India – EFTA Economic Partnership Agreement

• The EFTA states (Switzerland, Norway, Iceland and Principality of Liechtenstein) and India have signed a landmark Trade and Economic Partnership Agreement (TEPA) which eliminates the majority of customs duties on industrial products.
• Key businesses which could be potentially impacted are machinery, metals, pharmaceuticals, optical and medical devices, clocks and watches exporting to India and organic chemicals, aluminium, apparel and clothing products importing from India.
• The Agreement should be effective from 2025 by when it is expected to be adopted by the parliaments of the respective countries.

The Free Trade Agreement between the EFTA States (Switzerland, Norway, Iceland, and Principality of Liechtenstein) and India is the result of 16 years of negotiations, marking a significant milestone for European trade relations. By being the first European countries to secure a trade agreement with India, the world's most populous country, these nations are unlocking significant economic potential. For Switzerland particularly, the deal offers easier access to one of the world's fastest-growing markets. It demonstrates that even with the abolition of industrial tariffs in 2024, Switzerland can still provide attractive incentives for negotiating new trade agreements. The agreement is also advantageous for Indian exporters, particularly those in the organic chemicals, pharmaceuticals, and food processing industries, targeting the EFTA and Swiss markets.

In brief:

• On 10th March, the EFTA States and India signed the Trade and Economic Partnership Agreement (TEPA).
• The EFTA States undertake to maintain the abolition of all customs duties on imports of industrial products, fish and other marine products that originate from India.
• India will eliminate customs duties on most industrial products originating in an EFTA State.
• Market access for agricultural products has been mutually improved, considering specific trade interests and local production sensitivities of the individual EFTA States and India.
• The preferential duty benefits under the agreement are subject to meeting the rules of origin criteria and requisite documentation. This requires the business to review their current customs process with respect to origin, import and export.
• The EFTA countries committing to invest 100 billion USD in India which is expected to lead to 1 million new jobs over the next 15 years.
• The agreement is subject to the parliamentary approval process in Switzerland and is expected to enter into force by 2025.

Landmark Agreement TEPA: Unlocking New Horizons For Your Business

The agreement, referred to as the Trade and Economic Partnership Agreement, aims to establish a free trade area between the EFTA States and India, with the goal of promoting efficient and transparent procedures to reduce costs and ensure predictability for the trading communities of the Parties. The agreement seeks to achieve the liberalization of trade in goods and services, enhance investment opportunities, promote competition, provide for adequate and non-discriminatory protection and enforcement of intellectual property rights, and develop trade relations to contribute to sustainable development.

The agreement also emphasizes the importance of good corporate governance and corporate social responsibility and reaffirms the rights of governments to regulate and set their sustainable development policies and priorities. It recognizes the value of international agreements on labor and the environment as means to address global and regional environmental and social challenges.

Trade in goods

After entering into force, the agreement has a scheduled elimination of customs duties applicable to 84.6% of all Swiss exports. In 10.1% of Swiss exports, customs duty concessions will be granted. Key exports from EFTA countries to India are:

• Specialty chemicals
• Medical Instruments
• Organic Chemicals
• Pharmaceutical Products
• Electrical Machinery and Equipment
• Optical and Photographic Instruments
• Certain metals

To benefit from preferential tariff treatment, businesses must comply with the rules of origin as set in Annex 2A of the Agreement.

The agreement requires that a product must fulfill at least one of the following origin criteria in order to qualify for preferential trade as mentioned above.

• The product has been wholly obtained in one of the parties
  
  
• Non-originating materials used in the working or processing of that product have undergone sufficient working or processing in one of the parties.

Preferential origin of products needs to be confirmed by a proof of origin. For this purpose, the parties to the agreement has different options:

• An origin declaration completed by an approved exporter established in an EFTA State or India.

• A movement certificate EUR.1 issued by a customs authority of an EFTA state.
  Indian exporters can use ‘EFTA-India Certificate of Origin’ issued by the designated Indian authority or issued under the self-declaration of origin process.

Compliance with the rules of origin, including a valid proof of origin, is mandatory for preferential treatment of goods and therefore for saving customs duty.

Trade in services

The agreement offers several new opportunities for Swiss businesses by ensuring enhanced market access for service providers.

For financial service providers, TEPA facilitates the process for obtaining licenses to operate in the Indian market. The limitation of foreign capital will be uplifted in the banking sector from 51% to 74%.

Besides a strengthened framework in the financial services sector, benefits for Swiss machinery industry might arise as personnel for the installation and maintenance of machinery will be allowed to reside in India for up to 90 days.

Intellectual property rights

TEPA explicitly prevents discrimination against patented Swiss products in India, overcoming a major legal challenge of the last years, and simplifying the patent opposition and notification processes.

Moreover, the agreement contains provisions regarding the protection of test data, which is particularly important for pharma businesses.

Regarding trademark applications, TEPA contains clear regulations for protecting industries, in which a products origin is part of its unique value proposition.

Sustainable Development

The agreement contains extensive regulations in a variety of fields related to sustainable development. A notable focus lies in the effective implementation and promotion of environmental and labor laws, demonstrating a commitment to integrate these factors into the trade relation.

The provisions guarantee equal opportunities and simplified compliance with environmental agreements of which economic operators are part of.

Our recommendations

Despite the pending ratification process by the Parliament, Swiss companies should already start by assessing the opportunities of TEPA. The Indian market has particularly high import tariffs. By opening the market to goods originating in EFTA states, e.g. Swiss business may have a competitive advantage over EU based manufacturers.

We recommend to:

• Review the products currently exported to the Indian market.
• Assess the origin of the products according to the origin rules in the TEPA.
• Evaluate the magnitude and the potential timeframes related to the savings that can be attained under the TEPA.
• Review terms and conditions to ensure that benefit can be embedded in the commercial contracts.
• Review internal control and processes for the origin determination required for TEPA benefits.

Summary

The completion of the TEPA agreement is projected to greatly enhance trade relations and encourage stronger economic connections between the involved parties, all while upholding commitments to sustainable development and ecological responsibility. For Swiss companies, this accord offers a special advantage to establish themselves in a prospective market ahead of competitors, particularly those from the European Union. In addition, it offers a platform for these businesses to diversify their worldwide trade connections. To understand how TEPA might specifically influence your business operations, we invite you to contact our Global Trade team members Ashish Sinha or Jonathan Baumeler.