GSP tariff benefits to be extended beyond end of 2011

On April 5 2011 the EU Council published a draft regulation to extend the generalised system of preferences (GSP), which provides developing countries with preferential access to the EU market through reduced tariffs, beyond December 31 2011, the date on which the scheme is due to expire.(1) Businesses with manufacturing interests in developing countries which export goods into the European Union may be affected by the scheme, which has been in operation since 1971.

The scheme allows the granting of trade preferences (ie, reduced or zero-rate tariffs) on virtually all imports entering into the European Union from developing countries, unless an industrial sector manufacturing imports has developed sufficiently and 'graduated' to a level from which it can no longer benefit from the scheme. For example, China has long been a beneficiary country of the scheme, but not in certain sectors (eg, textiles
and clothing or electrical goods) which are sectors from which it has graduated and in relation to which it can no longer benefit.

The existing version of the scheme was established by EU Regulation 732/2008 and is scheduled to apply only until the end of 2011. However, the council is aware that further improvements are required, based on a proposal from the European Commission for an entirely new regulation, which will ensure the continued effectiveness of the scheme. The proposal will have to take into account statistical trade data for 2009, which was a
year marked by a sharp fall in global trade, including in developing countries. Bearing this in mind, there is not enough time for a proposal to be drawn up and a new regulation adopted before the end of 2011. Consequently, the period of application of Council Regulation 732/2008 will have to be extended until December 31 2013 or until the new act is adopted – whichever comes first. Once adopted, the draft regulation of April 5 2011 will ensure that this takes place.

To continue with the example of China as a beneficiary country of the GSP scheme,when exporting goods into the European Union, the following sectors continue to be graduated – that is, the following products will continue to be excluded from preferences if originating in China and imported into the European Union (this list can be found in Annex I of EU Regulation 732/2008).

- Section VI Products of the chemical or allied industries.
- Section VII Plastics and articles thereof; rubber and articles thereof.
- Section VIII Raw hides and skins, leather, fur skins and articles thereof; saddlery and harnesses; travel goods, handbags and similar    containers; articles of animal gut (other than silkworm gut).
- Section IX Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting materials;
basket ware and wickerwork.
- Section XI XI(a) textiles and XI(b) textile articles.
- Section XII Footwear, headgear, umbrellas, sun umbrellas, walking sticks, seat sticks, whips, riding crops and parts thereof; prepared feathers and articles made therewith; artificial flowers; articles of human hair.
- Section XIII Articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products; glass and glassware.
- Section XIV Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coins.
- Section XV Base metals and articles of base metal.
- Section XVI Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.
- Section XVII Vehicles, aircraft, vessels and associated transport equipment.
- Section XVIII Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; clocks and watches; musical instruments; parts and accessories thereof.
- Section XX Miscellaneous manufactured articles.

As shown in the table, exporters of several products including China-origin toys (which fall under Section XX), electrical equipment, footwear, textiles, articles of wood, watches and clocks, will not benefit under the GSP Regulation. However, exporters from China of goods being placed on the EU market will benefit in respect of all other products listed in Annex II of the Regulation as sensitive or non-sensitive.
For further information on this topic please contact Reshad Forbes at Van Bael & Bellis by telephone (+32 2 647 73 50), fax (+32 2 640 64 99) or email (rforbes@vanbaelbellis.com).

(1) EU Regulation 732/2008 (which operates the existing GSP scheme) can be accessed at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:211:0001:0039:EN:PDF. The draft regulation of April 5 2011, which will extend the scheme beyond December 312011, can be accessed at http://register.consilium.europa.eu/pdf/en/11/pe00/pe00010.en11.pdf.