From import bans on chemicals, pesticides and grains, to licensing requirements for capital goods and arbitrary customs valuations, the United States has revealed a long list of grouses over India’s import policies.
The recently released 2021 National Trade Estimate (NTE) Report by the United States Trade Representatives, an annual compendium of Washington DC’s complaints against the trade mechanism of various economies continues to prominently feature India. The report points out India’s import restrictions managed through strict licensing, import quotas, certifications and customs rules, calling them a set of well thought out ‘non-tariff barriers’ which stops American goods from coming in.
While many of the issues have been ongoing, the reintroduction of certain topics such as US complaints over India’s customs valuation criteria have attracted displeasure from the Commerce Department. Indian customs officials hold discretionary power to reject the declared transaction value of an import if it is deemed to be lower than the ordinary competitive price.
The US has said this raises the cost of exporting to India beyond the usual tariff cost and opens trade to corruption and bureaucratic red tape. “In addition to being announced with the annual budget, India’s tariff rates are modified on an ad hoc basis through notifications in the Gazette of India and are subject to numerous exemptions that vary according to the product, user, intended use, or specific export promotion program, rendering India’s customs system complex to decipher and open to administrative discretion,” the report also stressed.
In August 2017, the Indian Government announced quantitative restrictions on all pesticides and insecticides. “While India later rescinded the restrictions because of its inability to deploy the relevant software to support the action, uncertainty remains regarding the future implementation of these restrictions,” the report said, urging India to eliminate its import licensing requirements.
Case in point, the report lists the long and winding process Indian importers have to follow to apply for bringing in Boric Acid, a key ingredient in pesticides. A certificate from the Central Excise Authority after providing end-user details and No Objection Certificates from the relevant government ministry are required before an application for an import permit can be submitted to the farm Ministry’s Central Insecticides Board and Registration Committee (CIBRC).
Similarly, multiple restrictions on import of pulses in the past five years has also irked Washington DC. In August 2017, India imposed import quotas on pigeon peas, black matpe beans, moong and urad lentils, among others. In April 2018, these quantitative restrictions were extended to peas. Stricter restrictions such as a 150,000 metric tons (MT) import limit for peas and 400,000 MT for black matpe and pigeon peas have continued in 2020-21.
The US has long complained of India arbitrarily putting certain imports into the restricted list. The website of the Directorate General of Foreign Trade (DGFT) under the Commerce Ministry maintains a list of restricted items. But the report panned India for often failing to observe other transparency requirements, such as publication of timing and quantity restrictions in the Gazette of India and notification to relevant committees of the World Trade Organization.
The US also has a series of complaints over India’s practice of distinguishing between goods that are new, and those that are secondhand, remanufactured, refurbished, or reconditioned, when assessing whether licenses are required. India allows imports of secondhand capital goods by the end users without an import license, provided the goods have a residual life of five years.
“India requires import licenses for all remanufactured goods because India does not recognize that remanufactured goods have typically been restored to original working condition and meet the technical and safety specifications applied to products made from new materials. Therefore, U.S. stakeholders report that obtaining an import license for remanufactured goods has been onerous,” the report said.
Bilateral talks heat up
India’s trade talks with the previous Donald Trump Trump administration had oscillated between having a limited scope trade pact and a comprehensive Free Trade Agreement. However, despite working on it for more than 3 years, talks remained inconclusive.
Most often talks had to be reset on trade concepts such as export incentives under America’s Generalized System of Preferences (GSP) scheme and reciprocal tariffs on a wide range of sectors. Now, New Delhi is again stepping up dialogue with the United States.
Last week, Commerce and Industry Minister Piyush Goyal had his first meeting with new U.S. Trade Representative Katherine Tai. Both sides later said they will aim to expand trade ties and remove non-trade barriers through better mutual recognition agreements in both goods and services trade.