India–EU FTA draft proposes clearer rules of origin, enhancing textile export competitiveness and strengthening bilateral trade ties.
Draft provisions under the proposed India–European Union Free Trade Agreement aim to bring greater clarity and predictability to rules of origin for Indian textile exporters. The move is expected to enhance the global competitiveness of India’s labor-intensive textile sector and expand its access to the European market.
Under Chapter 3 of the draft agreement, which outlines rules of origin, a product will be considered originating if it is either wholly obtained within a country or meets the product-specific requirements detailed in Annex II. For textile products, Annex II generally permits up to 10% by weight of basic textile materials to be non-originating. In select product categories, this tolerance threshold may be extended to 20% or 30%. Where these limits are surpassed, exporters must meet defined transformation or value-addition criteria to qualify for preferential tariff treatment.
For goods classified under Chapters 50 to 63 of the Harmonized System, the draft text introduces sector-specific tolerance norms instead of applying a uniform rule. This is particularly significant for textile manufacturers who frequently rely on a combination of domestic and imported fibres, specialty yarns and accessories in their production processes.
India and the European Union had earlier announced the successful conclusion of negotiations for the landmark trade pact, aimed at deepening bilateral trade ties amid shifting global trade dynamics. From India’s standpoint, the agreement is expected to unlock substantial market access, with over 99% of Indian exports by trade value projected to receive preferential or duty-free entry into the EU market.
The draft framework offers calibrated flexibility while maintaining clear domestic value-addition requirements. At the same time, it explicitly excludes minimal processes—such as simple packaging, ironing, labelling or minor assembly—from conferring originating status.
A key feature of the agreement is the introduction of bilateral cumulation. This provision allows inputs originating in the EU to be treated as originating when further processed in India. For exporters sourcing fabrics or trims from European suppliers, this could ease compliance with origin norms and facilitate smoother access to tariff concessions.
The draft also establishes a dedicated de minimis tolerance rule for textiles, separate from the general 10% value-based provision applicable to most other sectors. This reflects recognition of the complex and globally integrated nature of textile supply chains, while still ensuring structured compliance.
Clear documentation and verification procedures have been outlined to strengthen transparency. Although exporters will need to maintain detailed records, the defined compliance structure is expected to reduce ambiguity and limit arbitrary interpretation of origin claims.
India’s textile and apparel exports to Europe increased to approximately US$ 2.34 billion in FY25, up from US$ 2.11 billion in FY24, registering a year-on-year growth of nearly 11%, underscoring the growing importance of the European market for Indian textile manufacturers.
News Courtesy : Apparel Resources