India is preparing a comprehensive customs revamp in the upcoming budget for FY 2026-27 (begins in April), a move Finance Minister Nirmala Sitharaman has flagged as the government’s next big reform. While the headline goal is simplifying duties, for Gulf traders operational bottlenecks such as delayed customs clearances, certificate of origin, and tighter customs inspections remain a challenge.

India’s merchandise trade has crossed USD 1.16 tn in FY 2024-25, and nearly 29% of GDP moves through customs clearances — meaning even small frictions can translate into higher costs and delays across the economy, according to a Global Trade Research Initiative (GTRI) report (pdf).

Those frictions are most visible in Gulf-linked trade flows. “For Gulf exporters, the real friction today is time and predictability at Indian ports, not market access,” Ajay Srivastava, trade expert and founder of GTRI told EnterpriseAM, adding that “once tariffs are removed, the friction shifts from price to process.”

The implications of the customs processes are more visible along the USD 100 bn India-UAE trade corridor. As trade volumes under India-UAE are projected to increase to USD 200 bn by 2032, customs processes increasingly determine landed costs, delivery timelines, and dispute risk.

From tariff liberalization to execution risk

Close to 90% of tariff lines have zero duty under the comprehensive economic partnership agreement (CEPA) with Oman and the UAE, giving exporters from the region a clear pricing advantage over non-FTA countries. But that tariff differential has also increased scrutiny at the border. “When most favored nation tariffs are still 15-20% but FTA rates drop to zero, customs officers understandably apply closer scrutiny which often translates into slower clearances,” Srivastava said.

These delays can affect delivery schedules, inventory cycles, and financing costs even when documentation is in order for traders, particularly those operating through UAE-based trading and re-export hubs.

Rules of origin under CEPA have become a key friction point as customs authorities tighten enforcement to prevent misuse of lower tariffs, “Rules of origin enforcement is a cat-and-mouse game globally,” Srivastava told EnterpriseAM. “The problem arises when legitimate enforcement translates into delays.”

In India, origin verification can result in consignments being held for extended periods, even when documentation is in order. “The balance needs to shift toward risk-based, time-bound enforcement,” he said, arguing for faster and predictable clearances.

Where it hits hardest: Gold, chemicals, and machinery

The friction is most visible in high-value and high-volume flows in sectors where Gulf trading hubs play a central role.

The UAE accounted for 18% of India’s gold and silver imports in FY 2023-24. These high-value consignments are particularly exposed delays linked to origin certification. While energy imports are protected by long-term contracts, emerging non-oil goods such as chemicals and machinery also face daily disruptions in customs, despite lower tariff barriers.

Why predictable customs governance matters

“For Gulf traders, who tend to be well-capitalized and professionally organized, customs uncertainty matters more than duty rates,” Srivastava told us. One underutilized tool is advance rulings on classification and valuation of goods. Wider use of such rulings could eliminate uncertainty upfront, reducing disputes and shipment delays once goods arrive at Indian ports.

“The next signal of seriousness is faster clearance and procedural certainty,” as tariff barriers are largely already resolved. Srivastava said. This would require wider use of risk-based inspections, clearer timelines for FTA shipments, and fewer discretionary interventions at the border. “If India can ensure that FTA shipments clear in hours rather than days, it would materially improve India’s attractiveness as a trading partner for the Gulf,” Srivastava said.

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