The United States has terminated India’s designation as a beneficiary developing country under the Generalized System of Preferences (GSP) programme.
The move, which was first announced in March, will come into effect tomorrow (5 June) following a proclamation issued by US president Donald Trump on 31 May. It will eliminate the eligibility of thousands of products imported from that country for duty-free treatment.
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While the GSP programme excludes most textile and apparel products exported to the US, the designation of a country as eligible for GSP sends a strong message that it is taking steps to improve worker and intellectual property rights.
The US claims India has implemented a wide array of trade barriers that create serious negative effects on US commerce. It adds: “Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion.”
It continues: “The US says India’s termination from GSP follows its failure to provide assurances that it “will provide equitable and reasonable access to its markets in numerous sectors.”
Speaking to just-style when the GSP decision was first announced, the Apparel Export Promotion Council in India confirmed the GSP benefit extended to India on apparel items is “not very significant.” Overall, the 15 ready-made garment categories that India exports to the US account for less than 1% of India’s total apparel exports.
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By GlobalDataAccording to analysts at India Ratings and Research (Ind-Ra) the move by the US would mainly impact the woven silk garments segment, which constitutes 50% of the 1% of India’s total apparel exports that had been receiving GSP benefits. The other textile product categories that would be impacted include silk woven clothing for women (HSN 62044910), shawls, scarves, mufflers, mantillas, veils etc containing 70% or more by weight of silk or silk waste.
Ind-Ra also believes any reinstatement of GSP benefits for India would be conditional and would be accompanied by the need to make commitments or fulfil certain conditions. In the event of non-reinstatement, the agency expects the government to come up with a refund of taxes scheme, like Refund of State Levies, for the affected sectors.
There are no free trade agreements between the US and India. As a result, apparel exports from India to the US were subject to an average tariff rate of 14.4% for knitted apparel (HS chapter 61) and 10.8% for woven apparel (HS chapter 62), according to the re:source by just-style strategic sourcing tool.
In a parallel move, the US has also terminated Turkey’s designation as a GSP beneficiary country.
