India’s textile exports is hit due to US legislation for federal procurement stipulating sourcing of raw materials from the designated countries only or US domestic suppliers.
Voicing concern, FICCI has asked Indian Government to take up the issue either bilaterally with US or multilaterally including WTO to resolve the issue amicably.
India exports $20 billion worth of textiles goods and US and European Union are major destinations. Nearly 85 per cent of India’s textiles industry is in the MSME sector employing lakh of people in the country. India propose to take its textiles exports to $50 billion in the next five years and this US law will impede India’s textiles exports in a big way.
The General Services Administration (GSA) of US is responsible for supporting several federal agencies in US with basic functions, including procurement services.
Indian textile exporters have reported that the buyers or companies based in the United States (US) supplying to the US government departments and agencies have halted sourcing their raw materials for the textiles industry from countries like India which are not part of the General Services Administration (GSA) Schedule Contract.
Pursuant to the Buy American Act, the U.S. federal acquisition process is based on preferential treatment of U.S.-made products.
Manufacturers are considered as U.S. products if manufactured in the United States and the cost of U.S. components is more than 50% of the overall cost of all components. Under certain conditions however, the Buy American Act may be waived. The Trade Agreements Act of 1979 (TAA) gives the President authority to waive Buy American Act requirements for certain procurement’s.
So far it has been waived for eligible products in acquisitions covered by the WTO Government Procurement Agreement, some relevant free trade agreements (FTA), as well as for least-developed countries.
As per the TAA, all products listed on the GSA Schedule Contract be manufactured or “substantially transformed” in a “designated country”.
As India does not fit into this category, the US-based buyers have stopped their sourcing from Indian textile manufacturers immediately, impacting the order books and the production lines of some of the major textile exporters.
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