Financial Times

3,400 items can enter US duty-free under US GSP, but Sri Lankan exports paying duty

By Dilshani Samaraweera

Last year nearly US$ 20 million worth of goods from Sri Lanka, that do not have to pay duties under the US GSP scheme, paid duties. Top US trade officials say this can be prevented by informing US importers about the availability of the US GSP for Sri Lanka. Under the US GSP scheme 3,400 items get duty free entry into the US, but so far Sri Lanka is using the scheme to export about 253 products.

“The duty saving, because of the GSP, makes your product less expensive than goods from countries that do not have the GSP. So it is very important for you to inform your buyer in the US that your product comes under the GSP,” said the Executive Director of the US GSP Programme from the office of the US Trade Representative, Marideth Sandler, at an awareness seminar on the US GSP scheme held at the Export Development Board, on Friday.

Most types of textile and apparel items, Sri Lanka’s biggest export to the US, cannot use the US GSP scheme. Most footwear, handbags and luggage also do not qualify. However, many products, such as jewellery, skins, carpets and certain agricultural products, do qualify, adding up to 3,400 items.

The rules of the US GSP scheme are also seen as more flexible than the EU GSP+ scheme. The US scheme requires 35% domestic value addition of products, to qualify for duty free entry into the US, and also allows South Asian countries to collaborate.

“Under the US GSP, for rules of origin, we treat all the South Asian countries as one country. Two or more SAARC countries can work together to produce an export item to meet the 35% rule of origin. The item can be partially manufactured in one country and then sent to the second country in the region for finishing and export,” said Ms Sandler.

This system of ‘regional cumulation,’ is used extensively by the automobile industry in South East Asian countries that also benefit from the US GSP.

However, despite the easier rules, Sri Lanka’s utilisation of the US GSP scheme is still well below potential. “Unlike the EU GSP+, the US GSP rules of origin are very flexible. So this is not the cause for under utilisation of the US GSP,” said the Director General of Commerce, Department of Commerce of Sri Lanka, Gomi Senadhira.

In 2008, Sri Lanka exported US$ 172 million worth of goods into the US, duty free, under the US GSP scheme. Sri Lankan and US trade officials say Sri Lanka’s exports to the US can increase if exporters identify GSP eligible goods and target those markets. This is also expected to help diversify Sri Lanka’s export basket.

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