USTR Report: US Warns India Against Retaliatory Tariffs, Criticizes Tariff Barriers
U.S. Trade Representative Robert Lighthizer touched on India’s potential retaliatory tariffs against the U.S. and criticized the country’s “significant tariff and nontariff barriers” in the 2019 National Trade Estimate on Foreign Trade Barriers. The 540-page report, released March 29, said India’s tariff barriers “impede imports of U.S. products into India” and was critical of India’s “complex” customs system and failure to “observe transparency requirements.”
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The report was issued the same day India’s Ministry of Finance announced it would again be delaying retaliatory tariffs on goods imported from the U.S. The tariffs, originally announced in May 2018, were a retaliation against President Donald Trump’s decision to increase Section 232 steel and aluminum tariffs. “The United States has urged India to work to address the common problem of excess capacity in the global steel and aluminum sectors, rather than engage in unjustified retaliation designed to punish American workers and companies,” the report said. “The United States will take all necessary action to protect U.S. interests in the face of such retaliation.”
The report also said India’s tariff practices create difficulties for U.S. exporters, adding that India’s average Most Favored Nation applied tariff rate of 13.8 percent “remains the highest of any major world economy.” India’s effort to increase its manufacturing capacity has led it to raise duties -- including on “labor-intensive products” and “electronics and communications devices” -- to promote domestic production, according to the report.
The report also notes that U.S. “stakeholders” have reported difficulty obtaining Indian import licenses for remanufactured goods, encountering issues such as “excessive details required in the license application; quantity limitations set on specific part numbers; and long delays between application and grant of the license.”
In addition, India “often fails to observe transparency requirements,” including publishing “timing and quantity restrictions in its Official Gazette or notification to WTO committees,” the report said. India modifies its customs rates on an “ad hoc basis through notifications in the Gazette of India” and include many varying exemptions depending on the product, the report said, “rendering India’s customs system complex to decipher and open to administrative discretion.” U.S. companies also underwent “extensive investigations related to their use of certain valuation methodologies when importing computer equipment,” according to the report, including “excessive searches and seizures of imports.”
The report said India “lacks an overarching government procurement policy,” creating many procurement rules, guidelines and procedures issues by multiple government bodies that result in problems with “transparency, accountability, competition, and efficiency in public procurement.” The report noted that a recent report from the World Bank said there are “over 150 different contract formats used by the state owned Public Sector Undertakings, each with different qualification criteria, selection processes, and financial requirements.”
India also recently promoted “data localization requirements” that would create “significant barriers” in digital trade between the U.S. and India, the report said. The requirements force “all payment service suppliers” to store their electronic payment information relating to Indian citizens on servers located in India, according to the report. The change would require the construction of “redundant data centers,” the report said, and adding “an only-in-India data storage requirement will hamper the ability of service suppliers to detect fraud and ensure the security of their networks.”