailed records supporting COO claims for mandated periods, adding to compliance obligations.
Conclusion
The Certificate of Origin (COO) under the India-Sri Lanka Free Trade Agreement (ISFTA) is a vital document that unlocks tariff concessions, facilitates customs clearance, and improves trade competitiveness for exporters and importers on both sides.
Despite challenges related to rules of origin, paperwork, and administrative procedures, the benefits of COO issuance and CEPA compliance are substantial — enabling expanded export opportunities, cost savings, and improved market access.
Indian exporters are encouraged to invest in understanding COO requirements, streamline documentation, and engage with export promotion authorities to fully harness ISFTA’s potential.
By effectively utilizing COO and ISFTA’s preferential tariff regime, businesses can secure a competitive edge and contribute to the deepening partnership between India and Sri Lanka.
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