Exporters may route shipments through UAE, Mexico, African countries

Chennai: Exporters in some of the key industries are exploring routing their shipments to the US through countries with basic tariffs like the UAE, GCC, Mexico and some of the African countries. E-commerce exports are also expected to gain traction in the coming days.

Though UAE is a large trading hub, there are several Indian companies which have manufacturing facilities there. India also has a Free Trade Agreement with the UAE and the companies plan to route their products to the US through UAE, said K Unnikrishnan, joint director general, FIEO.

“Many of these companies have been exporting goods produced in the UAE to Africa, the US and Europe. Now they can also route India-made goods also through the UAE,” he added.

These include gems and jewellery makers, textile and apparel manufacturers and food products manufacturers. Apart from UAE, most of the countries in the GCC have lower tariff rates for imports and the US also has charged them with just basic tariffs.

Several Indian gems and jewellery manufacturers also have facilities, including diamond processing units in countries like Botswana, Nigeria and South Africa. These African countries can be used for routing shipments.

Some of the Indian auto component manufacturers with facilities in Canada and Mexico can export products to the US and can route India-made products as well. US-Mexico-Canada Agreement (USMCA) compliant goods from both the countries will attract only zero duty.

However, such re-routed shipments have to go through the scrutiny of Rule of Origin laws. For most of the countries with whom the US has preferential trade, the country has been asking for 40 - 50 per cent of regional value content. Ascertaining the value content will be a humongous task for the US Customs department.

Further, Indian exporters plan to increasingly use e-commerce to ship goods to the US. “Goods priced less than $800 are permitted to enter the US market without any duty and minimal inspection. Chinese companies like Shein and Temu have been using e-commerce routes to strengthen their presence in the US,” said Sanjay K Jain, Chairman ICC National Textiles Committee.

Though currently India’s e-commerce exports are valued at only $4-5 billion, this route may gain traction in the coming days, especially to the US.