KOLKATA (miningweekly.com) – The review and upgrade of the free trade agreement (FTA) between India and South Korea is facing a speed bump, with the latter seeking a relaxation of gold import restrictions.
The South Korean government wants restrictions on gold shipments into India, imposed last year, to be scrapped, declaring it a contravention of the FTA.
Countering the demand, India, which since 2017 has been in the process of holding bilateral meetings to review and expand the FTA agreement, is seeking to incorporate ‘value-addition norms’ in the trade agreement to check the surge in the inflow of the precious metal into India.
Under the FTA between the two countries, the customs duty on gold imported from South Korea is nil, against 10% applicable for shipments from non-FTA countries, along with a 3% integrated Goods and Service Tax.
The Indian government is unnerved by the surge in gold imported from South Korea, with imports hitting $338-million between July and August last year, compared with total South Korean gold imports for the entire 2016/17 financial year of $70-million.
In response, the Indian government has directed that all gold imports from South Korea will require a licence from the Directorate General for Foreign Trade. However, no importer has yet applied for such a licence, government officials in India have said.
The Customs Department, under the Finance Ministry, has warned against relaxing import restrictions and wants each gold consignment from South Korea be independently checked, rather than relying on the submission of self-assessment certification by the importer to prevent the misdeclaration and violation of the FTA agreement by merely using South Korea as a trans-shipment location.
The Customs Department is also considering demanding submission of bank guarantees for every consignment of gold from South Korea, reckoning that importers will be not be willing to get into import transactions as such a move will block up importers' working capital.
Government officials familiar with FTA review trade talks so far, said that India had a trade deficit with as many as ten countries in the Regional Comprehensive Economic Partnership grouping, including South Korea.
India’s trade deficit with South Korea during 2017/18 increased to $11.96-billion up from a deficit of $8.34-billion in the previous financial year.