NEW EU GENERALISED SCHEME OF PREFERENCES (EU GSP) AS OF 2014: UPDATE
We refer to our past trade and customs alert from December 2012 and would like to recall that as of January 1, 2014 the renewed EU GSP scheme entered into force. Under the new GSP scheme the EU focuses its preferences on countries most in need which do not benefit from a separate preferential market access scheme, such as free trade agreements (with the exception of the least-developed countries).
1. New EU GSP
The new EU GSP consists of three different types of arrangements.
General arrangement (duty free access for non-sensitive originating products)
As of January 1, 2014, the following 31 GSP beneficiary countries will benefit from the general arrangement: Azerbaijan, China, Colombia, Cook Islands, Guatemala, Honduras, India, Indonesia, Iran, Iraq, Kyrgyzstan, Maldives, Marshall Islands, Micronesia, Nauru, Nicaragua, Nigeria, Niue, Panama, Philippines, El Salvador, Sri Lanka, Syria, Tajikistan, Thailand, The Congo, Tonga, Turkmenistan, Ukraine, Uzbekistan and Vietnam.
GSP+ arrangement (duty free access for most of the originating products)
As of January 1, 2014, the following 10 GSP beneficiary countries will benefit from the GSP+ arrangement: Armenia, Bolivia, Costa Rica, Cape Verde, Ecuador, Georgia, Mongolia, Peru, Pakistan and Paraguay. Note, Pakistan is the sole addition to the list; the country previously benefited from a duty exemption on various textile and apparel products which expired December 31, 2013.
EBA arrangement (duty free access for all originating products, except for arms)
As of January 1, 2014, 49 least-developed countries defined by the UN benefit from the EBA arrangement. Current revisions to the EBA include the addition of South Sudan and the removal of the Maldives.
We like to flag that:
- Effective February 22, 2014, Azerbaijan and Iran will be removed from the list of GSP beneficiary countries because they have been classified as upper-middle income countries. The same will apply beginning January 1, 2015, to the following countries: China, Ecuador Maldives and Thailand. As of February 22, 2014 and January 1, 2015, the importation of goods originating from these respective countries will no longer benefit from preferences, unless these countries enter into a free trade agreement with the EU. To date, Thailand is the sole country actively negotiating such agreement with the EU although it is currently not expected that a free trade agreement will be provisionally applied beginning January 1, 2015. Subsequently, the financial impact for goods originating in Thailand could be significant. China’s removal should have a less significant financial impact as currently it only benefits from preferences with regard to a limited category of products. Furthermore, Ecuador and the EU will likely restart trade negotiations in the course of this year.
- Within the coming years, Peru, Colombia, Costa Rica, Guatemala, Honduras, Nicaragua, Panama and El Salvador will be removed from the list of GSP beneficiary countries as they will have concluded a trade or association agreement with the EU which is currently provisionally applied.
- The following GSP eligible countries may be reinstated as GSP beneficiary countries if the Economic Partnership Agreement (EPA) is not ratified prior to October 1, 2014: Cameroon, Ghana, Ivory Coast, Kenya and Swaziland.
- In the meantime, the European Commission examined GSP+ status requests for El Salvador, Guatemala and Panama. A proposal has been sent to both the Council and the European Parliament for their approval. Last month, the European Commission received a similar request from the Philippines which is currently under examination. It is expected that these countries will benefit from the GSP+ status during the course of 2014. Other GSP beneficiary countries eligible for GSP+ status might follow as well.
2. Product graduation
As of January 1, 2014, the product graduation regulation will not apply to Ecuador as it gained the GSP+ status (2014 only). Effective January 1, 2015, the product graduation regulation will no longer apply to China, Ecuador and Thailand as these countries will be removed from the list of GSP beneficiary countries. It follows that beginning January 1, 2015, product graduation will likely only apply to certain products originating in Costa Rica, India, Indonesia, Nigeria and Ukraine.
3. Impact on your business
The new EU GSP scheme requires close monitoring by your business due to its continuous revision. Over the years KPMG Meijburg & Co has gained extensive experience in carrying out preferential origin impact assessments and optimizing the use of preferential customs duty systems around the globe.