UAE and India Comprehensive Economic Partnership Agreement (CEPA) has been saved
UAE and India Comprehensive Economic Partnership Agreement (CEPA)
The historic India-United Arab Emirates (UAE) CEPA, which was signed between the two nations on 18 February 2022, officially came into force on 1 May 2022. This agreement is a trendsetter because of the short time of 88 days in which it was negotiated and concluded. CEPA is expected to increase the total value of bilateral trade in goods to over US$100 billion and trade in services to over US$15 billion within five years. The CEPA covers almost all the tariff lines dealt in by India (11,908 tariff lines) and the UAE (7581 tariff lines) respectively.
The CEPA includes a total of 11 service sectors and over 100 sub-sectors, the key sectors are listed below:
- Business services (including professional services such as computer accounting, real estate, advertising packaging, etc.)
- Telecommunication services
- Construction and related services
- Educational services
- Environmental services
- Financial and insurance services
- Health-related and social services
- Tourism and travel-related services (incl. including hotel travel agency services)
- Recreational, Cultural and Sporting services and,
- Transport services (incl. maritime and air transport services, and airport services and repair).
Key sectors that benefit from this CEPA rollout:
Sectors positively Impacted
Trade in Goods
Trade in Services
Key benefits of the agreement
As the CEPA is foreseen to further accelerate cross-border trade and investment flows between the two countries, the key benefits of the agreement for the UAE and India include:
1- Lower tariffs for trade in goods – Preferential Tariff Rates
- Tariff Elimination Immediate (TEI) - Majority of tariff lines will be subject to 0% customs duties
- Tariff Elimination Phased (TEP) - Other tariff lines will be benefited from elimination of customs duties in phased manner i.e., over the period of 5, 7 and 10 years
- Tariff Reduction (TR) - Tariffs will be reduced as compared to existing customs duty rates
Highlight: For the preferential tariff treatment, compliance with Rules of Origin (RoO) by the contracting parties must be ensured.
Relevant procedures for duty relief or reduced tariff under preferential origin rules should be applied in order to benefit from the preferential duty rates under CEPA.
2- Boost to Trade in Services
CEPA Is intended to enhance mutual provision of services between the economies, by providing the following:
- Provide open environment and market access for cross border trade of services
- Focus on the broad services sectors such as financial services, telecommunication services, construction and related services and educational and health services, etc.
3- Smooth customs procedures and trade facilitation
CEPA emphasizes on reducing unnecessary regulatory or administrative customs procedures and adopting international best practices for customs management such as (Illustrative):
- Invoice declaration of origin for approved exporters instead of traditional certificate of origin
- Cooperation inrelation to agreement on Technical Barriers to Trade (TBT)
- Commitments on working towards implementation of AEO mutual recognition agreement
- Agreement on transparency and impartiality on government procurement
- Mutually agreed provisions on Dispute Settlement, Digital Trade, Intellectual property rights, etc.
Key benefits for Indian stakeholders
- Overall, Indian stakeholders will benefit from preferential market access provided by the UAE on over 97% of its tariff lines which account for 99% of Indian exports to the UAE in value terms. This will be primarily from labor-intensive sectors such as gems and jewelry, textiles, leather, footwear, furniture, agricultural and wood products.
- Indian service providers will have enhanced access to around 111 sub-sectors from the 11 broad service sectors such as construction and related engineering services, educational services, health-care services, financial services.
- CEPA has also paved the path for UAE to become a hub for sourcing of India’s capital goods and intermediates for further exports to other destinations in Africa and Europe.
- Further thrust to pharmaceutical sector to facilitate access of Indian pharmaceuticals products in 90 days for products approved by regulatory authorities.
- Measures to facilitate cross border trade of goods and efficient customs clearance has been introduced under CEPA such as issuing customs rulings prior to import, smooth clearance for economic operators, reducing unnecessary customs procedures.
- Replacing the need to issue a traditional certificate of origin, CEPA adopts the invoice declaration of origin for approved or authorized Indian exporters.
- The agreement is pivotal to provide a platform for SMEs in India to expand internationally by granting them access to new customers, networks, and avenues of collaboration.
- Through the provisions of special safeguard measures, Indian domestic market can be protected against a sudden surge of imports from UAE due to tariff concessions.
- According to the agreement, Indian products are prevented from being subject to UAE’s antidumping investigations in cases wherein the products are transshipped.
Key benefits for UAE stakeholders
- UAE exporters would benefit from special and differential treatment, gaining greater access in India (except the energy sector) as well as within the WTO framework via tariff reduction or elimination applicable to over 80% of the product categories.
- According to the CEPA, export subsidies cannot be used for Indian products being exported to the UAE thus, enhancing trade integration between the regions.
- CEPA promotes mutual investments via the establishment of the UAE-India Technical Council on Investment which aims to promote, facilitate, and monitor the investment activities, as well as identifying new opportunities for investment.
- The agreement on one hand, allows UAE to benefit from products and services which are currently unavailable in UAE’s local market while ensuring to protect UAE’s domestic market via a mechanism of bilateral safeguarding measures against any potential treats due to exponential rise in imported goods due to tariff elimination and reductions
- The agreement establishes a committee, in order to discuss all issues in relation to Trade in Goods between UAE and India under CEPA
- CEPA fosters transparency and understanding of the application of the UAE and India’s sanitary and phytosanitary measures.
- According to the agreement, UAE products are prevented from being subject to India’s antidumping investigations in cases wherein the products are transshipped.
- The provisions of the agreement promote and accelerate the communication channels between the UAE and India in relation to government procurement.
- CEPA has provisions to ensure that the intellectual property provisions are balanced with existing UAE laws, regulation, and the UAE’s international commitments.
- The agreement brings forth a platform for SMEs in the UAE to expand internationally by granting them access to new customers, networks, and avenues of collaboration (UAE suppliers to engage in bids offered by India’s government agencies)
- Economic co-operation – CEPA enables consultations and co-operation on important areas of interest for UAE including competition policy, environmental cooperation, and air service cooperation.
- CEPA aims to establish a means of a timely and effective dispute settlement mechanism, as the panel shall deliver its final report to the UAE and India within one hundred and twenty (120) days of the date of composition of the panel.
- The UAE Cabinet approves the mandate and members of the UAE Trade Negotiation Higher Committee and ratifies all final CEPAs.
- The UAE Trade Negotiation Higher Committee reviews final terms of the CEPA and manages strategic matters and sensitive issues.
- The UAE Trade Negotiation National Committee reviews and approves final CEPAs, manages partner country relations, develops a CEPA strategy for each partner country, and supervises the CEPA process and strategic communications.
- The UAE trade negotiation team is comprised of experienced economists, trade analysts, legal and public relations experts from various government and private sector entities.
The way-forward for businesses
As the UAE and India CEPA has already been affected, the businesses are encouraged to assess the impact of the agreement on their operations. The benefits of the FTA will extend to the trade between the countries.
This CEPA also brings in opportunity for the businesses in both the countries to explore the possibility of any new investments and availing all the benefits arising out of CEPA and clubbing it with other incentives available in each of the countries.
How can Deloitte help?
Our team of professionals undertake an impact assessment for your business to ascertain extent of imports and exports made between India and the UAE, and how the CEPA impacts these trades. This will cover:
- Evaluation of price impact of CEPA on your business’ revenue in the short and medium term
- How to comply with CEPA requirements to ensure CEPA benefits can be accrued
- Review trade contracts in place to assess if terms should be amended to address risks and opportunities brought in by CEPA
As such, it is imperative to agree on a detailed action plan and next steps for CEPA impact assessment. Fully acknowledging the actions may be different for goods and services