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Changes to GSP Programme Could Boost Competitiveness of Certain Mainland Chinese Products

The removal effective from 1 November of a number of products from the Generalised System of Preferences could positively impact the competitiveness of various mainland Chinese chemicals and other products in the U.S. market. However, any market share gains are very likely to be limited by the fact that mainland China faces additional Section 301 tariffs in many of the products that were removed.

The GSP provides duty-free access to a broad range of products classified under thousands of different tariff lines that are made in some 120 designated beneficiary developing countries and territories. While Hong Kong and mainland China are not included in this programme, the removal of any products from GSP – and the fact that those products will thence face regular most-favoured-nation rates of duty – can potentially improve the competitive position of Hong Kong and mainland Chinese products in the United States, especially in instances where Hong Kong and/or mainland Chinese exporters directly compete for orders with exporters of any removed products.

The recent changes to the programme stem from the regular annual process where U.S. authorities determine whether any eligible products exceeded the applicable competitive needs limitations and whether the eligibility of any previously excluded products should be reinstated. Among other things, the GSP statute provides that products from beneficiary countries (other than least-developed beneficiaries) are to lose duty-free treatment if imports in a tariff line exceed half of total U.S. imports. However, the so-called de minimis provision allows for an annual waiver for any product for which total U.S. imports from all countries were less than that year’s de minimis amount, which was US$23.5 million for 2017 imports. While in the past de minimis annual waivers were routinely granted in virtually all cases, the Trump administration has taken a less flexible approach with regard to such imports and decided to terminate the eligibility of 92 items that complied with the de minimis clause. In light of this policy, an administration official admits it is very unlikely that those products will be reinstated into the programme in the foreseeable future.

While smaller suppliers like Bosnia and Herzegovina, Belize and the Falkland Islands lost duty-free access for only one product each, Argentina, Brazil, Ecuador, Philippines, Thailand and Turkey lost such access for multiple products. India alone lost GSP eligibility for 50 products, mostly organic chemicals. The full list of products excluded for denial of de minimis, as well as those which lost GSP for other reasons, can be found here

The table below shows a number of products where mainland China’s competitiveness in the U.S. market could potentially increase as a result of the removal of GSP benefits for the listed countries. However, any market share gains will most likely be curbed by the fact that mainland China faces additional Section 301 tariffs in 14 of these 15 products.

Of particular note is the removal of certain monumental/building stone and articles thereof classified under HTSUS 6802.99.00 from Brazil, which will now face a 6.5 percent MFN duty. Brazil was the largest U.S. supplier of these products in 2017 with total shipments of US$186.3 million and imports under GSP of US$183.0 million, while mainland China ranked third with total shipments worth US$45.1 million. Brazil has also lost duty-free access for certain unwrought refined copper classified under HTSUS 7403.19.00, although those shipments will now face a modest 1.0 percent MFN duty. Opportunities may also exist in, among other products, sandstone merely cut into blocks or slabs of a rectangular (including square) shape classified under HTSUS 2516.20.20, where India will now face a 3.0 percent MFN duty, as well as certain organic chemicals classified under HTSUS 2916.19.50, where Indonesia will now face a 3.7 percent duty.

Removed CountryImports from Removed Country in 2017 & Import RankImports from China in 2017 & Import RankMFN DutySection 301 Tariff
Total ImportsGSP Imports
6802.99.00Brazil$186,264,470 (1)$183,011,146 (1)$45,143,914 (3)6.5%10%
7403.19.00Brazil$20,859,208 (1)$18,351,188 (1)$1,479,592 (3)1.0%10%
2516.20.20India$5,0096,09 (1)$4,756,465 (1)$1,647,073 (2)3.0%10%
2916.19.50Indonesia$9,153,297 (1)$9,153,297 (1)$1,496,693 (2)3.7%10%
5702.92.10India$9,590,856 (1)$8,701,683 (1)$541,744 (2)2.7%10%
4411.12.90Brazil$6,988,335 (1)$6,988,335 (1)$1,088,645 (3)3.9%10%
4012.90.45Brazil$6,206,468 (1)$6,198,413 (1)$403,669 (3)4.2%10%
2906.19.30Brazil$5,331,924 (1)$5,331,924 (1)$1,219,608 (3)5.5%10%
2005.80.00Thailand$4,952,607 (1)$4,812,750 (1)$444,065 (5)5.6%10%
2933.19.35India$3,046,659 (1)$3,046,659 (1)$826,980 (2)6.5%10%
2933.99.06India$4,423,894 (1)$2,511,413 (1)$319,038 (2)6.5%No Tariff
2904.10.08India$2,308,180 (1)$2,308,180 (1)$768,240 (2)5.5%10%
2907.15.10India$2,239,379 (1)$2,239,379 (1)$2,054,741 (2)5.5%10%
5607.90.35Philippines$2,777,114 (1)$2,233,697 (1)$842,598 (2)3.4%10%
3920.94.00India$2,224,670 (1)$2,224,670 (1)$813,564 (2)5.8%25%
Source: USITC.
Content provided by Picture: HKTDC Research
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