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EU’s Revised Duty Preference Scheme Takes Effect Jan. 1

Friday, December 20, 2013
Sandler, Travis & Rosenberg Trade Report

Significant changes to the European Union’s Generalized System of Preferences programs for developing countries will take effect Jan. 1, 2014. Under the new GSP, which was announced in October 2012, benefits will be limited to those countries most in need and more support will be provided to those that are serious about implementing international conventions on human rights, labor rights, the environment and good governance.

GSP. The number of GSP beneficiaries is being reduced from 176 to 90, with benefits remaining for the following.

49 least-developed countries: Afghanistan, Angola, Bangladesh, Bhutan, Burkina Faso, Burma (effective Jan. 1, 2014), Burundi, Benin, Cambodia, Chad, Central African Republic, Comoros Islands, Congo (Democratic Republic of), Djibouti, Eritrea, Ethiopia, Equatorial Guinea, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Liberia, Lesotho, Madagascar, Mali, Mauritania, Malawi, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, South Sudan (effective Jan. 1, 2014), Somalia, Sudan, Timor-Leste, Togo, Tanzania, Tuvalu, Uganda, Vanuatu, Yemen, Zambia

41 other low and lower-middle income countries: Armenia, Bolivia, China, Cape Verde, Colombia, Congo (Republic of), Cook Islands, Costa Rica, Ecuador, Georgia, Guatemala, Honduras, India, Indonesia, Iraq, Kyrgyzstan, Maldives, Marshall Islands, Micronesia, Mongolia, Nauru, Nicaragua, Nigeria, Niue, Pakistan, Panama, Paraguay, Peru, Philippines, El Salvador, Sri Lanka, Syria, Tajikistan, Thailand, Tonga, Turkmenistan, Ukraine, Uzbekistan, Vietnam

Benefits are being removed from the following.

33 countries and territories that have alternative trade arrangements for accessing the EU market: Anguilla, Netherlands Antilles, Antarctica, American Samoa, Aruba, Bermuda, Bouvet Island, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Cocos Islands, Christmas Islands, Falkland Islands, French Polynesia, French Southern Territories, Gibraltar, Greenland, Guam, Heard Island and McDonald Islands, Mayotte, Montserrat, New Caledonia, Norfolk Island, Northern Mariana Islands, Pitcairn, Saint Helena, South Georgia and South Sandwich Islands, St. Pierre and Miquelon, , Tokelau, Turks and Caicos Islands, U.S. Minor Outlying Islands, U.S. Virgin Islands, Wallis and Futuna

34 countries that enjoy another trade arrangement with the EU (such as a free trade agreement) that provides substantially equivalent coverage as GSP: Algeria, Antigua and Barbuda, Bahamas, Barbados, Belize, Botswana, Cameroon, Côte d'Ivoire, Dominica, Dominican Republic, Egypt, Fiji, Ghana, Grenada, Guyana, Jamaica, Jordan, Kenya, Lebanon, Mauritius, Mexico, Morocco, Namibia, Papua New Guinea, Seychelles, South Africa, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Surinam, Swaziland, Trinidad and Tobago, Tunisia, Zimbabwe

Seven countries and one territory listed by the World Bank as high-income economies for the past three years: Bahrain, Brunei Darussalam, Kuwait, Macau, Oman, Qatar, Saudi Arabia, United Arab Emirates

12 countries listed by the World Bank as upper middle-income economies for the past three years: Argentina, Belarus, Brazil, Cuba, Kazakhstan, Gabon, Libya, Malaysia, Palau, Russia, Uruguay, Venezuela

The EU notes that these countries will receive GSP preferences once again if (a) they fall out of the high- or upper middle-income categories, (b) their FTAs are revoked or expire, or (c) the autonomous trade regime is phased out.

The EU also states that there will be transition periods of at least one year for changes in the beneficiaries list and at least two years for countries concluding a preferential market access arrangement with the EU.

Product coverage. The revised GSP expands duty-free benefits to the following products, which the EU states were selected to avoid negative impacts on LDCs that already have duty-free/quota-free access to the EU for all products.

- fresh cut carnations and buds, of a kind suitable for bouquets or for ornamental purposes (0603.12.00)

- sun-cured oriental type tobacco, unstemmed or unstrapped (2401.10.60)

- alkali/alkaline-earth metals other than sodium and calcium (2805.19)

- are-earth metals, scandium and yttrium, whether or not intermixed or interalloyed (2805.30)

- aluminum oxide, excluding artificial corundum (2818.20)

- ammonium sulfate (3102.21)

- mixtures of ammonium nitrate with calcium carbonate/other inorganic non-fertilizing substance (3102.40)

- sodium nitrate (3102.50)

- double salts and mixtures of calcium nitrate and ammonium nitrate (3102.60)

- wattle extract (3201.20)

- polyethylene terephthalate in primary forms, having a viscosity number of => 78 mi/g (3907.60.20)

- unwrought lead other than refined, not elsewhere specified in 7801 (7801.99)

- unwrought tungsten (wolfram), including bars and rods obtained simply by sintering (8101.94)

- unwrought magnesium, containing at least 99.8% by weight of magnesium (8104.11)

- unwrought magnesium, excluding of 8104.11 (8104.19)

- unwrought cadmium; powders (8107.20)

- unwrought titanium; powders (8108.20)

- titanium waste and scrap (8108.30)

- video recording or reproducing apparatus, excluding magnetic tape-type; video recording or reproducing apparatus, whether or not incorporating a video tuner, excluding magnetic tape-type and video camera recorders (8521.90.00)

GSP+. GSP+ grants additional, mostly duty-free preferences to support vulnerable developing countries in implementing international conventions on human and labor rights, sustainable development and good economic governance. A country may benefit from GSP+ if (a) its GSP-covered exports represent less than 1% of the EU’s imports from all GSP beneficiaries (import share ratio) and (b) it has a limited diversification of exports to the EU (diversification ratio). The EU is relaxing the import share ratio from 1% to 2% and specifying that the diversification ratio is 75% of a country’s exports to the EU for its seven largest sections (up from five previously).

Countries that meet this new eligibility criterion and can apply for GSP+ are as follows: Armenia, Azerbaijan, Bolivia, Cape Verde, Cook Islands, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Iran, Iraq, Kyrgyzstan, Maldives, Marshall Islands, Micronesia, Mongolia, Nauru, Niue, Nicaragua, Nigeria, Pakistan, Panama, Peru, Philippines, Republic of Congo, Sri Lanka, Syria, Tajikistan, Tonga, Turkmenistan, Ukraine and Uzbekistan.

Everything but Arms. There will be no change to the Everything but Arms arrangement, which provides for duty-free and quota-free access to the EU for all goods except arms and ammunition from 49 LDCs (listed above). However, the EU expects that the effectiveness of EBA will be strengthened because reducing the number of GSP beneficiaries will reduce competitive pressure and make preferences for LDCs more meaningful.

Other. Other revisions being made to increase the predictability, transparency and stability of the GSP programs include (a) establishing GSP for ten years rather than the previous three, (b) clarifying the administrative procedures for the withdrawal of GSP preferences and safeguards, (c) clarifying the procedures that trigger the general safeguard clause, and (d) expanding the special safeguards to cover all textiles and ethanol.

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