USTR to Reconsider Duty-Free Treatment For Travel Goods From All GSP Beneficiaries

Industry news

USTR to Reconsider Duty-Free Treatment For Travel Goods From All GSP Beneficiaries

The Office of the US Trade Representative has initiated its annual review of the products and countries eligible for duty-free treatment under the Generalised System of Preferences and is accepting petitions seeking to add, preserve or remove GSP benefits. As part of this review, importers, foreign governments and others will again have an opportunity to petition the US government for changes in the coverage of GSP. Notably, USTR has also decided to open a supplemental comment period and hold a hearing to give stakeholders the opportunity to submit further information with respect to the possible addition to GSP of handbags, luggage and other travel goods made in more advanced beneficiary developing countries.

As previously reported, a 30 June presidential proclamation added handbags, luggage and other travel goods under 27 HTSUS subheadings (including luggage, backpacks, handbags and pocket goods such as wallets) to the list of GSP-eligible products but only for least-developed beneficiary developing countries (of which there are currently 43) and African Growth and Opportunity Act beneficiary countries (of which there are currently 38). This decision was met with disbelief by US travel goods importers and retailers, trade associations and lawmakers, who have since urged USTR to change its position and expand the designation to cover travel goods from all GSP beneficiary countries. The American Apparel and Footwear Association applauded USTR's announcement to reconsider its stance on travel goods "because it sets forth a clear process and a definite timeline for a final decision."

USTR will hold a hearing on October 18 in Washington, D.C., to explore the travel goods matter and will allow parties to submit comments, pre-hearing briefs and requests to appear at the hearing by October 4. The agency notes that interested parties need not resubmit information previously provided and should rather provide any new information or analysis with respect to the possible further extension of GSP benefits for non-LDBDCs for each of the travel and luggage tariff lines under consideration in light of the statutory criteria. USTR is aiming to conclude its review of travel goods by January 2017.

The eventual addition to GSP of handbags, luggage and other travel goods from all eligible beneficiary countries could potentially undermine the competitive position of mainland Chinese and Hong Kong exporters in the US market for these products. Mainland China is by far the largest US supplier of the tariff lines under consideration with a 60.7% share or US$ 2,746.3 million of total US imports during January-June 2016, while Hong Kong ranks fourteenth with a 0.6% share or US$ 27.8 million. Vietnam ranks second with an 11% share or US$ 496.0 million, followed by Italy with an 8.4% share or US$ 382.2 million and France with a 5.7% share or US$ 258.2 million.

While none of these suppliers benefit from preferential duty treatment under GSP, fifth-ranked the Philippines, sixth-ranked India, seventh-ranked Indonesia and tenth-ranked Thailand would qualify to receive duty-free treatment should USTR decide to expand the scope of the travel goods initiative. The Philippines accounted for 2.4% or US$ 108.6 million of total US imports of covered goods during January-June 2016, India held a 2% share or US$ 90.5 million, Indonesia held a 1.2% share or US$ 54.9 million, and Thailand accounted for 0.8% of all imports or US$ 35.7 million.

US imports from mainland China of the travel goods under consideration have been sluggish in recent times, falling by 12% during January-June 2016 after dropping by 0.4% to US$ 6,418.8 million in 2015. By comparison, imports from Vietnam went up by 12% to US$ 949.3 million in 2015 and 7.7% during January-June 2016, imports from the Philippines increased by 64.9% to US$ 226 million in 2015 and 11.2% during January-June 2016, imports from India grew by 11.5% to US$ 217.5 million in 2015 but fell by 10% during January-June 2016, shipments from Indonesia advanced 10.6% to US$ 110.6 million in 2015 and 2.1% during January 2016, and imports from Thailand grew by 18.8% to US$ 90.5 million in 2015 but declined by 14.1% during January-June 2016.

Currently, sixteenth-ranked Cambodia is the only relatively large US supplier of covered travel goods that benefits from duty-free treatment under GSP. US imports from that country surged 143.3% to US$ 48.6 million in 2015 but were only 1.7% higher at US$ 23.7 million during January-June 2016. Twelfth-ranked Burma (Myanmar) and fifteenth-ranked Bangladesh are also up-and-coming least-developed country suppliers of covered travel goods that are making significant strides in the US market, but they are currently ineligible to receive GSP benefits. Bangladesh was suspended from the programme in June 2013, while a review of Burma's potential GSP designation is currently under way.

US import duties on the travel goods under consideration are substantial, averaging 13.1% during January-June 2016. Duties are high or fairly high for most major and up-and-coming suppliers, including mainland China (14.7% average during January-June 2016), the Philippines (12.5%), India (8%), Indonesia (12.1%), Thailand (14.5%), Burma (10.3%).