Made in India, Powered by China: Can Products Using Chinese Components Qualify Under the India–UK FTA?

Why the Origin of Your Components Could Determine Whether Your Product Receives Preferential Tariffs Under the India–UK Comprehensive Economic and Trade Agreement

The India–United Kingdom Comprehensive Economic and Trade Agreement (“India–UK CETA” or the “India–UK FTA”) marks a significant milestone in bilateral trade relations. It offers preferential tariff treatment across a broad range of goods traded between the two countries.

For Indian manufacturers, the agreement presents an opportunity to improve price competitiveness in the UK market and integrate more deeply into global supply chains.

Why Rules of Origin Matter Under the India–UK FTA

However, preferential tariff treatment under a free trade agreement is not granted merely because goods are exported from India. Eligibility depends on whether the exported product qualifies as an “originating product” under the Rules of Origin (“RoO”) contained in the Agreement.

This issue assumes particular significance for Indian manufacturers because India imports a substantial proportion of its industrial inputs, components and raw materials from third countries, particularly China. Sectors such as electronics, automobiles, engineering goods, renewable energy equipment, chemicals, pharmaceuticals, electrical machinery and consumer products routinely rely on imported intermediate goods.

Can Products With Chinese Components Still Qualify?

This naturally raises a critical commercial question:

Can a product manufactured in India using Chinese components still qualify for preferential tariff treatment under the India–UK FTA?

The answer is yes, but only if the applicable Rules of Origin are satisfied. Whether a product qualifies is a technical legal determination that depends on the manufacturing process, customs classification, value addition and the specific Product-Specific Rule (“PSR”) applicable to that product.

Businesses should therefore resist making assumptions based solely on the country from which their components are sourced.

Rules of Origin: The Foundation of Every Free Trade Agreement

Rules of Origin are among the most important provisions of any preferential trade agreement. Their primary objective is to ensure that tariff concessions are available only to products that genuinely originate in one of the contracting parties, rather than to goods produced elsewhere and merely routed through a member country.

Without effective origin rules, businesses could simply import finished goods from third countries, perform minimal processing, and re-export them under preferential tariffs—a practice commonly referred to as trade deflection. Accordingly, the India–UK FTA establishes detailed origin criteria to distinguish products that genuinely originate in India or the United Kingdom from those that merely transit through either country.

Importantly, these rules recognise the reality of modern global manufacturing. Few products today are made entirely from domestic materials. Manufacturers routinely source components from multiple jurisdictions while undertaking substantial manufacturing in another country.

The Rules of Origin therefore focus not merely on where components originate, but on whether sufficient manufacturing has taken place within the exporting country.

Imported Chinese Components Do Not Automatically Disqualify a Product

A common misconception is that the use of Chinese components automatically prevents a product from qualifying as Indian-origin. That is not how modern Rules of Origin operate.

The mere presence of non-originating materials does not disqualify a product. Instead, the relevant inquiry is whether those imported materials have undergone sufficient transformation in India in accordance with the applicable Product-Specific Rule. For example:

• An automobile assembled in India may contain imported electronic control units.
• An electrical appliance may incorporate Chinese circuit boards and sensors.
• Industrial machinery may use imported bearings or motors.
• Pharmaceutical formulations may contain imported active ingredients or intermediates.
• Consumer electronics may include imported semiconductors, displays or batteries.

Each of these products may still qualify as originating if the manufacturing undertaken in India satisfies the prescribed origin requirements. Conversely, products involving only minimal assembly or superficial processing may fail to qualify even if the final export takes place from India.

Everything Begins with the Correct HS Classification

Origin analysis should always begin with determining the correct customs classification of the finished product under the Harmonized System (“HS”). This step is often underestimated but is legally critical because the applicable Product-Specific Rule is linked to the HS classification of the finished product.

Two products manufactured in the same factory may therefore be subject to entirely different origin requirements. For instance:

• One product may require a Change in Tariff Heading (“CTH”).
• Another may require a minimum Regional Value Content (“RVC”).
• A third may require a specific manufacturing process.
• Yet another may combine multiple origin tests.

Accordingly, businesses should not simply ask: “How much of our product is made in India?”

Instead, they should first determine: “What is the correct HS classification of our finished product, and what Product-Specific Rule applies to that classification?” Only then can the eligibility of the product be properly assessed.

The Three Principal Methods by Which Products Acquire Origin

Although Product-Specific Rules vary across tariff lines, most manufactured goods qualify through one or more of the following tests.

1. Change in Tariff Classification

One of the most widely used origin tests requires imported materials to undergo sufficient processing so that the finished product falls under a different tariff classification. Depending on the applicable rule, this may require:

• Change in Chapter (CC)
• Change in Tariff Heading (CTH)
• Change in Tariff Sub-heading (CTSH)

For example, a manufacturer may import various components from China and undertake extensive fabrication, machining, assembly, calibration and testing in India. If these operations transform the imported inputs into a new product classified under a different tariff heading as required by the applicable rule, the finished product may satisfy the origin requirement.

The extent of the required tariff shift varies depending upon the relevant Product-Specific Rule.

2. Regional Value Content (Value Addition)

Many Product-Specific Rules also prescribe a minimum Regional Value Content (“RVC”), requiring a specified proportion of the product’s value to originate within India or the United Kingdom. The precise percentage differs across products and must be calculated using the methodology prescribed under the Agreement.

The calculation generally considers factors such as:

• Value of originating materials
• Value of non-originating materials
• Manufacturing costs
• Labour
• Overheads
• And, where applicable, profit

Where imported Chinese components constitute a significant proportion of the finished product’s value, businesses should carefully analyse whether the required regional value threshold is still achieved.

Manufacturers relying heavily on imported inputs may need to reassess sourcing strategies, localisation initiatives or manufacturing processes to remain compliant.

3. Specific Manufacturing or Processing Operations

Certain sectors are governed by process-based origin rules rather than, or in addition to, tariff shift or value addition requirements. In such cases, origin depends upon whether specified manufacturing operations have been carried out within India.

Examples may include:

• Chemical reactions
• Pharmaceutical processing
• Textile manufacturing operations
• Metalworking processes
• Specialised engineering activities
• Other sector-specific manufacturing requirements

Where process rules apply, merely assembling imported components may not be sufficient. Businesses must therefore review the Product-Specific Rules applicable to their products with considerable care.

Minimal Operations Do Not Confer Origin

The India–UK FTA, like most modern trade agreements, excludes certain activities from conferring originating status. Operations that are considered too minor or insufficient generally include activities such as:

• Simple packing or repacking
• Relabelling
• Sorting or grading
• Washing or cleaning
• Dilution
• Simple assembly using basic tools
• Other operations that do not result in substantial transformation

Accordingly, importing substantially finished products from China, performing only limited processing in India, and exporting them to the UK is unlikely to satisfy the Rules of Origin.

Businesses should therefore evaluate not merely whether manufacturing occurs in India, but whether the nature and extent of that manufacturing meets the legal threshold prescribed under the Agreement.

Documentary Compliance Is Equally Important

Even where a product satisfies the substantive origin requirements, preferential tariff treatment may still be denied if documentary obligations are not met. Manufacturers should maintain comprehensive records demonstrating compliance with the Rules of Origin, including:

• Bills of materials
• Supplier declarations
• Manufacturing records
• Costing sheets
• Inventory records
• Production flow charts
• Customs documentation
• Calculations supporting the applicable origin test

Exporters should also ensure that origin declarations or certificates are completed accurately and that internal compliance systems are capable of substantiating origin claims during customs verification.

Origin verification is a recognised feature of modern FTAs, and customs authorities may request supporting evidence even after preferential treatment has been granted.

Supply Chain Planning as a Competitive Advantage

For many businesses, compliance with Rules of Origin should no longer be viewed as a customs formality but as a strategic supply chain consideration. Manufacturers that proactively analyse their sourcing patterns may identify opportunities to:

• Increase local value addition
• Diversify suppliers
• Relocate selected manufacturing processes to India
• Redesign products to satisfy tariff-shift requirements
• Optimise procurement costs while preserving FTA eligibility
• Strengthen resilience against future geopolitical or trade-related disruptions

Conversely, businesses that ignore origin planning may find themselves unable to access the very tariff benefits that the India–UK FTA is designed to provide.

Key Sectors Likely to Be Most Affected

The Rules of Origin are expected to be particularly significant for sectors that rely extensively on imported intermediate goods, including:

• Electronics and electrical equipment
• Automotive and auto components
• Engineering goods and industrial machinery
• Renewable energy equipment
• Pharmaceuticals and medical devices
• Chemicals and specialty chemicals
• Consumer durables
• Textiles and technical textiles
• Capital goods manufacturing

For these industries, origin analysis should become an integral part of export planning rather than an afterthought at the time of shipment.

Practical Considerations for Businesses

As businesses prepare to utilise the India–UK FTA, they should consider undertaking a structured origin compliance review by:

1. Identifying the HS classification of each export product
2. Reviewing the applicable Product-Specific Rules
3. Mapping the origin of all major inputs
4. Assessing whether current manufacturing satisfies the required tariff shift, value content or process rule
5. Implementing documentation and record-keeping protocols
6. Training procurement, manufacturing and logistics teams on origin requirements
7. Periodically reviewing sourcing strategies as supply chains evolve

Early compliance planning can help avoid disputes with customs authorities, minimise delays in obtaining preferential treatment and ensure that contractual commitments to overseas buyers are fulfilled.

Conclusion

The India–UK FTA offers Indian manufacturers an unprecedented opportunity to expand exports into one of the world’s largest consumer markets. However, preferential tariff treatment is not determined by where a product is shipped from, nor by the nationality of every component used in its manufacture.

A product incorporating Chinese components can, in many cases, still qualify as originating in India. The decisive issue is whether the manufacturing undertaken in India satisfies the applicable Rules of Origin under the Agreement.

For businesses operating in increasingly complex global supply chains, origin compliance is now a strategic business function that directly affects pricing, market access and international competitiveness.

Companies that invest early in understanding Product-Specific Rules, documenting their manufacturing processes and aligning procurement decisions with origin requirements will be significantly better positioned to realise the commercial benefits of the India–UK FTA while minimising regulatory and customs risks.

Last Updated on 27 July, 2026