US unwittingly presents an opportunity to India’s jewellery sector to step up exports

By Suneeta Kaul

In a significant move, US President Donald Trump recently ended the preferential economic treaty signed with Hong Kong, thus bringing to a close the territory’s separate customs treatment from China. Resultantly, the duty on imports from Hong Kong will be hiked to 7.5 per cent from 3.3 per cent. This is likely to create opportunities for India’s jewellery sector to extend its exports to the US, and even persuade at least some manufacturing units in China to shift base to India.

Till now, India has been at a disadvantage vis-a-vis Hong Kong, with the tariff applicable on Indian jewellery products ranging from 5% to 7%, as against 3.3% for imports from Hong Kong. This is in spite of India being the bigger supplier to the US — we exported jewellery products worth $ 1.6 billion to the US, as against just $ 300 million by Hong Kong. Now, in view of the preferential treatment to the latter ending, India can look forward to a more level playing field, and take the opportunity to increase its exports to the US.

Capitalising on the opportunity

India is already one of the largest sourcing partners of the US for gold jewellery products. In 2019-20, our exports of gems and jewellery to the US stood at $ 9.55 billion, accounting for 26% of total exports of $ 39 billion. In order to expand our footprint in the US, we will have to take several steps.

Says Sabyasachi Ray, Executive Director, Gems and Jewellery Export Promotion Council (GJEPC), “To increase our exports to the US and take advantage of the Hong Kong situation, it is imperative to enhance our promotional campaign for jewellery products in the US market. This will help India to regain the exports it had lost, post the withdrawal of the Generalized System of Preferences (GSP) by the US. We are in the midst of a deadly pandemic, which has led to several geo-political changes, and has forced the entire world to connect virtually. India will have to initiate a digital marketing campaign to once again showcase its competitiveness in jewellery products. The industry also needs to organise virtual meets with the US counterparts, which will enable it to promote its products.”

Additionally, if India’s own import duty on cut and polished gem stones is revised downwards, it would enable the industry to make its exports more competitive. “As of now, we are faced with an import duty of 7.5 per cent on gem stone imports. We import gems such as rubies, sapphires, tanzanites, large diamonds, and so forth. These are set in the jewellery pieces and re-exported. The government needs to immediately remove this import duty, otherwise the benefit of the US step will go to countries such as Thailand. I would say that companies exporting jewellery to the US should be given preferential treatment for financing and taxes,” opines Sanjay Kala, President, Jaipur Jewellers Association.

The industry is also seeking Government support for ensuring ease of doing business. “The Centre has to frame enabling policies for e-commerce, and simplify the procedures for entry and exit in SEZs. Additionally, it has to give AEO (Authorized Economic Operators) status to eligible exporters from the sector, apply RMS (Risk Management Systems) to sectoral exports (presently, RMS is not being applied to the gems and jewellery exports and imports), and introduce other trade facilitation measures. This will enable companies to start their manufacturing and trading business from India,” adds Ray.

Unless the hurdles being faced by the industry are removed, and steps taken proactively to give a leg-up to exports, India could fritter away the advantage. Sounding a note of caution, Bobby Kothari, Director, Jewelex India Pvt Ltd, says, “While the US ending Hong Kong’s preferential treatment could create an opportunity for India to expand its exports, as of now, it seems more business is going to other countries, than to India.”

The duty hike by the US on imports from Hong Kong has another facet to it. Several Indian companies export gems to Hong Kong, which value-adds to them and then exports the finished products to the US. In view of its exports to the US becoming costlier, Hong Kong might cut its import of gems from India. Says Kala, “India exports diamonds in large numbers to Hong Kong, which uses them to make final jewellery products, and then exports them to the US. But with the new duty structure, India’s diamond exports to Hong Kong are likely to be impacted adversely.”

However, overall, the pros outweigh the cons, and the US has, unwittingly, presented an opportunity to India. It remains to be seen whether the industry is able to capitalise on it.

Courtesy:Retail Jeweller India News Service.