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The world's supply chains are on the move—and this time, it's not just about cost or efficiency. It's about trust, traceability, and the rules. With the US doubling down on tariffs against China but pressing pause on new reciprocal measures, a rare window has opened for economies like India to stake their claim in the next phase of global trade.
India is in the spotlight—but playing the origin game right is the only way to win.
The "reciprocal tariffs" concept gained prominence under the Trump administration—an approach that sought to mirror tariffs imposed on American goods by other countries. While limited in execution, the idea resonated with domestic constituencies. Invoking emergency powers under the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act, Trump ordered additional ad valorem tariffs on all articles imported into the US customs territory, including those from India.
However, in a significant shift from the earlier aggressive trade policy, Trump recently announced a 90-day pause on implementing additional reciprocal tariffs. While maintaining high tariffs on Chinese imports, this recalibration signals strategic reconsideration amidst global supply chain challenges and evolving geopolitical priorities.
Tariffs under Section 301 of the Trade Act of 1974 on Chinese imports remain firmly in place—and are expanding. These levies primarily target strategic sectors such as semiconductors, critical minerals, and clean tech components. The objective is clear: reduce dependency on China and shift the supply chain locus toward more aligned economies.
The tariff escalation during the previous trump administration provided critical compliance lessons for global exporters and importers, particularly regarding origin-linked scrutiny. A key concern was the rise in transshipment and origin fraud, where goods manufactured in China were rerouted through third countries like Vietnam or Mexico to circumvent US tariffs. These practices invited intensified enforcement by the US Customs and Border Protection (USCBP), often resulting in retroactive duty assessments and punitive actions.
Additionally, the US significantly increased FTA audits, especially under the United States-Mexico-Canada Agreement (USMCA), focusing on verifying the legitimacy of Certificates of Origin. In many cases, incorrect or incomplete origin declarations led to denial of preferential treatment and imposition of duties. Authorities also began applying the substantial transformation test more stringently—mere assembly, packaging, or marginal processing in intermediary countries was insufficient to confer new origin status. This led to a surge in litigation as importers contested the imposition of tariffs or denial of FTA benefits.
However, legal success largely hinged on the quality and credibility of the place of origin documentation and compliance trail maintained by the parties involved. These developments underscore the growing importance of robust origin compliance mechanisms in a tariff-sensitive trade environment.
The continuation of high US tariffs on Chinese goods and a pause on new reciprocal measures opens a unique window for India—if it can act swiftly and strategically.
The ongoing realignment of global supply chains—accelerated by sustained US tariffs on Chinese goods—has opened up a significant opportunity for India to position itself as a viable alternative sourcing destination. With US importers actively seeking to diversify away from China, several of India's manufacturing sectors—such as electronics, pharmaceuticals, textiles, and auto components—are well-placed to benefit from this shift.
However, the transition is not automatic. For India to secure a meaningful place in these reconfigured value chains, it must offer more than just capacity—it must deliver competitive costs, consistent product quality, and supply reliability. Predictable and transparent customs procedures are essential, minimising bottlenecks and inspiring confidence among international buyers.
Most critically, proven compliance with Rules of Origin (RoO) and the ability to produce valid origin certifications under relevant FTAs will determine whether Indian exports can benefit from preferential access in major markets like the US. In this evolving landscape, India's ability to align manufacturing strength with trade compliance and facilitation will be key to capturing the supply chain shifts underway.
A critical pillar of India's trade strategy lies in the strategic role of origin compliance. While FTAs and preferential schemes—such as a potential reinstatement of the Generalised System of Preferences (GSP) or upcoming IPEF-linked benefits—offer enhanced market access, these advantages can only be unlocked through strict adherence to Rules of Origin (RoO).
At the heart of this is the requirement that goods undergo a substantial transformation in India to qualify as originating products. This means that simple assembly or superficial value addition is insufficient; the transformation must be meaningful and meet the criteria defined under each trade agreement. To substantiate such claims, exporters must maintain a robust documentary trail that includes cost sheets, bills of materials, production records, and process documentation.
Equally important is a sound understanding of FTA-specific Product-Specific Rules (PSRs), such as the Change in Tariff Heading (CTH), Regional Value Content (RVC), or specific processing rules. These technical criteria vary by agreement and product and are critical for accurate origin declarations.
Moreover, leveraging customs trade facilitation tools—like obtaining advance rulings on classification or the place of origin, and enrolling in the Authorised Economic Operator (AEO) scheme—can enhance predictability, minimise border delays, and improve credibility with customs authorities. In an increasingly compliance-driven trade landscape, origin verification is not just a procedural formality but a strategic determinant of market access, cost efficiency, and risk mitigation.
As India expands its global trade footprint through a growing web of FTAs—such as the India-UAE CEPA, India-Australia ECTA, and upcoming agreements with the UK and EU—it must align its customs infrastructure with its broader trade strategy. Preferential access is only meaningful if usable, predictable, and fast.
This starts with digitising and streamlining the Certificate of Origin (CoO) process through platforms like ICEGATE and the DGFT portal. Equally important is the robust implementation of CAROTAR, 2020, backed by industry awareness and capacity-building initiatives to help exporters navigate origin requirements confidently.
At a strategic level, India's negotiators must prioritise simplified and harmonised Rules of Origin, mutual recognition of standards, and regional cumulation provisions in ongoing and future FTAs. Simultaneously, targeted support for high-potential sectors—such as electronics, pharma, and textiles—will be critical in enhancing export readiness and origin compliance.
For exporters, this shift requires a proactive approach:
Together, these steps form a compliance-first, trade-ready framework that reduces risk, enhances credibility, and ensures Indian exports are not just competitive but preferential.
Conclusion: From trade tension to trade transformation
The current global trade environment—marked by shifting tariffs, paused retaliatory measures, and ongoing geopolitical decoupling—offers India a rare strategic window. However, grabbing this opportunity will not hinge solely on producing more—it will depend on exporting smarter.
India must double down on customs modernisation, origin compliance, and FTA utilisation to anchor itself as a reliable, rule-abiding trade partner. In an era where tariffs are increasingly a function of origin, compliance is competitiveness.
Dipika Shetye, Manager, Tax, Grant Thornton Bharat, has also contributed to this article.
This article first appeared in the Taxmann on 22 April 2025.