Indian Exporters Explore Alternative Routes to Bypass Tariffs and Boost US Shipments
In response to increasing tariffs and shifting global trade dynamics, Indian exporters in key sectors are increasingly looking for alternative export routes to the United States, including trade allies such as the United Arab Emirates, other Gulf Cooperation Council (GCC) countries, Mexico, and certain African countries.
Leveraging FTAs and Overseas Facilities
Many Indian companies already have manufacturing facilities in the UAE, a well-known trading hub with which India has a Free Trade Agreement (FTA). These facilities, which were previously utilized to export commodities to Africa, Europe, and the United States, are now considered as crucial locations for rerouting Indian-manufactured products through the UAE to benefit from cheaper tariffs.
K Unnikrishnan, Joint Director General at the Federation of Indian Export Organisations (FIEO), highlighted that sectors such as gems and jewellery, textiles, apparel, and food products are among those actively exploring this approach. “The UAE offers a base with minimal tariffs, making it a feasible transit point for goods headed to the US,” he noted.
Africa and North America as Strategic Trade Points
African countries like Botswana, Nigeria, and South Africa—where several Indian gem and diamond processing units are located—are also seen as potential transshipment points. Similarly, auto component manufacturers with facilities in Mexico and Canada are exploring exports of India-made products through these countries, which fall under the US-Mexico-Canada Agreement (USMCA). This route offers the benefit of zero duty for qualifying products.
Rule of Origin: A Regulatory Challenge
Despite these opportunities, exporters must navigate the onerous “Rule of Origin” rules imposed by US Customs. Goods that pass through these trading partners must meet regional value content requirements, which normally vary between 40% and 50%. Determining and confirming compliance can be difficult and resource-intensive.
E-commerce: A Growing Export Channel
Indian exporters are also turning to e-commerce as a cost-effective and tariff-free way to reach US consumers. Under current US regulations, shipments valued under $800 can enter duty-free with minimal inspection—an approach that Chinese firms like Shein and Temu have successfully exploited. According to Sanjay K Jain, Chairman of the ICC National Textiles Committee, India’s e-commerce exports, which are now valued at roughly $4-5 billion, are expected to rise significantly, particularly in the US market.
While these alternate methods present exciting opportunities, exporters must carefully consider compliance, cost effectiveness, and logistical viability. Despite shifting trade restrictions, Indian businesses can grow their global footprint and increase their position in important areas if they employ the proper strategy.