The US President, Mr George Bush, issued a proclamation on Friday ending the 'generalised system of preference' (GSP) – a tariff regime that allows the US Government to extend preferential tariff arrangements for select countries, according to reports from Washington.
Consequently, these exports would attract import tariff applicable for exports from other countries engaged in the same trade.
Duty-free imports into the US under the GSP accounted for $32.6 billion worth of goods from developing countries in 2006, according to the reports.
India shipped gold jewellery worth $1.6 billion and $20 million worth of brass lamps under the GSP programme in the first 10 months of 2006, the US Trade Representative stated when initiating the review last year.
Along with India, Brazil and some other developing countries have also been targeted under a programme revamped late last year by the US Congress.
On paper, the reason for such termination could be that such duty-free access is no longer required for these products as the countries in question have reached a specified threshold level from where they could compete without the aid of concessional tariff.
A Bill approved by Congress in December last stipulated new guidelines for determining whether a particular product is eligible for duty-free treatment under the GSP programme.
But trade policy analysts here attribute the US decision to terminate GSP benefits for particular products of India and Brazil to their joint stand against the continued heavy farm subsidy payout by the US and their refusal to cut tariffs on industrial goods as demanded by developed countries during the recent G4 trade talks held in Germany.
Indian jewellery exports will now attract 6.5 per cent duty in the US.
Out of the total jewellery purchased by US from various countries, Indian jewellery accounts for 33.2 per cent, according to GJEPC News, published on the Gem and Jewellery Export Promotion Council (Council) Web site.
The effect of this could be that Indian jewellery may lose some business to China, said Mr Vasant Mehta, Vice-Chairman of the council.
However, the extent of the actual effect will only realised by the end of the year, he added.
With the applicability of import duty, Indian jewellery now comes on par with and will compete against products from China, Hong Kong, Thailand, as these nations do not enjoy duty-free imports either.
Representatives of the export community do not see the levy of 6.5 per cent as a serious threat to the business.
If the burden is evenly shared between the Indian supplier, US importer and the end-consumer, then the real impact is negligible, according to manufacturers.
Ultimately, it all boils downs to the product itself, i.e., the quality and the design, said Mr Rajesh Mehta, Chairman of Rajesh Exports.
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