US Ends Preferential Trade Treatment, Solar Exports From India to Bear 25% Safeguard Duty

The decision is set to put additional tariffs burden of over $300 million on the American businesses every year, including solar exports from India which are expected to incur a safeguard duty of 25 percent.

In a major blow to India’s newly elected government, the Trump administration has terminated India’s designation as a beneficiary developing nation under the key GSP (Generalised System of Preference) trade programme. The decision is set to put additional tariffs burden of over $300 million on the American businesses every year, including solar exports from India which are expected to incur a safeguard duty of 25 percent.

The White House in a statement said India had not assured the United States that it would provide “equitable and reasonable access” to its markets, which was why the Trump administration had taken the action.

The US government had notified India on March 4, 2019, of its intent to terminate the country’s designation. The 60-day notice period ended on May 3. “I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” Trump said.

This development is a setback for India on the trade front but will have a limited impact on the Indian solar industry in general. However, it will impact manufacturers who were banking on growing exports to the United States. The Indian solar industry’s total exports in the calendar year 2018 amounted to $107 million.

India was the largest beneficiary of the programme in 2017 with $5.6 billion worth of exports to the US being given duty-free status, according to a Congressional Research Service report issued in January. For India’s solar sector, exports to the United States totaled $50 million, accounting for 47%. Exports to the United States also grew about 32% from $38 million in 2018 to $50 million in 2019.

In July 2018, keeping in view the interests of the domestic solar manufacturers, the Indian Government imposed long-awaited safeguard duty on imports of solar equipment from China and Malaysia for two years. The finance ministry imposed safeguard duty of 25 percent on the imports from July 30, 2018, to July 29, 2019, and a gradually reduced rate of 20 percent from July 30, 2019, to January 29, 2020, and 15 percent from January 30, 2020, to July 29, 2020.