31 July 2015
Potential Addition of Handbags/Luggage to GSP Programme Could Impact Competitiveness of Mainland Chinese Products
As previously reported, the United States on 29 June enacted into law legislation reauthorising the Generalised System of Preferences for two years. The new law includes a provision that expands the potential coverage of this programme to include textile and leather travel goods such as handbags, backpacks, suitcases and similar items classified under HTSUS 4202.11.00, 4202.12.2020, 4202.12.2050, 4202.12.40, 4202.12.8030, 4202.12.8070, 4202.21.60, 4202.21.90, 4202.22.15, 4202.22.45, 4202.22.8050, 4202.31.60, 4202.32.40, 4202.32.80, 4202.32.9550, 4202.32.9560, 4202.91.0030, 4202.91.0090, 4202.92.15, 4202.92.20, 4202.92.3020, 4202.92.3031, 4202.92.3091, 4202.92.45, 4202.92.9026, 4202.92.9060 and 4202.99.90.
However, duty-free treatment for these products under GSP is not automatic. Parties interested in adding a product to the list of GSP-eligible items must first submit a petition to the Office of the U.S. Trade Representative. If the petition is accepted, the petitioner must follow a year-long process that includes the drafting and submission of comments and briefs as well as advocacy during hearings designed to gauge the economic impact of the product's inclusion. A strong economic case must be made during this process in order for the petition is to be successful. The process could end with the issuance of a presidential proclamation granting GSP eligibility to the covered product beginning on 1 July 2016.
The addition of handbags, luggage and other travel goods to the GSP programme could potentially undermine the competitive position of mainland Chinese and Hong Kong exporters in the U.S. market for these products. Mainland China is by far the largest U.S. supplier of travel goods and other products of heading 4202 with a 65.0 percent share of total U.S. imports during January-May 2015. Vietnam ranks second with an 8.7 percent share, followed by Italy with a 7.7 percent share, France with a 5.1 percent share, the Philippines with a 2.2 percent share and India with a 2.1 percent share. Hong Kong, for its part, held a 0.5 percent share of total U.S. imports during January-May 2015.
U.S. imports of mainland Chinese products of heading 4202 have seen little growth over the past 17 months, falling by 0.2 percent to US$7,262.2 million in 2014 and growing by a modest 2.0 percent to US$2,844.1 million during January-May 2015. By comparison, imports from Vietnam went up by 29.6 percent to US$886.2 million in 2014 and 17.7 percent to US$379.6 million during January-May 2015, imports from the Philippines increased by 45.2 percent to US$157.0 million in 2014 and 77.1 percent to US$95.1 million during January-May 2015, imports from India grew by 6.3 percent to US$214.5 million in 2014 and 10.0 percent to US$92.6 million during January-May 2015, shipments from Thailand advanced 10.4 percent to US$90.8 million in 2014 and 23.6 percent to US$39.3 million during January-May 2015, and imports from Bangladesh surged by 103.7 percent to US$20.4 million in 2014 and 192.5 percent to US$16.3 million during January-May 2015.
U.S. import duties on heading 4202 products are fairly high, averaging 12.8 percent in both 2014 and January-May 2015. Duties are high for most major and up-and-coming suppliers, including mainland China (13.8 percent average during January-May 2015), India (9.8 percent), the Philippines (11.2 percent), Indonesia (12.8 percent), Thailand (14.3 percent), Bangladesh (9.4 percent) and Cambodia (16.9 percent). This means that eventual duty-free treatment for imports classified under one or more tariff lines within heading 4202 could give GSP-eligible suppliers such as the Philippines, India, Thailand, Indonesia or Cambodia a considerable price advantage over mainland China. While Bangladesh was suspended from GSP in June 2013 due to its failure to meet statutory eligibility requirements related to worker rights, that country could potentially be reinstated in time to take advantage of any eventual benefits for heading 4202 goods.