India Warns of Impact from Proposed US Tariffs

Indian jewelry
Indian jewelry

India’s jewelry industry could lose business to rivals such as China and Mexico if the US goes ahead with its proposed new tariffs on the sector, industry leaders warned this week.

Fresh import duties would jeopardize jobs and the well-being of the industry in both India and America, officials from the southern Asian nation said Monday in a meeting with the US Trade Representative (USTR).

The calls come after the USTR threatened to levy punitive tariffs of up to 25% on 17 jewelry categories originating in India, as well as on certain goods from other countries. The action, which it announced in March, was a response to e-commerce taxes in those jurisdictions that targeted online retailers. The proposed tax excludes loose diamonds.

Around 140 members of the Indian trade submitted petitions against the move before the April 30 deadline, the Gem & Jewellery Export Promotion Council (GJEPC) said Tuesday. The USTR allowed a panel of industry representatives to present comments at the virtual meeting.

Leading the delegation, GJEPC chairman Colin Shah argued that India had already seen a decline in gold-jewelry exports to the US after losing its preferential trade status with the US around 15 years ago. The latest move would exacerbate the situation, he insisted.

“Further [duties] on jewelry will accelerate that drop, and the beneficiaries will be China and Mexico,” Shah told USTR officials.

While Indian jobs would shift to other countries, US jewelry companies would miss out on the long credit and memo facilities that Indian suppliers offer, Shah added. In addition, India jewelry companies operate an estimated 500 offices across the US, employing thousands of locals, he asserted.

India’s exports of gold jewelry to America fell 22% from $1.9 billion in 2007 to $1.49 billion in 2019, according to a report the GJEPC released in March.

Source: Diamonds.net

India Says Slump in Diamond Exports Is Much Worse Than 2008

India diamond

Diamond exports from India, which polishes about 90% of the world’s rough diamonds, will collapse by as much as a quarter this year as the pandemic crushes demand and breaks supply chains.

Overseas sales of cut and polished diamonds may slump 20% to 25% in the year ending March from $18.66 billion last year, according to Colin Shah, chairman of the Gem & Jewellery Export Promotion Council. That will push exports to the lowest in data going back to the 2009 fiscal year on the association’s website.

“In 2008, things were bad for a quarter and business recovered after that,” Shah said in an interview. “This is now two quarters gone.” While festivals such as Diwali, Christmas and Valentine’s Day will prop up demand in the next six months, that won’t be enough to lift full-year exports, he said.

Losing Luster

India imposed one of the world’s strictest lockdowns in March to contain the coronavirus outbreak. That brought activity to a halt and put the economy on course for its first annual contraction in more than four decades. With more than 7 million infections, the country is one of the world’s virus hot spots.

The measures to control the pandemic meant production centers were closed or operating at very low levels, and rough-diamond imports fell in line with poor end-product demand. The country’s diamond exports sank 37% to $5.5 billion in the six months through September from the year-earlier period.

Workers have now started returning to the diamond-polishing hubs of Surat, Mumbai and Kolkata, and factories are operating at 70% to 80% of capacity with social-distancing norms in place, Shah said. Still, it’s difficult to predict global supply chains as rules to control the virus change frequently, he said.

Uneven Recovery

The International Monetary Fund warned this week the world economy faces an uneven recovery until the virus is tamed. Chinese consumers are starting to spend again, while in Europe, the luxury sector is back near pre-pandemic levels despite a surge in Covid-19 cases that’s hurting normal tourism.

De Beers sold about $467 million of rough diamonds in its eighth sales cycle of 2020, Anglo American Plc said Wednesday. Sales improved compared with $334 million in the previous cycle, and $297 million during the same cycle in 2019.

“We continue to see a steady improvement in demand for rough diamonds in the eighth sales cycle of the year, with cutters and polishers increasing their purchases,” said Bruce Cleaver, chief executive officer of De Beers. “But these are still early days and there is a long way to go before we can be sure of a sustained recovery in trading conditions.”

Source: bloomberg

India Extends Deadline for Duty-Free Reimports

Polished diamonds

The Indian government has granted diamond companies extra time to ship polished goods back to the country without incurring customs duty.

At present, reimports are subject to the 7.5% levy once the diamonds have been outside India for three months. The Central Board of Indirect Taxes and Customs (CBIC) has extended the deadline by a further three months for all parcels for which the cutoff date was previously between February 1 and July 31, it said Friday.

The country’s Gem & Jewellery Export Promotion Council (GJEPC) had been lobbying for the change after the Covid-19 pandemic delayed the return of goods companies had sent overseas for grading and other services.

“The latest notification on the extension of three months on reimport of certified diamonds is a great respite for our exporters,” said GJEPC chairman Colin Shah.

Last week, the council urged the government to reduce customs duty on polished to 2.5%, arguing that the move would boost India’s status as a hub for trading and distribution of diamonds.

Source: Diamonds.net

India Extends Import Curbs as Surat Shuts Again

Melee grading at De Beers Group

Indian trade bodies have recommended continued limits on rough-diamond imports in July, with a fresh weeklong shutdown of the Surat cutting sector adding to concerns about the market.

The Gem & Jewellery Export Promotion Council (GJEPC) and four other organizations have called for the industry to avoid shipping rough into the country between July 10 and 31. They are giving companies a window of July 1 to 9 in which to import goods to keep factories operational, and will review the policy in the final week of the month, the groups said in a letter to members Tuesday.

“Over [the] last few weeks, manufacturing operations have commenced, albeit under several constraints because of issues [such as social distancing],” they noted. “In view of this, it was generally felt that some new raw materials would be needed for continuing operations and keeping the labor force employed.”

Weak polished demand during the coronavirus pandemic led to fears of a diamond oversupply, prompting the GJEPC, the Bharat Diamond Bourse, the Mumbai Diamond Merchants Association, the Surat Diamond Bourse and the Surat Diamond Association to call for a rough-import pause for a month from May 15. They later delayed it to June 1 so companies could complete outstanding shipments.

These initial curbs have helped reduce stockpiles and manage cash flow, while miners have also offered support by being flexible with contract clients’ purchasing obligations, the groups added. The GJEPC will write to the large rough producers, urging them to continue that policy to avoid a collapse in the value of inventory, the letter stated.

However, the industry must still “proceed with great caution,” the organizations warned following a Saturday meeting with trade members.

“It is difficult to say when the Indian diamond industry will be fully operational,” said GJEPC chairman Colin Shah. “The industry [has] resumed manufacturing activities in a limited way, while maintaining all the stringent safety norms. But these are unprecedented times.”

The trade must, therefore, strike a delicate balance between continuing operations and maintaining workers’ livelihoods on the one hand, and ensuring health and safety on the other, Shah added.

Surat closure

The sector suffered a setback on Monday when the Surat Municipal Corporation ordered the closure of all diamond-manufacturing units in the city for seven days, according to a note the Surat Diamond Association released on Tuesday. More than 700 diamond workers in Surat have tested positive for Covid-19 in recent weeks, with the polishing industry becoming a local virus hot spot, the Deccan Herald reported.

Diamond cutting in India has struggled to restart, even after the government relaxed the lockdown rules it introduced in March to contain the coronavirus. The Surat sector gradually reopened in May following a full closure, with the government allowing 50% of workers in factories and 33% in offices. But several outbreaks at manufacturing units have forced companies to shut again and send workers into quarantine.

Local media have carried reports of staff members attending work while unwell, with communal meals and the use of air-conditioning intensifying the risk of infection.

China dispute

Adding to the troubles, a diplomatic rift with Beijing has led to unsold memo goods being held up at Indian customs on their return from Hong Kong and China, traders told Rapaport News. The Indian government has reportedly told customs officials to check all imports from China following a June 15 military clash in a disputed Himalayan border region that killed 20 Indian soldiers and caused an unknown number of Chinese casualties.

Companies might need to route goods via other locations such as Dubai at extra cost to avoid the bottleneck, an executive at a diamond manufacturer explained.

“We have been instructed [by customs agents] not to export anything, specifically diamonds, from Hong Kong to India, as customs have completely refused to release those parcels,” he said. “I see a problem escalating, and if this situation doesn’t get under control in the next two or three weeks, there definitely will be an issue.”

Source: Diamonds.net

World’s diamond polishing hub loses its shine as demand plummets

Indian diamond polishing

The world’s diamond polishing hub, Surat, is staring at a potential crisis as demand is lowest since 2008 and around 100,000 people have lost work since December 2018, according to Surat Diamond Association.

Several industry leaders and a senior government functionary said the current slowdown began in November 2018 when demand for diamond jewellery went down, has gone from bad to worse on account of global factors, the high price of rough diamonds, and a liquidity crunch on account of banks not lending for a prolonged period.

The Surat diamond industry accounts for 80% of the world’s polished stones with an annual turnover of about Rs 1 lakh crore and employees around 700,000 people, according to the association and Gujarat Diamond Workers Union. “Ten years back, if the polished diamonds prices were down by 25%, then that of rough stones was down by 50%. So the availability of raw material at cheaper rates allowed Surat traders to make a comeback in some time,” says Savji Dholakia, promoter of one of Surat’s biggest diamond manufacturing and exporting units, Hari Krishna Exports.

“For the first time in the over five-decade history of this industry, the prices of rough diamonds have remained inflated for almost a year. My sense is that if there is no correction in the prices soon, the Surat diamond industry may have to go through its toughest patch in which factories having strong finances will survive,” Dholakia added.

Dinesh Navadia, chairman of the Gems and Jewellery Export Promotion Council (GJEPC) said the United States-China trade war, and devaluation of Yuan has further fuelled the crisis in recent weeks. “China exports over 42% diamonds polished by Surat, and it further exports jewellery to US. In turn, the US accounts for 40% Chinese diamond jewellery. But prevailing trade war between two superpowers has disturbed this equation, leading to sluggish demand,’’ he said.

According to the GJEPC’s April-July report, the rough diamond import compared to last year in the same period was down 28%. “From ~42,247 crore in April-July 2018, import of rough diamond is down to ~31,266 crore this year. Similarly, export of polished diamond has declined by 17% year-on-year for the April-July period,” the report said.

Nitin Patel, deputy chief minister of Gujarat, admitted that the industry was going through a rough patch and the government was trying to provide all possible help. “We have several round of talks with the industry and are providing whatever assistance we can,” he said. A Gujarat government official privy with the discussions said that diamond traders want exemption from import duty on gold and capital gains tax in addition to easy mode of finance to tide over the current. “Most of the issues are related to Central government,” he said.

The diamond traders say they are also suffering as banks have cut down on lending in the current financial year because of rising non-performing assets (NPAs). While the big factories have managed to stay afloat by decreasing their production well below the capacity, the smaller players have been hit hard, Navadia said.

“Nearly 30 % of the 4,000-odd small and medium factories operating in Surat have gradually downed the shutters after the Diwali vacation last year,” Bhavesh Tank, vice-president of the Gujarat Diamond Workers’ Union. Workers, a majority of whom are from parched rural areas of Saurashtra, have been finding it difficult to sustain their livelihoods. “Joblessness so far has affected average performer. The big firms have been trying to retain only highly skilled workers,’’ said Babu Gujarati, president of the Surat Diamond Association (SDA).

Govind Adhiya, a 30-year-old diamond polisher, is ready to pack his bags and go back to his hometown of Rajula in Saurashtra. The resident of Varachha, a neighbourhood of small lanes and cramped bylanes for polishers, has been without work for nearly two months and his future doesn’t look any brighter.

“In 2008, during the time of global recession, I had just finished my training in diamond polishing and found myself jobless. I had to go back to my native home. This time it is a double whammy as now I also have a family to support,” said Adhiya.

He was among 250 others employees of small diamond polishing factories, who were first asked to go home on summer vacation and were never called back to work. “Unexpectedly, they [factory owners] announced summer vacation. And since I have not heard from by employer’’, said Rakesh Patel, another worker at the diamond polishing unit in Surat.

Jignesh Chotai and several others who worked in two-shifts are now doing only one shift. “In one shift also, there is not too much of work. I do not know how I would pay school fees of my two kids if things don’t improve,’’ Chotai said.

“About one lakh [100,000 of total 700,000 workers] have been rendered jobless since last Diwali,’’ Tank said. “Most of them [who have lost jobs] used to take up polishing work from small factories on contract basis. Most of these factories have also closed down.” To prevent a repeat of the 2008 meltdown, Navadia said this time the big firms are trying to distribute work among workers and are trying to minimise layoffs. “Firms have also lowered the salaries to minimise job losses,” he said.

Source: hindustantimes