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USTR Moves Forward with Petitions to Add Travel Goods to GSP

The Office of the U.S. Trade Representative has accepted for review 34 petitions to modify the list of products eligible for duty-free treatment under the Generalised System of Preferences. Of particular importance for mainland Chinese and Hong Kong exporters are various petitions requesting the expansion of the programme to include textile and leather travel goods such as handbags, backpacks, suitcases and similar items classified under HTSUS 4202.11.00, 4202.11.0030, 4202.11.0090, 4202.12.40, 4202.21.60, 4202.21.90, 4202.22.15, 4202.22.45, 4202.31.60, 4202.32.40, 4202.32.80, 4202.92.15, 4202.92.20, 4202.92.45, 4202.99.90, 4202.12.2020, 4202.12.2050, 4202.12.8030, 4202.12.8070, 4202.22.8050, 4202.32.9550, 4202.32.9560, 4202.91.0030 and 4202.91.0090.

As previously reported, 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 the tariff lines under consideration with a 60.5 percent share or US$4,138.1 million of total U.S. imports during January-November 2015. Italy ranks second with a 10.3 percent share or US$701.9 million, followed by Vietnam with an 8.2 percent share or US$564.1 million, France with a 6.4 percent share or US$439.4 million, India with a 2.9 percent share or US$199.3 million, and the Philippines with a 2.5 percent share or US$172.5 million. Hong Kong, for its part, held a 0.4 percent share or US$28.6 million of total U.S. imports of subject merchandise during January-November 2015.

U.S. imports from mainland China of the travel goods under consideration saw little growth last year, falling by 0.1 percent during January-November 2015 after dropping by 0.8 percent to US$4,523.8 million in 2014. By comparison, imports from Vietnam went up by 28.8 percent to US$555.2 million in 2014 and 12.9 percent during January-November 2015, imports from the Philippines increased by 56.8 percent to US$106.3 million in 2014 and 95.6 percent during January-November 2015, imports from India grew by 4.4 percent to US$192.1 million in 2014 and 13.3 percent during January-November 2015, shipments from Thailand advanced 14.1 percent to US$65.4 million in 2014 and 15.4 percent to US$67.9 million during January-November 2015, imports from Bangladesh surged by 212.9 percent to US$14.1 million in 2014 and 157.1 percent to US$29.4 million during January-November 2015, and imports from Cambodia soared by 358.3 percent to US$13.1 million in 2014 and 81.9 percent to US$20.8 million during January-November 2015.

U.S. import duties on the products under consideration are substantial, averaging 11.5 percent in both 2014 and January-November 2015. Duties are high or fairly high for most major and up-and-coming suppliers, including mainland China (13.1 percent average during January-November 2015), India (7.8 percent), the Philippines (9.7 percent), Indonesia (9.0 percent), Thailand (14.1 percent), Bangladesh (8.1 percent) and Cambodia (16.5 percent). This means that eventual duty-free treatment for goods classified under one or more of the tariff lines under consideration 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 travel goods.

USTR is also considering the potential addition to the programme of effervescent wine classified under HTSUS 2204.21.20, essential oils of lemon classified under HTSUS 3301.13.00, and ferromanganese containing by weight more than four percent of carbon classified under HTSUS 7202.11.50, as well as the potential removal from the programme of fluorescent brightening agent 32 classified under HTSUS 3204.20.10 and other fluorescent brightening agents classified under HTSUS 3204.20.80 from India and Indonesia; polyethylene terephthalate resin classified under HTSUS 3907.60.00 from India; and non-adhesive plates, sheets, film, foil and strip classified under HTSUS 3920.62.00 and 3921.90.40 from Brazil.

The addition of essential oils of lemon could negatively impact shipments by third-ranked mainland China, which surged by 926.9 percent to US$6.7 million during January-November 2015. By comparison, shipments by first-ranked Argentina rose 82.8 percent to US$94.4 million during that period. On the other hand, the removal of certain brightening agents from India, which was the largest U.S. supplier of subject merchandise during January-November 2015 with a 16.4 percent share or US$11.5 million, could have a positive impact on fourth-ranked mainland China, which held an 11.9 percent share or US$8.3 million of the U.S. import market.

Moreover, USTR will assess whether to continue the GSP eligibility of the following products by waiving the applicable competitive need limitation: fresh or dried whole dates classified under HTSUS 0804.10.60 from Tunisia; virgin olive oil classified under HTSUS 1509.10.40 from Tunisia; dead single-cell micro-organisms, excluding yeasts, classified under HTSUS 2102.20.60 from Brazil; non-alcoholic beverages, not including fruit or vegetable juices, classified under HTSUS 2202.90.90 from Thailand; rare gases other than argon classified under HTSUS 2804.29.00 from Ukraine; insulated beverage bags with textile outer surfaces classified under HTSUS 4202.92.04 from the Philippines; porcelain or china household tableware and kitchenware in sets classified under HTSUS 6911.10.37 from Indonesia; and parts and accessories of motor vehicles classified under HTSUS 8708.50.95 from India.

A public hearing on these petitions will be held on 3-4 March. Comments, pre-hearing briefs and requests to appear at the hearing are due by 19 February, while post-hearing briefs and comments are due by 25 March. The U.S. International Trade Commission is expected to publish in April a public version of its report on the probable economic effect of the proposed changes. Any modifications that the president may proclaim to the list of GSP-eligible articles resulting from this review would then be effective on 1 July.

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