45% of Indian exports to the U.S. will not face new 10% tariffs, Commerce Ministry says

About 45% of India’s exports to the U.S. remains outside the purview of the new 10% tariff that Washington has levied on imports, the government said on Saturday.

The government also said that it remained engaged with the U.S. regarding a quota-based system regarding India’s textile exports to the U.S. 

The office of the U.S. Trade Representative (USTR) on July 23 released the final findings of its investigation on whether the U.S’ trade partners were doing enough to prevent the import of goods made using forced labour. As a result of this investigation, it decided to levy a tariff of 10% on 17 economies, including India. While an additional five — the European Union, Taiwan, Japan, Korea, and Switzerland — will receive a lower effective tariff rate, the remaining 38 countries that were investigated will receive a higher tariff than India’s.

The statement by the Ministry of Commerce and Industry on Saturday highlighted that the new 10% tariff is lower than the initially proposed 12.5% on India and some other countries. 

India’s efforts

“The Government of India remained closely engaged with the USTR throughout the investigation through detailed written submissions and in-person consultations, including participation in public hearings,” it said, adding “as a result of these sustained efforts, India has been placed in the lower tier of additional tariffs under the final measures, providing a relative advantage to Indian exports in key sectors.”

The Ministry said that “a substantial share” of India’s exports to the U.S., currently attract zero additional duties, such as generic pharmaceuticals, smartphones and certain other specified products, and continue to remain outside the scope of the additional 10% duty. 

Apart from these, it said that products already covered by U.S. measures under Section 232 of the U.S. Trade Expansion Act such as steel, aluminium and auto parts, are not subject to the additional 10% duty. 

Further, it pointed out that the tariffs under Section 232, which had been levied last year and that range between 25-50%, are levied equally on nearly all countries thereby not putting India at a disadvantage in this regard.

“On account of these exemptions, an estimated 45% of India’s exports to the U.S. remain outside the purview of the additional 10% Section 301 duty,” the statement said. 

‘Working with the U.S.’

The statement acknowledged that India’s remaining 55% of exports will attract the additional 10% duty, but added that India’s “tariff incidence is comparatively lower than that for most other economies covered by the investigation”.

That is, out of the 60 countries that were investigated, India’s tariff is lower than 38 other countries. 

In its report, the USTR also provided for the establishment of a “textile mechanism” in the form of tariff-rate quotas (TRQs) for Bangladesh, Cambodia, Indonesia, and Malaysia, to encourage these countries to import U.S. cotton and textile goods, “in order to reduce reliance on inputs from other sources that are more likely to contain forced labour inputs”.

India was not included in this mechanism, but India said it continues working with the U.S. government regarding India’s textile exports.

Highlighting that the textile specific mechanism referenced in the final measures “is yet to be established and operationalised,” the Ministry said.“India continues to engage with the U.S. on this matter as part of the ongoing negotiations for the India-U.S. Bilateral Trade Agreement (BTA).”

The government “remains committed” to working with the U.S. towards the early conclusion of the India-U.S. BTA, the ministry said.