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India’s engineering exports to US to be hit by lapse of duty concessions in July

One of India’s biggest export promotion bodies, EEPC India, has warned of a sharp dip in engineering exports from India to the United States unless the government acts fast.

The warning has come in the context of the expiry of U.S.’s Generalized System of Preferences — special duty exemptions granted to developing countries — for India’s engineering goods at the end of July. The GSP allows rich WTO member countries to lower tariffs for the least developed countries without lowering tariffs for rich countries.

In a presentation before India’s Board of Trade, the EEPC said the Indian government should immediately seek renewal of the GSP in the U.S. – one of India’s largest export destinations, particularly for engineering goods.

According to the EEPC (formerly Engineering Exports Promotion Council), India’s engineering exports to USA has fallen by nearly 14 per cent from USD 2.18 billion in the four months ended July 2012 to $1.89 billion during April-July 2013. 

“The Government must request the US Government to extend the GSP scheme at the earliest as otherwise our exports to the US are likely to be hit considerably,” the EEPC India said.

It also said that both the  USA and the European Union  are now targeting Indian engineering goods.

Earlier, raw materials like Stainless Steel bars and wires were targeted.Now finished products like threaded rods are being also investigated. We must also try to counter this by restricting imports of these countries or at least investigating the exports of their products to India,” it said.

EEPC India also suggested that both Africa and the South East Asia hold good potential for exports even though shipments to these regions, especially Africa, have dropped considerably.   

“We find that funding is an important issue, especially in Africa. Though Exim Bank’s Lines of Credits are available for African countries, the interest rates are very high, whereas, our competitors from China and other countries are able to offer cheaper financing for a longer period resulting into loss of orders”.

EEPC Chairman Mr Aman Chadha suggested  that for Africa, the governments’lines of credit should be offered at a cheaper rate so that “we are able to convert many enquiries into orders”.  

Further, financing under National Exports Insurance Account (NEIA) routed through the EXIM Bank is available only to Govt. buyers or a company where the respective Govt. has a stake in that company. We suggest that this should be made available to all categories.

Exports to Africa have declined 7.71 per cent between April-July this fiscal. The organization also requested that the ASEAN region should be brought under FMS (focused market scheme – which entails duty and other benefits), since China enjoys zero duty benefit for many engineering products whereas India benefits only from a phased out preferential duty benefit. “This will also help us compete with Thai and Malaysian exporters,” the EEPC India Chief said.

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