Dec 29, Colombo: The expiration of US Generalized System of Preferences (GSP) for Sri Lanka on 31 December has only a marginal impact on the country 's exports to US, the Ministry of Industry and Commerce said.
The US Embassy in Sri Lanka Friday said the GSP program will lapse at the end of the year since the U.S. Congress did not re-authorize GSP before adjourning for the year.
Following the announcement, Sri Lanka's Minister of Industry and Commerce Rishad Bathiudeen said the lapse of the U.S. GSP program for 2018 does not affect Sri Lanka's trade with the U.S. in a significant way.
"What is important to understand is that this non-renewal of US GSP does not affect our US trade in a significant way and impact is even lower when it comes to total national exports," the Minister said. Clarifying on Sri Lanka's US GSP expiration at a meeting with the Ministry officials on Friday
The U.S. Embassy said the immediate effect of GSP expiration is GSP eligible imports to the United States from Sri Lanka and other GSP beneficiary countries and territories will be subject to non-preferential duties beginning January 1, 2018.
Minister Bathiudeen said the only one fifth of Sri Lanka's exports to US could be temporarily impacted by this routine event.
According to the Minister, Sri Lanka's leading exports to U.S. at an annual value of US$ 2 Billion is not at all affected since apparel exports to US do not come under GSP.
Only around 20-25% of total exports to US, come under GSP. Most such GSP eligible exports from Sri Lanka to US are smaller value items such as travel bags, certain leather products and some pneumatic tire types.
Also some Lankan exporters don't claim the GSP entitlement and therefore the actual value of "affected exports to US" is around one fifth of total annual exports to US from Sri Lanka- around 20% at US$500 million to US$570 million, the Minister explained.
The expiration is not only for Sri Lanka but includes many other countries, taking place at the same time. Sri Lanka has one of the highest US GSP utilization rates among other US GSP beneficiaries -at around 85%.
Sri Lanka's trade with US shows a positive trend this year in comparison to 2015 and 2016.
According to the Department of Commerce, the U.S. is world's largest buyer of Sri Lankan exports. Total Sri Lanka - US trade remained unchanged in both 2015 and 2016. In both 2015 and 2016, total bilateral trade was at US$ 3.3 billion.
The U.S. purchased 27% of Sri Lanka's overall exports at an unchanged value of around US$ 2.8 billion, in each 2015 and 2016. Apparel products were Sri Lanka's biggest export item to U.S., taking 75% of Sri Lanka's exports in 2016 (at US$ 2.1 billion).
The total US-Sri Lanka bilateral trade from January to November this year 2017 has increased to US$ 3.41 billion compared to last year's trade total of US$3.3 billion. Of this year's US$3.41 billion trade with US until November Sri Lanka exports amounted to US$ 2.64 billion.
According to the Department of Commerce, apart from apparels, the other Lankan export items to US in 2016 were tires and tea. Main import items from US to Sri Lanka were preserved oils such as sunflower, soya etc, various technical instruments (Optical, photographic, precision, medical etc.) and plastics. Total imports from US in 2015 was at US$ 470.8 million and it increased by 15% to US$ 540 million in 2016.
Sources from the Department of Commerce confirmed despite the expiration, the issuance of US GSP entitlement certificates by the Department will continue as usual and with changes to the present procedure.
It was also revealed that this GSP expiration appears to be another regular event since the US GSP is routinely reauthorized every year and "the expiration takes place before reauthorization that arrives a few weeks later."
The GSP entitlement for Sri Lanka and other beneficiary countries could be renewed and returned as soon as the US Congress re-authorizes it.
The direct beneficiaries of US GSP are US manufacturers who can avail input material for their productions at low or no duties, indirect beneficiaries being Lankan exporters. Once the reauthorization takes place, the US importers who applied for the Certificates from Colombo and earned it, can submit their claims and collect benefits at their end retroactively, the Ministry of Industry and Commerce said.