the european union’s generalised system of preferences - gsp

8/8/2019 The European Unions Generalised System of Preferences - GSP

1/20

The European Unions

Generalised System of Preferences

GSP

European Commission | Directorate- General for Trade


2/20

SvenTorfinn/P

anosPictures


3/20

Contents

What is GSP?

Chronology

Structure of the EU's GSP

> The general arrangements

> The special incentive arrangements for the protection of labour rights

> The special incentive arrangements for the protection of the environment

> The special arrangements for least developed countries

> The special arrangements to combat drug production and trafficking

Rules of origin

Cumulation of origin

How does an importer get the GSP benefit?

How the GSP is managed

Further information

2

3

4

5

6

7

8

9

10

11

12

15

17


4/20

What is GSP?

Trade policy plays a key role in the European Union (EU)'s relations with

the rest of the world and the EU is one of the most important actors in

international trade, accounting for a fifth of all world trade. The EU

strives to include developing countries more fully into the world trade system so

that all countries may share its potential benefits.

The EU's common commercial policy must be consistent with and consolidate

the objectives of development policy, in particular the eradication of poverty and

the promotion of sustainable development in the developing countries.

Trade has proved to be one of the most effective tools to foster development.

Increased trade with developing countries will enhance their export earnings,

promote their industrialisation, encourage the diversification of their economies

and accelerate their economic growth. The classical instrument for achieving

these objectives is tariff preferences, which provide an incentive to traders to

import products from developing countries and thus help them to compete on

international markets. Such tariff preferences should be sufficiently attractive

in order to motivate traders to use the opportunities offered by the scheme.

In 1968, UNCTAD recommended the creation of a Generalised System of

Preferences under which industrialised countries would grant autonomous trade

preferences to all developing countries.

The EU's generalised scheme of tariff preferences (GSP) offers lower tariffs or

completely duty-free access for imports from 178 developing countries and

territories into the EU market. The EU's scheme grants special benefits for the

49 least developed countries and to countries implementing certain labour or

environmental standards. The EU grants the preferences without asking for

concessions from the beneficiary countries. In 2002, EU imports benefiting fromGSP preferences amounted to EUR 53 billion.

2 | EUROPEAN UNION | GSP |


5/20

| THE EUROPEAN UNION S GENERALISED SYSTEM OF PREFERENCES | GSP | 3

1968

The United Nations Conference on

Trade and Development (UNCTAD)

recommended the creation of a

Generalised System of Preferences

under which industrialised countries

would grant trade preferences to all

developing countries.

1971

Contracting parties to the General

Agreement on Tariffs and Trade

(GATT) approved a waiver to the

most-favoured-nation clause of theAgreement and in 1979 adopted the

so-called enabling clause, creating

the legal framework for the

Generalised System of Preferences,

and authorising developed countries

to establish individual GSP schemes.

1971

The European Community

implemented its first GSP scheme.

GSP was applied in the framework of

10-year programmes, through differentregulations for industrialised products,

textile products, agricultural products

and those covered by the European Coal

and Steel Community (ECSC) Treaty,

adopted on a yearly basis.

1995

The present 10-year cycle began

in 1995 and will expire in 2005.

A single multiannual regulation

now covers all products.

2002

A new GSP regulation, the third of

the 10-year cycle, (Council Regulation (EC)

No 2501/2001 as last amended by Council

Regulation No 2211/2003) implements the

current scheme from 1 January 2002 to

31 December 2005. New guidelines for the

next 10-year cycle 2006-2015 are currently

being prepared.

Chronology


6/20

Structure of the EU's GSP

The availability of tariff preferences as well as their scope depend on the

arrangement enjoyed by the beneficiary country of the exporter in which the

products originate.

Arrangements

Five arrangements are available for beneficiary countries under the GSP:


> The special incentive arrangements for the protection of labour rights

> The special incentive arrangements for the protection

of the environment

> The special arrangements for the least developed countries

> The special arrangements to combat drug production and trafficking

Each of the different GSP arrangements includes different products, which are

listed in Annex IV of the Regulation. Different arrangements may grant different

tariff preferences for the same products. The availability of tariff preferences as

well as their extent therefore depend on the arrangement enjoyed by the

beneficiary country.

Beneficiary Countries

Beneficiary countries are developing countries, i.e. those which are members

of the Group of 77. Beneficiary countries also include China, the so-called

economies in transition that appeared after the break-up of the Soviet Union, as

well as dependent territories with a level of development similar to that of

developing countries. The scheme includes 142 beneficiary countries and

36 territories. Certain beneficiary countries of the GSP, for example the ACPcountries, enjoy at the same time other preferential arrangements. It may be

assumed that traders use the most favourable treatment.

Originating products

To be eligible for preferential tariff treatment under the EU's GSP scheme,

products have to originate in a GSP beneficiary country. Preferential rules of origin

for the GSP determine whether or not goods produced in the beneficiary

countries are eligible. The country also has to benefit from GSP arrangements

which include those products. The GSP covers only products which aredutiable1. It is, of course, not possible to grant tariff preferences for imports of

products for which the Most Favourite Nation (MFN) duty 2 is already zero.

Furthermore, the GSP does not include import of products of Chapter 93 (arms

and ammunition) of the EU's Common Customs Tariff.


(1)

Products which

outside a

preference

scheme would

face a tariff rate

greater than zero.

(2)

Duty applied by

the EU on theimports from

third countries

(WTO members),

according to the

Common

Customs Tariff.


7/20


Purpose

The General Arrangements offer the basic preferential treatment to beneficiary

countries.

Products covered

The general arrangements cover roughly 7000 products, of which 3250 are

classified as non-sensitive and 3750 are classified as sensitive products. The

sensitivity of products is determined by the situation of the sector manufacturing

the same products in the Union. Sensitive products still require a higher border

protection, while non-sensitive products can compete with duty-free imports

from developing countries.

Benefits

The tariff preferences offered by the general arrangements differ according to the

sensitivity of the products concerned: non-sensitive products enjoy duty freeaccess to the EU market, while sensitive products benefit from a tariff reduction.

These arrangements provide, as a rule, for a reduction of MFN ad valoremduties

by a flat rate of 3,5 percentage points. An important exception to this rule of a

flat rate reduction is the textiles and clothing sectors which enjoy a percentage

reduction 3 of 20%. For specific duties, a percentage reduction of 30% is the

general rule. Where duties include ad valoremand specific duties, only the ad

valoremduties are reduced.

In order to avoid any increase of preferential duties as compared to the previous

scheme, the new regulation provides for a stand-still clause according to

which ad valorempreferential duty rates applicable on 31 December 2001 will

continue to apply as long as they are more favourable than the ones that result

from the provisions of the new Regulation.

Beneficiaries

The 178 countries and dependent territories listed in Annex I of the regulation

benefit from GSP.


(3)

In a flat rate

reduction, the

percentagepoints are

deducted directly

from the normal

MFN duty rate

while in a

percentage

reduction the

reduction is first

calculated from

the MFN duty

rate using the

percentage and

then deducted.


8/20

> The special incentive arrangementsfor the protection of labour rights

Purpose

Promoting the respect of international labour standards through additional tariff

preferences.

Products covered

These arrangements cover all sensitive products included in the general

arrangements (as non-sensitive products are exempted from duties under the

general arrangements, they cannot qualify for additional preferences).

Benefits

For ad valoremduties of products covered by the arrangements, a reduction of

5 percentage points in addition to the basic reduction of 3,5 percentage points

is provided (thus raising the total reduction to 8,5 percentage points). Theadditional reduction is 20% for textiles and clothing and 30% for specific duties.

Where duties include ad valoremand specific duties, only the ad valoremduties

are reduced. This arrangement also applies to products of sectors which have

been graduated (i.e. excluded from the GSP for a beneficiary country). Products

of these graduated sectors then enjoy a treatment which is equivalent to the one

offered by the general arrangements.

Beneficiaries

These special arrangements are available for countries complying with the so-

called core labour standards. These are the standards laid down in the eight

International Labour Organisation (ILO) Conventions concerning the four areas to

which the 1998 ILO Declaration on Fundamental Rights and Principles at Work

refers: the elimination of all forms of forced or compulsory labour, freedom of

association and the effective recognition of the right to collective bargaining,

elimination of discrimination in respect of employment and occupation, and the

abolition of child labour.

The arrangements are available upon request of any GSP beneficiary countries

(not on request of individual companies). The requesting country has to commit

itself to monitor the application of the special incentive arrangements and to

provide the necessary administrative co-operation.

The European Commission examines the requests. The authorities of the

requesting country are involved at all stages and this process should be

completed within a year.



9/20

> The special incentive arrangementsfor the protection of the environment

Purpose

Promoting the respect of international environmental standards through addi-

tional tariff preferences.

Products covered

These arrangements cover about 50 tariff lines concerning tropical forest

products.

Benefits

For ad valoremduties of products covered by the arrangements, a reduction of

5 percentage points in addition to the basic reduction of 3,5 percentage points

is provided (thus raising the total reduction to 8,5 percentage points). The

additional reduction is 30% for specific duties. Where duties include ad valoremand specific duties, only the ad valoremduties are reduced. This arrangement

also applies to products of sectors which have been graduated. Products of

these graduated sectors then enjoy a treatment which is equivalent to the one

offered by the general arrangements.

Beneficiaries

These special arrangements are available on request of a GSP beneficiary

country (not on request of individual companies) complying with international

standards concerning sustainable forest management. Requests have to include

the laws of the requesting country incorporating the substance of the

international standards concerned as well as the measures taken in order to

implement them. The requesting country has to commit itself to maintain these

laws, monitor the application of the special incentive arrangements and provide

the necessary administrative co-operation.

The European Commission examines the requests. The authorities of the

requesting country are involved at all stages and this process should be

completed within a year.



10/20

> The special arrangements forleast developed countries

Purpose

Many developing countries are facing particular problems, which impair their

efforts to develop. Such a group are the 49 countries that have been identified

by the United Nations as least developed in terms of their low GDP per capita,their weak human assets and their high degree of economic vulnerability.

Extreme poverty is pervasive and persistent in most Least developed countries

(LDCs), many of them dependent on primary commodity exports. Pervasive

poverty within LDCs has effects at the national level that cause poverty to persist

and even to increase. Rapid reduction in extreme poverty in the LDCs can be

achieved through sustained economic growth. These special arrangements (also

known as EBA the Everything But Arms initiative) were established to address

the special needs of this group of countries.

Products covered

All dutiable products (more or less 8200 tariff lines, without Chapter 93, arms

and ammunition) are included in these special arrangements for LDCs which

grant duty free access to the EU market.

Benefits

These arrangements provide duty-free access for all products covered and

originating in the beneficiary country. Only imports of fresh bananas, rice and

sugar are not fully liberalised immediately. Duties on those products will begradually reduced until duty-free access will be granted for bananas in January

2006, for sugar in July 2009 and for rice in September 2009. In the meantime,

duty-free tariff quotas for rice and sugar have been set up. These quotas will

increase annually.

Beneficiaries

The beneficiary countries are the 49 least developed countries, as defined by the

United Nations.



11/20

> The special arrangementsto combat drug production and trafficking

Purpose

These arrangements are meant to assist the beneficiary countries in their struggle

to combat illicit productions by providing them with export opportunities for

substitution crops and by improving their economic and social development. Theobjective is not only to foster industrialisation and diversification, but also to

promote sustainable development.

Products covered

The special arrangements to combat drug production and trafficking cover all

industrial products (Chapters 25 to 97 of the Common Customs Tariff, except

Chapter 93) included in the general arrangements and classified as sensitive (on

non-sensitive products, no additional preferences can be applied). They also

cover some agricultural products (Chapters 1 to 24 of the Common CustomsTariff), which are included in the general arrangements and classified as sensitive,

as well as to certain agricultural products which are not covered by the general

arrangements.

Benefits

These arrangements provide duty-free access to the above products covered by

the scheme.

BeneficiariesThese arrangements were unilaterally granted by the EU to Andean Community

countries in 1990, to imports of certain products originating in Bolivia, Colombia,

Ecuador, Peru, and later in Venezuela. Subsequently, the special arrangements

were extended to the member states of the Central American Common Market

(Costa Rica, Guatemala, Honduras, Nicaragua and El Salvador) as well as to

Panama, and more recently to Pakistan.



12/20

Rules of origin

Preferences under the GSP apply to

imports into the customs territory of the

European Union, of specific products

from individual countries. The products

have to originate in a beneficiary country,

and that country has to benefit from GSP

arrangements which include those products.

For being considered as originating in the

exporting country, products have to meet certain

requirements which are laid down in the rules of origin.

The rules of origin are contained in Commission Regulation No 2454/93, as

amended (see Guide on GSP rules of originat the website indicated on the last

page of this brochure). The rules of origin applying to imports under the GSP are

meant to ensure that the tariff preferences foster the development of beneficiarycountries.

While products wholly obtained in the exporting country are considered as

originating there, products manufactured with inputs from other countries are

considered so only if they have undergone sufficient working or processing.

The rules of origin also provide that products have to be accompanied by a

certificate of origin Form A or an invoice declaration, and that they have to be

shipped directly to the EU.



13/20

Cumulation of origin

The rules of origin applying to imports under the GSP allow, under certain

conditions, for cumulation of origin. Where those conditions are met, inputs from

other countries are considered as originating in the exporting country. In order to

foster regional integration, the rules of origin provide for the possibility of regional

cumulation of origin between the members of regional groups. Where a product

has been manufactured in or with inputs from two or more countries belonging

to a group enjoying regional cumulation, inputs from other countries of the same

group are treated as if they originate in the exporting beneficiary country.

At present, there are three groups benefiting from regional cumulation:

> Group I

Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, the Philippines,

Singapore4, Thailand, Vietnam.

> Group IICosta Rica, Honduras, Guatemala, Nicaragua, El Salvador, Panama,

Bolivia, Colombia, Ecuador, Peru, Venezuela.

> Group III

Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka.

In order to foster economic co-operation between the Union and beneficiary

countries, the rules of origin provide that all imports under the GSP are entitled

to bilateral cumulation of origin, which is also known as donor country content.

| THE EUROPEAN UNIONS GENERALISED SYSTEM OF PREFERENCES | GSP | 11

(4)

Singapore,

excluded from

GSP, continues to

participate to the

cumulation of this

ASEAN group.


14/20

How does an importer getthe GSP benefit?

The importer has to provide a certificate of origin Form A to the customs

authorities in the EU in order to prove the origin of the imported products in the

beneficiary country. These certificates are issued by the competent governmental

authorities of the exporting country (usually customs authorities) if they find that

the exports meet the requirements of the rules of origin. This Form A is made

available to the exporter as soon as actual exportation has been effected or

ensured. When applying for tariff preferences, the importer has to join a certificate

of origin to the customs declaration.

For smaller consignments, an invoice declaration may be submitted instead of a

Form A as proof of preferential origin.



15/20

> Checklist:how to benefit from the EUs GSP scheme

Step 1 > Establish product classification and duty rate

Establish the 8-digit product classification according to the EUs Combined

Nomenclature and the products preferential rate of duty using the EUs TARIC

database at the website indicated on the last page of this brochure.

The website shows the GSP preferential rate for a product and country. Any

special arrangement enjoyed by the country is included in the rate. The normal

third-country MFN duty rates are also shown.

If a product does not show a preferential rate this may be because:

the country is not covered by the GSP (beneficiary countries are listed

in Annex I of Regulation 2501/2001);

the product is not covered by the GSP (products covered are listed

in Annex IV of the Regulation 2501/2001);

the sector to which the product belongs is graduated (excluded from

the GSP) for the country concerned (for graduated sectors, see current

regulation implementing graduation on the GSP website).

Step 2 > Check the origin criteria

Ensure that the product complies with the origin criteria set by the EU.

Step 3 > Check the consignment conditions

Ensure that the modalities governing the transport of goods from the preference-receiving country to the EU market fulfil the provisions laid down in the rules of

origin.

Step 4 > Prepare documentary evidence

Fill in the certificate of origin Form A or the invoice declaration correctly; these are

the official documents on which the EU customs authorities rely to grant GSP

benefits to products.

Step 5 > Ship product and submit documents to customs authoritiesin the EU

For information on steps 2 to 4, see rules of origin guide at website address at

the end of this brochure.



16/20


17/20

How the GSP is managed

The EUs GSP is managed by the European Commission. It is assisted by the

Generalised Preferences Committee, composed of representatives of EU

Member States and chaired by the Commission.

Administrative co-operation

Administrative co-operation with the authorities of beneficiary countries is neces-

sary in order to control compliance with the requirements for benefiting from the

tariff preferences. In the framework of this co-operation, the Union customs

authorities may ask the beneficiary countries authorities issuing certificates of

origin Form A to confirm their authenticity and double-check their initial control.

In the event of fraud or in case that those authorities refuse to co-operate, arran-

gements may be temporarily withdrawn.

Exclusion of beneficiary countries

Some developing countries have reached a level of development similar to that

of developed countries. In that case, the rationale for granting trade preferences

does not exist anymore. Therefore, the GSP scheme provides the possibility of

excluding countries which are sufficiently developed and which fulfil certain crite-

ria during three consecutive years. Each year, the Commission determines which

countries meet the criteria and notifies them. Once excluded, a country may be

included again if during three consecutive years, it does not meet those criteria.

Graduation of sectors

Some beneficiary countries may have reached, in certain sectors, a level of com-

petitiveness which ensures further growth even without preferential access to the

EU market. Sectors in the meaning of the GSP Regulation are divisions of a

countrys economy manufacturing related products. Such sectors will be gra-

duated (excluded from the GSP) if they meet the criteria for graduation. Imports

originating in a beneficiary country that have been graduated in the sector of the

products concerned lose the benefit of GSP tariff preferences. Each year, the

Commission determines the sectors which meet the criteria and notifies the

countries concerned. Once graduated, a sector may be included again if duringthree consecutive years, it does not meet the criteria.



18/20

Safeguard measures

Since preferential treatment under the GSP is granted without any quantitative

limitations, preferential imports may increase in a way which causes serious diffi-

culties for Community producers of like or directly competing products. The GSP

regulation provides for the possibility to apply safeguard measures, i.e. to

reintroduce Common Customs Tariff duties where such difficulties arise.

Temporary withdrawal

Any arrangement may be temporarily withdrawn at any time, in respect of all

products from a beneficiary country or only some of them. Reasons include,

among others, practise of slavery or forced labour, violation of certain ILO core

labour standards concerning, for instance, freedom of association and the right

to collective bargaining, and failure to provide administrative co-operation.

Temporary withdrawal of preferences is an exceptional measure applied only in

cases of clearly unacceptable practices.



19/20

Further information5

is available from the following:

For questions on the GSP, please contact

European Commission,

Directorate General for Trade:

Mr Philippe Cuisson

E-mail: [email protected]

Tel: (32-2) 295.27.94

Fax: (32-2) 296.92.90

or

Mr Benoit Lefort


Tel: (32-2) 299.86.90

Fax: (32-2) 296.92.90

or

Mr. Hannu Pitknen


Tel: (32-2) 296.83.25

Fax: (32-2) 296.92.90

For questions on the GSP rules of origin, please contact:

Mr. Robert Light


Tel: (32-2) 295.07.89

Fax: (32-2) 296.98.50

European Commission

Directorate-General for Taxation and the Customs Union

The GSP on the net:

http://europa.eu.int/comm/trade/issues/global/gsp/ index_en.htm

Guide on GSP rules of origin:

http://europa.eu.int/comm/taxation_customs/customs/origin/gsp/index_en.htm

Expanding exports to the EU: Helpdesk for Developing Countries:

http://europa.eu.int/comm/trade/issues/global/development/thd_en.htmhttp://export-help.cec.eu.int


Fax: (32-2) 296.73.93

TARIC (Integrated Tariff of the Community) data base:

http://europa.eu.int/comm/taxation_customs/dds/en/home.htm

FEBRUARY 2004


(5)

This guide is

intended only as an

introduction.

The information is of

a general nature

only and does not

necessarily address

all specific

circumstances of the

legislation or reflect

the latest legislative

amendments. The

sole legal provisions

are those contained

in the regulations

duly adopted by the

Community. Readers

should consult the

relevant part(s) of

the legislation for a

fuller explanation.


20/20

ht tp : / /europa.eu. in t /comm/t rade

Published by the European Commission

Directorate-General for Trade

Information contained in this brochure does not necessarily r eflect t he European Union

official positions.

Neither the European Commission nor any person acting on behalf of

the Commission is responsible for the use which might be made of the following information.

Use of part of, or all, the text is authorised provided the source is mentioned.

European Communities, 2004

Production: Mostra! Communication

the european union’s generalised system of preferences - gsp

Documents