15 July 2016
U.S. Reduces or Eliminates Tariffs on 201 IT Products, Provides Duty-Free Treatment to Travel Goods from Certain GSP Beneficiaries
The United States on 1 July implemented the immediate or staged elimination of tariffs on a broad range of information and communications technology products, as required by the expanded Information Technology Agreement. The expanded ITA covers 201 IT products that have an annual global trade value of more than US$1.3 trillion and were subject to tariffs of up to 35 percent. Covered goods include multi-component semiconductors (MCOs), medical equipment, GPS devices, tools for manufacturing printed circuits, video game consoles, printer ink cartridges, static converters and inductors, loudspeakers, software media (e.g., solid state drives), point-of-sale cards to download software and games, LEDs, touch-sensitive input devices, children’s electronic learning devices, and various information and communications technology testing instruments. Only about a third of the WTO’s members have signed the agreement, which binds them to provide duty-free access to their markets for the affected goods for all 163 WTO members.
Tariffs on about two-thirds of the tariff lines covered by the expanded ITA were eliminated as of 1 July and most of the remaining tariffs will be phased out in annual stages through 1 July 2019, although some will not be fully eliminated for five or even seven years. Tariff elimination schedules vary by country and mainland China will phase out its tariffs more slowly than others. The U.S. presidential proclamation with the full list of covered products and their applicable tariff elimination schedule can be accessed here.
It is virtually impossible to assess the exact impact of these duty reductions on U.S. imports from mainland China because new tariff breakouts have been created for a range of products covered by the ITA expansion and, as a result, there is currently no import data on these new breakouts. However, there are a number of mainland Chinese products for which data is available that will clearly benefit from lower duties from 1 July, as shown in the table below. They include other static converters classified under HTSUS 8504.40.95, headphones and earphones and sets consisting of a microphone and one or more loudspeakers classified under HTSUS 8518.30.20, multiple loudspeakers mounted in the same enclosure classified under HTSUS 8518.22.00, other television cameras classified under HTSUS 8525.80.30, and television transmission apparatus classified under HTSUS 8525.50.30. Mainland China is the largest U.S. supplier of each of these five products with shares of total U.S. imports ranging from 38.2 percent to 81.5 percent in 2015.
Separately, the Office of the U.S. Trade Representative has decided to add to the Generalised System of Preferences 27 new types of travel goods made in a least-developed beneficiary country or a country eligible for the African Growth and Opportunity Act. As a result, originating goods 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 from those countries will benefit from duty-free treatment under GSP effective 1 July.
There are several up-and-coming least-developed country suppliers of travel goods, including in particular Cambodia, Bangladesh and Burma (Myanmar). However, of those three suppliers only Cambodia is currently eligible to receive GSP benefits in the United States. Bangladesh was suspended from the programme in June 2013 due to its failure to meet statutory eligibility requirements related to worker rights (a worker rights review of Bangladesh is on-going), while a review of Burma’s potential GSP designation is currently under way.
In a controversial move, USTR also decided to defer a decision on whether to add to the GSP subject travel goods from other beneficiary countries, such as Thailand, India, Indonesia, Pakistan, Sri Lanka and the Philippines. The Philippines and India are currently the fifth and sixth largest U.S. travel goods suppliers (heading 4202), while Indonesia and Thailand rank eighth and ninth. Mainland China is by far the largest U.S. supplier of travel goods, followed by Vietnam, Italy and France, although none of those suppliers qualify for any sort of GSP preferences.
The decision not to provide duty-free treatment to travel goods from other GSP beneficiaries has attracted a great deal of criticism from U.S. importers. The American Apparel and Footwear Association, the Outdoor Industry Association, the Travel Goods Association, and the Sports & Fitness Industry Association sent a letter to U.S. Trade Representative Mike Froman on 5 July expressing astonishment at the decision, which they believe runs counter to both congressional intent and the views expressed by stakeholders at the hearings held by the U.S. International Trade Commission and the Trade Policy Staff Committee. The letter argues that those views were disregarded “despite virtually unanimous stakeholder and strong bipartisan support for the product expansion.”
Moreover, the associations believe that deferring the decision without a specific timeline for a final pronouncement “further harms U.S. businesses and the development of other GSP beneficiary countries by creating confusion and uncertainty.” According to the associations, the complex backpacks and sports bags made for many well-known U.S. brands will not be produced in AGOA or LDC countries in the near future, which means that USTR’s decision will not alter the current commercial and supply chain reality. Indeed, the letter states that the decision to exclude more relevant GSP suppliers “leaves companies with few options but to source from the super-competitive China.” In closing, the associations urged Froman to provide as soon as possible duty-free treatment to subject travel goods made in all GSP beneficiary countries and requested an urgent meeting to “discuss this critically important matter.”