India to wait for US ‘proclamation’ on GSP withdrawal before imposing retaliatory tariffs

India is likely to wait and see if the US government comes up with the ‘Presidential proclamation’ or executive order for withdrawal of the generalised system of preference (GSP) scheme that would put an end to zero duty benefits for about 3,500 goods from the country before it imposes retaliatory duties on 29 goods imported from the US.

A new notification further pushing the date of implementation of the retaliatory duties by 14 days to May 15 is expected to be notified by the Finance Ministry soon, an official said.

“In case the US comes up with the proclamation to withdraw the GSP scheme for India early May, as it decided two months back, New Delhi, too, would impose the retaliatory duties on American goods,” the official added.

New Delhi had first announced its intention to impose retaliatory duties on 29 American imports in June 2018 as a tit-for-tat for the American action of raising import duties on steel and aluminium imported from India unilaterally on grounds of national security. It, however, has been postponing the imposition of duties in the hope that it could arrive at a suitable trade package with the US which would also sort out the issue of the penal duties of 10 per cent and 25 per cent on Indian aluminium and steel respectively.

“The bigger issue for India now is the continuation of the GSP scheme for Indian exporters as its withdrawal will lead to a loss of competitiveness and business in the American market for sectors such as leather and garments,” the official added.

In March, the US Trade Representative’s office notified to the US Congress and to the governments of India and Turkey the decision to terminate their beneficiary country status as they no longer complied with the statutory eligibility criteria. As per the USTR, the changes could take effect in about 60 days after the notifications and would be enacted by a Presidential proclamation.

The US decided to withdraw the GSP scheme for India after its dairy and medical equipment industry complained about market access problem in India due to regulations.

“While the 60-day period since the notifications were made by the USTR would elapse in the beginning of May, we don’t know when the decision would actually be implemented by a Presidential proclamation. An extension of our retaliatory tariffs deadline by 14 days will give us some time to see what the US has in mind,” the official said.

In case, the Presidential proclamation announcing GSP withdrawal comes early, India may not wait till May 15 for imposing the retaliatory duties but may come up with a separate notification for immediate implementation, the official added.

The retaliatory duties to be imposed on American goods such as walnuts, chickpeas, boric acid, Bengal gram and lentils adding up to more than $200 million.

According to the USTR, the total US imports under GSP in 2017 was $21.2 billion, of which India was the biggest beneficiary with $5.6 billion, followed by Thailand at $4.2 billion and Brazil at $2.5 billion. India’s exports under the scheme were more than 10 per cent of its total exports worth $49 billion to the US in 2017.

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