Express exports to US show 'small dips' after tariff, says EICI CEO

EICI CEO Vijay Kumar discusses the impact of the 25% tariff on Indian express exports to the US, noting small dips

The Indian express logistics industry has experienced “small dips” in its shipments to the US since the 25 per cent tariff came into effect earlier this month. However, any real impact will only become evident after a lag of several months, Vijay Kumar, Chief Executive Officer of the Express Industry Council of India (EICI), told Business Standard in an interview on Tuesday.

 

The industry has an annual turnover of around USD 9 billion, with 70 per cent of its business coming from the domestic market and the remaining 30 per cent from international trade. Of the international share, about 20 per cent involves shipments to and from the US.

 

Since August 1, Indian exports to the United States have been subject to a 25 per cent reciprocal tariff. From August 27, an additional 25 per cent penalty—linked to India’s continued purchases of Russian oil—will come into force, effectively doubling the levy to 50 per cent on most shipments.

 

When asked about the impact of the existing tariff on exports handled by express logistics companies, Kumar said, “It is too early for me to comment. About 20 per cent of our international trade is with the US, and not all products shipped there are covered by this tariff. Electronics and pharmaceuticals are excluded. But yes, some of the products we carry—such as textiles, leather, and handicrafts—will be affected.”

 

He added, “There will always be a lag from the time the tariff kicks in. It started earlier this month. The actual impact depends on how exporters price their products after discussions with their US customers.”

 

According to Kumar, the lag could last a few months, and early signs already point to “small dips” in shipments. “I have gathered this from discussions with various members,” he said. When asked if “small dips” meant a 5-10 per cent fall, he replied, “It is very difficult for me to give a number. These are anecdotal and subjective.”

 

“Currently, a 25 per cent tariff is in place in India. Compared to China, we still have an average five per cent advantage. For this reason, we are not seeing too much impact yet. What happens on August 27, no one knows,” Kumar said.

 

The tariff from the US government applies to a wide range of products, including textiles, gems and jewellery, auto components, machinery, seafood, and leather goods, though pharmaceuticals and smartphones have been exempted, offering some relief. EICI's members—which include players like Blue Dart, UPS, FedEx, and DTDC—comprise about 80 per cent of the total industry turnover.

 

The express logistics industry currently falls under the 12 per cent GST slab. When asked about the government’s proposal to have just two GST slabs—5 per cent and 18 per cent—from October this year, Kumar said, “First, we would prefer it to be five per cent because the lower the rate, the better it is for all the players concerned. Second, whatever the rate is, the other logistics players in the space (normal transporters, freight forwarders, etc.) should also have a similar rate. It would be fair play.”

 

Currently, other players such as freight forwarders come under the 5 per cent slab but do not receive the benefit of abatement, unlike the express logistics industry, which does. Kumar added that if express logistics is also brought under the 5 per cent slab, the abatement should be retained. Abatement is a mechanism that reduces the taxable value of goods or services—GST is applied only on the smaller, abated portion of the transaction value, thereby lowering the overall tax liability.

 

He stated that more than the rate change, the bigger concern for the express logistics industry is the frequent procedural changes introduced by the GST authorities through circulars. “We have huge networks, and implementing these changes takes a long time. That is why there needs to be certainty in policy, and such changes should be minimised,” he added. 

A report by EICI and consultancy firm KPMG on Tuesday evening called for overhauling tax and regulatory frameworks to unlock the full potential of India’s express delivery sector. It said measures such as revamping the GST regime and the e-way bill system, including removal of multiple GST registrations and duplication of data, could save the industry significant time and resources.

 

The study stressed that a robust policy framework is essential to sustain the sector’s growth, even as government investments in infrastructure and initiatives like the foreign trade and e-commerce policies provide a boost. It recommended closer collaboration between industry players, policymakers and regulators to address operational bottlenecks.

 

Other proposals include integrating urban freight planning into city development to expand delivery services without straining the urban environment, and revising the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010. Bringing express cargo on par with general cargo, coupled with favourable rules for reverse logistics, could further accelerate cross-border e-commerce, the report added.