Nearly 60 times jump in silver imports from UAE unusual: GTRI

UAE Silver Imports Surge 60-Fold Sparks Origin Rule Concerns: GTRI Report

A recent report by the Global Trade Research Initiative (GTRI) has revealed a nearly 60-fold increase in silver imports from the United Arab Emirates (UAE) during the last fiscal year, prompting concerns about potential breaches in the rule of origin established under the India-UAE free trade agreement (FTA), effective since May 2022.

Former trade officer Ajay Srivastava, heading GTRI, highlighted a staggering rise in silver imports from $29.2 million in FY23 to $1.74 billion in FY24. This spike is significant as the UAE does not produce silver; instead, it imports large silver bars, melted and converted into silver grains. Such processes typically add less than 1 percent value, falling short of the 3 percent threshold mandated by the FTA for preferential tariff treatment.

Despite claims by traders and certification by UAE authorities regarding a 3 percent value addition to meet rules of origin, doubts persist about the accuracy of these certifications.

GTRI emphasized the urgent need for a robust monitoring mechanism to track import volumes and values closely. Such oversight, they argued, is essential for prompt policy responses to irregular import spikes and rigorous verification of claimed value addition by Dubai-based refiners involved in gold and silver imports to ensure compliance with FTA rules.

The report also highlighted India’s high import duties—currently set at 15 percent on gold, silver, and jewellery—as a significant factor driving these import dynamics. GTRI suggested that reducing tariffs to 5 percent could help curb large-scale smuggling and misuse of tariff differentials.

Srivastava further underscored that a substantial 7 percent tariff arbitrage had resulted in a revenue loss of Rs 1,010 crore for India in FY24 alone. Looking ahead, as India commits to phasing out tariffs entirely on unlimited quantities of silver from the UAE over the next eight years, GTRI projected a cumulative revenue loss of Rs 6,700 crore due to the tariff advantage enjoyed by UAE imports.

In FY24, India’s total silver imports amounted to $5.4 billion globally. With tariffs expected to diminish progressively under the FTA, GTRI anticipated a significant shift in silver imports towards the UAE, exacerbating revenue challenges for India and highlighting the critical need for stringent oversight and adaptive policy measures.