Import Licensing: Leading ICT Firms Seek US Intervention Say India’s Decision Intended to Force Firms to Participate in PLI 2023

Import Licensing: Leading ICT Firms Seek US Intervention Say India’s Decision Intended to Force Firms to Participate in PLI 2023

The businesses have come forward in unison to note how the licencing system would impact imports of goods made by U.S. businesses, including certain goods developed in the U.S.

Leading ICT companies from around the world, like Apple, Amazon, Google, and Microsoft, have strongly protested India’s decision to licence the import of laptops, tablets, personal computers, and servers starting on November 1 to the U.S. government.

Eight industry groups, including AMD, HP, Dell, Intel, Cisco, Samsung, IBM, Meta, and Micron, have written to Katherine C. Tai, the U.S. Trade Representative, and Gina M. Raimondo, the U.S. Secretary of Commerce. According to them, the Indian government should reconsider implementing this policy, and the U.S. government should initiate a stakeholder engagement to request opinions from businesses and all pertinent stakeholders formally.

According to the industry organisations, the obvious conclusion is that the action is meant to increase local manufacturing and pressure businesses to take part in the government’s production-linked incentive (PLI) programme.

The businesses have come forward in unison to note how the licencing system would impact imports of goods made by U.S. businesses, including certain goods developed in the U.S. One company has stated that this import licence would prevent them from exporting computers from the U.S. to India with pre-loaded software intended to facilitate manufacturing at multiple facilities in India, which is another illustration of how this measure will negatively impact U.S. manufacturing investment in India.

The businesses have emphasised that import licencing regulations place a severe risk on the sizeable investment made by U.S. businesses in data centres in India. The data centre investments are expected to suffer if the licencing regulations impede server imports, negatively affecting India’s I.T. sector and all Indian stakeholders who use this technology.

The proposal, introduced without previous warning or public input, may dramatically disrupt trade, obstruct attempts to integrate India into global supply chains further, and hurt firms and consumers in both nations, according to the industry organisations.

In a significant development that has ruffled the feathers of the Information and Communication Technology (ICT) sector globally, leading firms have sought intervention from the United States government.

This comes in response to India’s recent decision to introduce a stringent import licensing regime for certain ICT products. These companies allege that the decision is intended to compel international firms to participate in India’s Production Linked Incentive (PLI) scheme.

The Government of India recently introduced an import licensing regime, requiring foreign manufacturers to obtain licenses before importing certain ICT products.

According to the government, this move aims to boost domestic manufacturing, foster innovation, and reduce import dependency. However, several multinational companies view this as a de facto trade barrier erected under the guise of promoting domestic industry.

India’s Production Linked Incentive (PLI) scheme aims to encourage companies to manufacture their products in India by offering them incentives for incremental sales from products manufactured in domestic units.

The government expects this scheme to attract significant investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking, and Packaging (ATMP) units.

Leading ICT firms argue that India’s import licensing decision is not a standalone policy but is tied to a broader agenda to force foreign firms to participate in the PLI scheme. These companies allege that the new licensing requirements are onerous and may serve as a non-tariff barrier to trade. They also contend that these moves contravene World Trade Organization (WTO) rules and have therefore sought intervention from the United States government.

In response, the United States Trade Representative (USTR) office has initiated talks with its Indian counterparts. The U.S. government is keen to ensure that the policy does not create an unfair advantage for Indian manufacturers at the cost of international players.

The dispute has broader implications for global trade, potentially affecting the delicate balance of the WTO and international relations between key players like the U.S., China, the European Union, and India.

Firms argue that compulsory participation in the PLI scheme places them at a competitive disadvantage, as it mandates significant investments in setting up manufacturing operations in India. Companies are worried about the logistical and operational challenges of re-arranging global supply chains to accommodate extensive manufacturing operations in India.

The sudden introduction of the import licensing regime has been viewed as abrupt and unpredictable, raising concerns about the regulatory stability in India.

The Indian government, on the other hand, maintains that the policy is aimed at fostering domestic industry growth and is in line with the ‘Make in India’ initiative. Officials argue that the PLI scheme is voluntary and not mandatory for foreign companies.

A high-level dialogue between the U.S. and Indian governments could lead to a negotiated settlement that balances India’s interest in promoting domestic manufacturing with the concerns of foreign ICT firms.

If a bilateral resolution is not achieved, the matter could escalate to the WTO, where a neutral decision may be made through its dispute resolution mechanism.

Introducing India’s import licensing regime for ICT products has stirred a global debate. Leading ICT firms are up in arms over what they perceive as a forceful move to make them participate in India’s PLI scheme. As the U.S. government steps in to negotiate, the world watches closely, aware that this dispute’s outcome can redefine trade relations and the global ICT supply chain.