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US strikes India: Ends concessional tariff for select products with effect from November one

United States on Thursday revoked duty-free concessions on import of at least 50 Indian products, mostly from handloom and agriculture sectors, reflecting the Trump administrationís tough stand on trade-related issues with New Delhi.

This is seen as retaliation to India persisting with buying Iranian petroleum products despite the US sanctions and going ahead with the purchase of Russian missiles. India has benefitted by over five billion US dollars by the duty free access to these products last year

US President Trump has earlier declined an invitation to be the chief guest at the forthcoming Republic day parade to be held in New Delhi on Jan 26 next year.

The federal register issued a notification, listing out 90 products which were so far subject to duty-free provisions under the Generalized System of Preferences (GSP).

President Trump issued a presidential proclamation on Tuesday, leading to the removal of these products from the privilege beginning November 1.

As of November 1, these products will no longer qualify for duty-free preferences under the GSP program but may continue to be imported subject to regular Most Favored Nation duty-rates, according to official sources.

A review of the products indicates that the presidential proclamation is not country specific, but product specific.

With India being the largest beneficiary of the GSP, it has been hit the most by the latest decision of the Trump administration.

The GSP, the largest and oldest US trade preference program, is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

A count of these products indicated that at least 50 of them are from India. Notably India is the largest beneficiary of the GSP. In 2017, Indiaís duty-free export to the US under the GSP was to the tune of more than USD 5.6 billion.

The volume of India export to the US impacted by the latest move of the Trump administration is not known yet, but the list of products from which duty-free import provision has been removed reflects that a large number of small and medium size business could be impacted, in particular handloom and agricultural sector.

In his presidential proclamation, Trump said that certain waivers will no longer be granted for any product, regardless of the country source..

Products from other countries like Argentina, Brazil, Thailand, Surinam, Pakistan, Turkey, the Philippines, Ecuador and Indonesia have also been removed from the GSP list.

Some of the prominent Indian products removed from the duty-free provisions of the GSP include dried pigeon pea seed; areca nuts, fresh or dried, in shell; turpentine gum; mangoes, prepared or preserved by vinegar or acetic acid; sandstone, merely cut into blocks or slabs of a rectangular (including square) shape; tin chlorides; barium chlorides; salts and esters of tartaric acid,.

Dyed, plain weave certified hand-loomed fabrics of cotton, containing 85 per cent or more cotton by weight; plain weave certified hand-loomed fabrics of cotton, containing 85 per cent or more cotton by weight, hand-loomed carpet and other textile floor coverings, not of pile construction, woven, made up of man-made textile materials have also been removed.

Base metal clad with gold mixed link necklaces and neck chains and keyboard musical instruments, like harmoniums and similar keyboard instruments with free metal reeds are among the other products.

These products can still be exported to the US from India but they will be subject to regular tariffs. The Indian goods will lose their competitive edge because of higher prices.

In April, the US announced eligibility review of India for the GSP. According to the USTR, the total US imports under GSP in 2017 was USD 21.2 billion, of which India was the biggest beneficiary with USD 5.6 billion, followed by Thailand (USD 4.2 billion) and Brazil (USD 2.5 billion).

 

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