Indian Jewelry to Become More Expensive

By Rob Bates -- JCK Online, 8/1/2007 2:00:00 AM

Jewelry from India and Thailand imported into the United States will now bear a 5.5 per-cent duty, the result of changes being made in America's Generalized System of Preferences, which aims to help developing countries by lowering their import tariffs.

Sterling Jewelers Inc. and associations like Jewelers of America lobbied against the move to reimpose the duty, which was made by the Bush administration in June. The decision had been expected for some time but was unexpectedly postponed at the end of last year when the GSP program was renewed. (See “Indians and Thai Jewelry Industries Threatened by GSP Fate,” JCK, November 2006, p. 31.)

India has imported its jewelry duty free since 2001, and Thailand has not had a duty for “decades,” reports say. The reinstated 5.5 percent levy, which went into effect in July, will make Indian jewelry more expensive, manufacturers complain. “Consumers will get less for their money,” says Basant Johari of the Indian Diamond and Colorstone Association, noting that the duty's lifting led to tremendous growth in the Indian jewelry industry.

Elizabeth Chatelain, of the Indo-Argyle Diamond Council, predicts there will be an “adjustment period” as retailers and manufacturers squabble over who will absorb the price increase. “The volume retailers don't want to absorb 6 percent, so they will probably negotiate how much they want to pay,” she says. “It will probably take a good year for a manufacturer to pass those costs on to the retailer. But that 6 percent has to come from somewhere.”

The move will likely be a boon for China, the other jewelry-manufacturing country known for its low labor costs, which has always had the 5.5 per-cent duty. It also comes at a time when the strengthening of the rupee is adding additional costs to Indian manufacturers. “It is a double whammy in certain ways,” Chatelain says. “It will affect business a bit, but we will survive this. Every year since we started doing this, finished jewelry imports have increased.”

Chatelain thinks this will eventually cause India to turn away from U.S. retailers to their own domestic market. “The U.S. retailer is no longer the low-hanging fruit,” she says. “The smart Indian companies are saying, I can sell domestically and not worry about all these issues and have more profit.”

Initially, some industry organizations, like Manufacturing Jewelers and Suppliers of America, had asked for the duty to be reimposed, since India has duties on U.S. imports. But eventually MJSA reversed itself and said it would push for GSP renewal if India reduced its jewelry tariffs within two years.