Trade Policy Updates (From 1st January to 31st January 2019)

01 Feb 2019

Trade Policy Updates (From 1st January to 31st January 2019)

1) The US Trade Representative’s (USTR) office recently changed the scheduled date of a tariff rate rise to 25% from 10% on US$ 200 billion worth of Chinese goods to 0501 GMT on March 2, 2019, from March 1 as both nations pursue trade talks.

The notice does not affect the 25% tariff rate in place on US$ 50 billion worth of Chinese technology items. The notice attributed the change to new US-Chinese engagement “with the goal of obtaining the elimination of the acts, policies, and practices covered in the investigation” following a December 1 meeting between the Presidents of the countries in Buenos Aires.

2) India exempted the Rupee payments for Iran oil from hefty taxes.

Iran will be able to use the rupee funds for a range of expenses – including imports from India, the cost of its missions in the country, direct investment in Indian projects, and its financing of Iranian students in India. It can also invest the funds in Indian government debt securities.

3) The Cabinet Committee on Economic Affairs has given its approval to the proposal of the Department of Commerce for including merchant exporters under the Interest Equalisation Scheme (IES) for Pre and Post Shipment Rupee Export Credit by allowing them interest equalisation rate of 3% on such credit for export of products covered under 416 tariff lines identified under the scheme.

These products are largely in MSME/ labour intensive sectors including Textiles. The proposal will entail benefits of around Rs 600 crore to exporters on interest equalisation, for the remaining period of the scheme.

4) To promote Government participation in production and exports of textile and apparel products, India government has announced Special Package for garments and made-ups sectors. The package offers labour law reforms, additional incentives under ATUFS, enhanced duty drawback coverage and relaxation of Section 80JJAA of Income Tax Act.

5) The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), effective since December 30, may push Vietnam to reform its economic institutions and improve the business climate to optimise opportunities.

CPTPP will offer Vietnam better access to the nine large Asia-Pacific markets, thus helping diversification of markets.

As more than 90% of import tariffs in CPTPP member markets have been lifted immediately after the deal took effect.

When tariffs are cut, Vietnam can increase the export of its key products such as textile-garment and footwear without competition from other countries.

6) The Government of Turkey has initiated a safeguard investigation on yarn of nylon or other polyamides. A safeguard investigation seeks to determine whether increased imports of a product are causing, or is threatening to cause, serious injury to a domestic industry.

As per a notification issued by the WTO, Turkey had initiated the safeguard investigation on December 30, 2018. The product under investigation ‘yarn of nylon’ are currently classified in the Turkish Customs Tariff Schedule under the customs tariff codes 5402.31, 5402.32, 5402.45, 5402.51 and 5402.61.

7) The Ghana local textile industry has received a boost following the government’s decision to zero-rate Value-Added Tax on the supply of locally manufactured textiles for a period of three years.

The move is to help reduce their cost build up, make the local textile industry price-competitive and help them compete with the influx of cheap textile products from other parts of the world.

8) The Goods and Services Tax (GST) council in its 32nd meeting held on Thursday doubled the exemption threshold limit of textile players from the existing Rs 2 million to Rs 4 million effective April 1, 2019.

9) Under the Gujarat’s new textile policy 2019 announced on Thursday, the government has removed incentives for two crucial activities such as ginning and spinning that occupy an important role in the textile value chain.

Ginning and spinning have been struck off from a list of over eight manufacturing activities that will be eligible for incentives under various schemes, including credit linked interest subsidy of 6% for MSMEs and 4-6% for large enterprises.

10) In a consumer-friendly measure, the revenue department is planning to make it mandatory for composition dealers and service providers to declare their GST registration status in invoices to ensure that they do not charge any tax from buyers.

11) The Reserve Bank of India (RBI) on Friday notified that the Government has decided to include merchant exporters under the ongoing Interest Equalisation Scheme for Pre and Post Shipment Rupee Export Credit with effect from January 2.

12) The government has issued a notification to withdraw a condition that restricts claiming of an export incentive under goods and services tax (GST), after various petitions were filed in courts against the curbs.

Earlier, the DGFT and the customs department had imposed a condition that the advance authorisation scheme would be available to exporters only if imports have been undertaken by them.

13) The Pakistan government on Tuesday ordered immediate clearance of about PKR 36 billion refund claims of exporters and allowed tax and duty-free import of cotton.

In response to demands of the textile industry, the Economic Coordination Committee (ECC) approved withdrawal of customs duty, additional customs duty and sales tax on import of cotton effective Feb 1-June 30, 2019.

14) The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has officially come into force in Vietnam on January 14. From this date, Vietnamese goods exported to countries that have ratified the deal will enjoy new preferential tariffs.

15) Rising labor costs in East Asia and tax-free access to the US market is encouraging Asian textile and garment manufacturers and Western buyers to turn to Egypt.

China is planning to move 20% of its production to Egypt either by setting up shop, through mergers or full acquisitions of local companies. The US-China trade war is also pushing Chinese manufacturers to look for new hubs to avoid potential tariffs of 25% into the US.

16) Ghana government has suspended plans to begin the implementation of the tax stamp policy for the textile industry which is slated for this month.

The move is to ensure additional security features are added to the stamp. Government revealed last year of its plans to extend the tax stamp policy to textiles in order to curb smuggling of the product in the country and to increase jobs in the sector.

17) India and Mauritius discussed initiatives to strengthen bilateral ties including the early finalisation of the Comprehensive Economic Cooperation Partnership Agreement (CEPCA).

18) The regulatory duty on polyester and cotton yarn must be withdrawn in the upcoming mini-budget to strengthen the domestic manufacturing units, urged Faisalabad Chamber of Commerce and Industry (FCCI) President Syed Zia Alumdar Hussain.

19) Exporters are likely to get incentives based on parameters like research and development, product-specific clusters and production pattern under a five-year foreign trade policy to be released later this year.

The commerce ministry is working on recasting the existing export incentive schemes in line with the global trade norms of the World Trade Organisation. The new incentives, the official said, could focus on R&D activities, production parameters, product-specific clusters and rebates on state levies.

20) Under pressure to cut duties on at least 80% of its imports from China under a mega trade agreement spanning 16 countries, India has begun bilateral talks on the modalities of tariff concessions with the country.

The two-day meeting in China beginning Monday comes ahead of a meeting of negotiators of the 16 participating countries in Jakarta, Indonesia, later this week when all the member countries of the Regional Comprehensive Economic Partnership (RCEP) will chalk out timelines aimed at concluding the agreement this year.

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