The new trade agreement between the United States and India will eliminate tariffs on natural diamonds and gemstones cut in India—but that may not take effect for another month.
A joint statement from the two governments, issued Friday, confirmed that the U.S. plans to eliminate duties on goods in the White House’s Annex III—which includes cut-but-not-set natural diamonds and gemstones. The phase-out will occur after “the successful conclusion of the [U.S.-India] Interim Trade Agreement,” the statement said.
When will that interim agreement be signed? “We don’t know how long it will take,” Sara Yood, president and CEO of the Jewelers Vigilance Committee, tells JCK.
In an interview, India’s minister of commerce and industry Piyush Goyal said the signing should happen “sometime in March. We’ll have to match calendars and schedules.”
For now, natural diamonds and gemstones remain subject to the 25% “reciprocal” tariff the United States imposed Aug. 1. The rate was lowered from 50% last week, when the United States removed the 25% penalty it had added on India for buying Russian oil.
According to a release from India’s Gem & Jewellery Export Promotion Council (GJEPC), jewelry exports to the U.S. will now be taxed at a 31% rate—which includes the current 25% “reciprocal” tariff plus the longstanding 6% Most Favored Nation (MFN) duty on Indian finished jewelry (which does not apply to unset diamonds or gems).
The U.S.-India deal calls for American tariffs on Indian imports to be lowered from 25% to 18% following the conclusion of the interim agreement. After that, Indian jewelry imports will incur a 24% levy, which includes the new 18% rate plus the 6% MFN duty, the GJEPC said.
However, jewelry cast in the United States is considered of U.S. origin, due to the doctrine of “substantial transformation,” even if the gems are set and the piece is finished in India. Those goods will continue to incur no import duties.
Loose lab-grown diamonds are not included in Annex III, which is limited to natural products that cannot be produced in the United States. Once the interim deal is signed, they will be subject to an 18% tariff but not the extra 6% MFN duty, according to the GJEPC.
Where Things Stand
Current U.S. tariffs on Indian imports (effective Feb. 7):
Jewelry* – 31% (25% “reciprocal tariff” and 6% MFN)
Cut and polished natural diamonds – 25%
Lab-grown diamonds – 25%
Future U.S. tariffs on Indian imports (after interim agreement is signed):
Jewelry* – 24% (18% “reciprocal tariff” and 6% MFN)
Cut and polished natural diamonds – 0%
Lab-grown diamonds – 18% (“reciprocal tariff” only)
* Excludes jewelry that’s been cast in the United States
(Top picture: Getty Images)
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