Rising Imports Of Used Garment Hit Indian Apparel Industry

Apparel, Footwear, Fashion

Rising Imports Of Used Garment Hit Indian Apparel Industry

The issue of used apparel imports is again taking centrestage in the domestic garment industry. Rampant imports of used apparel by unlicensed importers, imports of fresh garments declared as used apparel to avoid customs duties, and sales of used apparel in the retail market - these are issues that the organised domestic apparel manufacturers and retailers are trying to take up with the government.

At a time when the Rs 2.5 trillion domestic apparel industry is facing a demand slowdown, rising imports of used garments is adding to the woes of garment manufacturers. Categorised as restricted item (which means imports not possible without government licences), the government has issued only 16 licences so far to players in Kandla Special Economic Zone (SEZ). Import of used garments elsewhere in the country is banned.

While these 16 authorised importers have been bringing in used apparel into India, a number of unauthorised importers also bring in several consignments at Kolkata, Chennai and Mumbai ports. Thus, unauthorised importers contribute equavalent to the quantity of official imports if not more.

"The domestic apparel industry is passing through a tough time, and imports of used apparel has worsened the overall scenario further," said Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI). According to industry estimates, overall 90 containers worth US$ 40,000 each of used garments primarily from the United States and the European countries hit Indian ports every month. "Import have doubled in the last one year due to importers' malpractices," said an importer on condition of anonymity.

According to industry sources, importers bring in fresh garments by misdeclaring the container as used garments for evading taxes. As against upto 15% of taxes levied on fresh garments, the used ones attract taxes on per piece basis, which works out to a negligible amount.

Being a restricted category item, used garments are imported by even large organised sector players, said the importer.

"In case the consignment is caught by the department of customs, which is very rare, importers pay a small penalty and get the goods cleared. This has become a regular practice".

Meanwhile, worsening the scenario further, the government of India is looking to issue 200 fresh licences to increase import of used garments. "We have protested the government's proposed move to issue fresh licenses," said Mehta.

Of the Rs 2.5 trillion domestic apparel industry, organised market contributes Rs 74,250 crore (30%) whereas unorganised market constitutes the remaining Rs 1,75,750 crore (70%). Speaking at the 63rd National Garments Fair, Mehta stated that the domestic apparel industry has the potential to double in the next seven years.

CMAI further urged the government to speed up aggressive follow up for Free Trade Agreement (FTA) with EU and other countries in addition to keep garments in the lowest GST (goods and services tax) list.