With both India and the US firm on their key concerns, there is a lot of suspense over the proposed trade deal. A few days before the July 9 deadline, the Indian team led by Commerce Minister Piyush Goyal had come back from the US, with Goyal saying India would not negotiate a deal under the pressure of a deadline. Meanwhile, the suspense over the deal has disrupted businesses in India.
Also Read: India seeks lower tariff than Indonesia in race for deal with US
India-US trade deal suspense plays out at the ports
Uncertainty over the trade deal has resulted in dry fruit importers holding back customs clearance of walnut, almond and other nut shipments from the US, anticipating a steep cut of about 50% in import duties, ET reported yesterday. Importers are looking to avoid losses they could incur if duties are reduced after they clear goods at current rates, but their move can worsen supply disruptions, industry insiders said.
Dry fruit supplies had already been hit by the halt in Afghan imports due to the closure of the Wagah border since the Operation Sindoor strikes on terror infrastructure in Pakistan and Pakistan-occupied Kashmir. India imposes a 100% tariff on US walnuts – both kernels and those in shells – and a specific duty of Rs 35 per kilogram on almonds in shell and Rs 100/kg on almond kernels. Trump often cites this to support his claim that India is a high tariff country. The industry expects India to halve these duties as part of the trade deal being negotiated. “Two commodities that are likely to see duty reduction in the proposed US-India trade deal are walnuts and almonds,” Ravindra Mehta, founding member at Nuts and Dry Fruits Council of India, or NDFC(I), told ET. “Many importers are postponing filing the bill of entry by a few days and opting to pay the penalty for delayed clearance, which is much smaller than the losses they may face in case the duties are reduced,” he said. However, the importers cannot delay unloading of the containers for more than 14 days as the shipping lines charge huge demurrage charges beyond this period.
“We are getting many calls from importers asking about the feasibility of filing the bill of entry with the customs as it means paying the existing import duty,” Gunjan Jain, president of NDFC(I), told ET. Some of the importers have opted to keep their goods in the custom bonded warehouses, where the rents are higher. “The importers do not have to pay import duty on the goods kept at the bonded warehouses,” Jain said. However, this wouldn’t help as “modalities of duty changes take time to complete,” he said. “We have seen this happen in case of duty changes on wine and whiskey imports from the UK and almond imports from Australia.”
Also Read: Mini US trade deal likely as genetically modified door ajar
Businesses on wait-and-watch mode
Prolonged trade talks are weighing on export orders, business plans and onboarding new US clients for Indian businesses, as global companies and brands adopt a wait-and-watch mode on the outcome of the negotiations, industry executives have told ET. The cautious stance is seen across major sectors such as electronics, apparel and textiles, seafood, gems and jewellery, ET has reported.
Electronics contract manufacturers like Dixon Technologies, Micromax-owned Bhagwati Products and Karbonn Group said, while they are continuing exports to the US, clients have halted plans for new orders till they get clarity on the trade negotiations. “Prospective clients who wanted to manufacture in India for the US are in a wait-and-watch mode, expecting clarity on where India stands vis-a-vis China and Vietnam in terms of US tariff,” said Atul Lall, managing director at Dixon Technologies. Dixon produces Motorola smartphones for exports to the US.
The current scenario is also impacting India’s long-term export orders for gems and jewellery, including for the Christmas and year-end shopping period. “The process of placing orders for Christmas usually begins in June from the JCK Show of jewellery at Las Vegas; first with sample line orders followed by the full orders in September-October,” said Sabyasachi Ray, executive director, The Gems and Jewellery Export Promotion Council. “This process has been disrupted as US importers are buying only for a short term for each month as there is no clarity on the exact rate of tariff.” US buyers are also doing rate negotiations, said Ray, adding that the buyers are expecting demand to fall if Indian jewellery becomes pricier due to higher tariffs. “Some buyers are negotiating about sharing the burden,” he said.
Seafood exporters too are facing slowdown in orders in the past few weeks as buyers are inquiring if the former is ready to absorb the entire burden of any increase in tariff. “There is a slowdown in exports from the past three weeks as new orders are not coming,” said Pawan Kumar G, president, Seafood Exporters’ Association of India.
Industry body Confederation of Indian Textile Industry (CITI) secretary general Chandrima Chatterjee said there is optimism in the short term that India will secure a good deal, with relative tariffs likely to be largely better than its major competitors. “However, this optimism may not completely translate into orders in the medium term due to the vague scenario about applicable product specific tariffs that will unfold,” she said. “There is cautious optimism. The buyers are holding back on big orders as the sectoral or category-wise tariff rates could vary significantly.”
