What's Happening?
The Gem and Jewellery Export Promotion Council (GJEPC) is responding to a significant increase in U.S. tariffs on Indian jewellery, which have risen to 25%-32%. This tariff hike poses a threat to India's strong position in the U.S. diamond jewellery market, potentially affecting 60%-70% of the trade. In response, GJEPC convened a meeting to discuss strategies to mitigate the impact, including exploring overseas manufacturing bases and supply chain adjustments. The council is considering legal provisions such as Chapter 9802, which could allow duties to be levied only on the value added abroad for goods incorporating U.S.-origin components. Additionally, the 'substantial transformation' rule might help reclassify the origin of products based on significant processing locations. The meeting also explored rerouting shipments through countries with lower tariff rates and establishing manufacturing bases in the UAE as long-term strategies.
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Why It's Important?
The tariff increase threatens India's dominance in the U.S. diamond jewellery market, where it currently holds a 42% share. The potential loss of market share could benefit competitors like Thailand, Vietnam, and Israel. The situation is critical, as overall gem and jewellery exports from India have declined by 5%, with polished diamond exports dropping 52% in the first quarter of FY 2024-25 compared to the previous year. This decline, coupled with the tariff hike, could have significant economic repercussions for the Indian jewellery industry. The GJEPC's efforts to find relief under existing U.S. trade provisions and explore alternative strategies are crucial to maintaining India's market position and mitigating the economic impact.
What's Next?
GJEPC is urging the Indian government to provide relief to the gems and jewellery export sector. This includes seeking policy relief, duty drawback extensions, and support for market diversification. The council is also considering establishing manufacturing bases in the UAE to leverage proximity to key markets and potential duty advantages. These steps are aimed at protecting the industry from the adverse effects of the tariff hike and ensuring its continued competitiveness in the U.S. market.
Beyond the Headlines
The tariff hike highlights the complexities of international trade and the need for industries to adapt to changing trade policies. It underscores the importance of strategic planning and diversification in maintaining market positions amid global economic shifts. The situation also raises questions about the long-term sustainability of relying heavily on a single market and the potential benefits of exploring new markets and manufacturing bases.
