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EU Reforms Developing Country Trade Scheme

by Mary Swire, Tax-News.com, Hong Kong

25 December 2013


The European Union's (EU's) rules for determining which countries pay less or no duty when exporting to the trade bloc will change on January 1.

The amendments to the EU's "Generalized Scheme of Preferences" (GSP) have been agreed with the European Parliament and Council. The regime will henceforward be focused on fewer beneficiaries, with the aim of ensuring the greatest impact on those countries most in need.

The number involved will fall from 177 to 90, although 67 will benefit from other arrangements with privileged access to the EU market. 20 countries will cease to receive preferential access altogether, as they are now regarded as high and upper-middle income countries. Their exports will enter the EU with a normal tariff, applicable to all other developed countries.

The EU has applied a GSP scheme since 1971. It has been revised several times to reflect evolutions in international trade and development patterns. The latest amendments were announced in October, 2012, to provide businesses and exporters with ample time to adapt smoothly to the new GSP.

The GSP covers three separate regimes. The standard arrangement provides for duty reductions on roughly 66 percent of tariff lines. Last year, this represented more than 70.2 percent of all EU imports benefitting from GSP, and about EUR40.7bn (USD55.6bn) worth of imported products.

GSP + offers deep tariff cuts for "vulnerable" countries that have ratified and implemented international conventions relating to human and labor rights, environment and good governance. January's changes will offer more support to countries that demonstrate their serious intention to implement these standards. Finally, an "everything but arms" arrangement provides full duty and quota free access for all products except arms and ammunition for 49 less developed countries (LDCs) on 99 percent of all tariff lines.

The EU has also decided to expand the number of products which enjoy preferences.

15 new tariff lines will be designated as "non-sensitive" and thereby receive duty-free access. Four tariff lines that were previously classified as "sensitive" will become "non-sensitive," and four further lines will be added to the GSP + regime. The categories have been selected to enhance the opportunities for the GSP beneficiaries, without simultaneously jeopardizing the competitiveness of the LDCs in question.

However, the EU maintains that LDCs would suffer from competition were duty-free treatment granted to a still wider range of products.

The reformed GSP will be in force for 10 years, to improve certainty for business operators. The previous scheme was reviewed every three years. There will be transition periods of at least one year for changes in the beneficiaries list and of at least two years for countries concluding a preferential market access arrangement with the EU. Removals from the list will only occur if countries are listed as high or upper-middle income for three years in a row.

TAGS: environment | tax | business | tariffs | tax rates | tax reform | standards | trade | European Union (EU) | Europe

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