HMRC Announces Adoption Of New Regulation On Tariff Preferences

by Robin Pilgrim, LawAndTax-News.com, London

07 August 2008

Her Majesty's Revenue and Customs (HMRC) has announced this week that on the 22nd of July, Member States (MS) adopted a new scope and coverage Regulation applying the EC’s Generalised System of Preferences (GSP) for the period from 1st January 2009 until the end of 2011.

The new regulation is broadly the same as the current arrangements, in that:

• the list of sensitive and non-sensitive products has not changed
• duty reductions remain the same as at present
• GSP remains suspended for Belarus and Myanmar

The only real changes are in the areas of product graduation and de-graduation and treatment of GSP+ countries.

The renewed preference system will ensure that GSP is targeted at those countries that need it most.

GSP provides real economic value to developing countries, with EUR57bn worth of trade under the scheme in 2007, the Commission explained.

EU Trade Commissioner Peter Mandelson commented last month:

"The continuation of GSP will ensure stability and predictability for beneficiaries and traders in the EU and developing countries. GSP is a vital tool of our pro-development EU trade policy."

As a result of re-calculations to reflect the evolution of trade, preferences for specific product groups will be re-established for six beneficiary countries of GSP (Algeria, India, Indonesia, Russia, South Africa and Thailand). Preferences will be suspended for one country, Vietnam, for Section XII products (footwear and some other products).

GSP, or "Generalised System of Tariff Preferences" as it's more formally known, was introduced in 1968 on the recommendation of officials at the United Nations Conference on Trade and Development (UNCTAD).

Under the rules of GSP, industrialised countries would grant trade preferences to all developing countries. This authorises developed countries to establish individual GSP schemes.

The European Community was the first to implement a GSP scheme in 1971.

The EU's GSP grants products imported from GSP beneficiary countries either duty-free access or a tariff reduction, depending on which of the GSP arrangements a country enjoys.

The EU's GSP is implemented following cycles of ten years, for which general guidelines are drawn up. Guidelines for the period 2006 - 2015 were adopted in 2004.

In practice, the GSP is implemented by means of Council regulations, during the ten-year cycle. The current GSP Regulation (980/2005) applies until 31 December 2008; and has now been replaced by the new Regulation, agreed by the Council on 22 July 2008.

Under the new Regulation:

1. Vietnam will no longer receive, wef 1 January 2009, GSP rates of duty for any products in Section XII of the Harmonised System (HS).
2. The full rate of duty will be payable on any ‘graduated’ product which is released to free circulation on or after 1 January 2009. There are no transitional arrangements in which preference can be granted to affected products which will be in transit or warehouse on that date.
3. Algeria will again receive with effect from 1 January 2009 the available GSP rates of duty for products in Section V of the HS of commodity codes.
4. Indonesia will again receive the available GSP rates of duty for products in Section IX of the HS.
5. India will again receive the available GSP rates of duty for products in Section XIV of the HS.
6. The Russian Federation will again receive the available GSP rates of duty for products in Section VI, and XV of the HS.
7. Thailand will again receive the available GSP rates of duty for products in Section XVII of the HS.
8. South Africa will again receive the available GSP rates of duty for products in Section XVII of the HS.

All current beneficiaries of the GSP+ arrangements (Bolivia, Columbia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Panama, Peru, Sri Lanka and Venezuela) must re-apply by 31 October 2008 to continue to benefit from the more generous GSP rates of duty.

The European Commission will make a decision by 15 December 2008 on their eligibility to continue to benefit from the facility from 1 January 2009.

Other GSP beneficiaries can also apply to benefit from the arrangement from 1 January 2009 – the same timetable will apply for the submission of applications and for a response by the Commission.

The new regulation also provides for a second round of GSP+ applications. Subject to the satisfaction of all relevant requirements (ratification and implementation of a total of 27 international conventions on core human and labour rights and environmental issues) any GSP beneficiary country will be able to apply by 30 April 2010 to benefit from the GSP+ arrangements with effect from 1 July 2010.

The Commission will make a decision by 15 June 2010 on their eligibility to use the arrangement from July 2010.

Products must continue to meet the appropriate origin rules in order to benefit from the new preferences. The rules can currently be found in Public Notice 828 (September 2007) Tariff preferences: rules of origin for: various countries including Albania.

In addition to this, the European Community is currently looking at all aspects of the GSP rules of origin to see whether they can be improved, simplified and made more development friendly. Further information will be provided on this matter as soon as it comes to hand.

However, there are unlikely to be any changes to the product specific rules until July 2009 at the earliest.

Changes to administrative and documentary requirements are unlikely to enter into force until 2013.

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