India: Textile exports hit due to US procurement legislation

Market News

India: Textile exports hit due to US procurement legislation

India’s textile exports are getting affected on account of the US legislation for federal procurement, which stipulates sourcing of raw materials from the designated countries or domestic suppliers, FICCI said. The industry body has submitted a representation in this regard to the Ministry of Textiles and Ministry of Commerce & Industry.

“FICCI has requested the Government of India to take up the issue either bilaterally or multilaterally with the US government to resolve the issue amicably,” it stated.

Indian textile exporters have reported that the buyers or companies based in the US supplying to their government departments and agencies have halted sourcing raw materials from countries like India, which are not part of the General Services Administration (GSA) Schedule Contract. The GSA is responsible for supporting several federal agencies in the US with basic functions, including procurement services.

Pursuant to the Buy American Act, the US federal acquisition process is based on preferential treatment of US-made products. A product is considered US made if manufactured domestically and the cost of local components is more than 50% of the overall cost of all components.

Under certain conditions however, the Buy American Act may be waived. The Trade Agreements Act of 1979 (TAA) gives the President authority to waive Buy American Act requirements for certain procurements. So far it has been waived for eligible products in acquisitions covered by the WTO Government Procurement Agreement, some relevant free trade agreements (FTA), as well as for least-developed countries.

As per the TAA, all products listed on the GSA Schedule Contract be manufactured or “substantially transformed” in a “designated country“. The designated countries, as per the GSA Schedule, consist of World Trade Organization Government Procurement Agreement Countries, countries having Free Trade Agreement with the US, Least Developed Countries and countries based in the Caribbean-Basin.

As India does not fit into any of these criteria, the US-based buyers have stopped their sourcing from our textile manufacturers immediately, impacting the order books and the production lines of some of the major exporters, FICCI said.