US’s Flex calls on India to review FTAs to stop bypass of import duties

Economy


NEW DELHI: US contract manufacturer Flex, among the largest in the world, has called on India to scrutinize and revisit some free trade agreements (FTA) which allow zero duty export to India, a route which some brands use to bypass import duties.

Arijit Sen, director at Flex, said that due to the Indo-ASEAN FTA, many companies are routing their products to India via Vietnam.

“The threat that comes is a far more insidious one. There are other countries which are pumping and routing their products through Vietnam for example,” Sen said in a webinar on Tuesday hosted by the industry body ASSOCHAM.

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“Of course, if there is an FTA with XYZ country, we will honour it, but going through the back door to enter into India with zero duty is not something we should be tolerating,” he added.

“It’s not that we don’t have the capacity. We have not yet taken adequate steps to ensure that we have a 35% local VAM (value-added manufacturing) which would allow us to reverse the flow of goods using the very same FTA,” Sen said.

Flex India runs three factories in India which manufacture smartphones for Xiaomi, Motorola and laptops for Lenovo.

He also urged the government to fix remission rates for electronic products under the RoDTEP (Remission of Duties and Taxes on Exported Products) scheme at par with the predecessor MEIS (Merchandise Exports from India Scheme). The government is mulling a rate of 0.2%-0.7% under RoDTEP against 2% currently offered under MEIS.

“MEIS was 2%, raised to 4% and brought back to 2%, but here, there is a huge gap between 0.2% and 2%,” Sen said during the webinar.

For handset manufacturing companies, who avail the Product-Linked Incentive (PLI) scheme, which offers a graded incentive between 4%-6%, the loss will be somewhat compensated but will leave a gap for other electronic manufacturers.

Jyoti Arora, Special Secretary & Financial Adviser, MeitY said that the government is open to discussions with the industry.

Reacting to the three incentive schemes announced on Tuesday, Sen said the industry must identify the low-hanging fruits which can be brought to India in the near term.

“The three areas in the ESDM sector which can be brought to India in two years time are-PCBAs (Printed Circuit Board Assembly), display and the energy source (or battery packs),” said Sen. “These three things constitute 50%-55% of BOM (Bill of Materials) in majority of electronic products.”



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