EU’s Updated GSP to Impact Asian Exporters and Manufacturers

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Oct. 24 – The European Union (EU), accounting for 20 percent of global imports and exports, plays a massive role in Asia’s markets. EU-India trade, for example, grew from €28.6 billion in 2003 to €79.9 billion in 2011. Furthermore, ASEAN as a whole represents the EU’s largest trading partner after the U.S. and China, with more than €206 billion of trade in goods and services in 2011.

Of the many trade agreements the EU has in place, the General Scheme of Preferences (GSP) is used to help promote economic growth and job creation in emerging nations. Beneficiaries of this program, which include China, Thailand, Indonesia, India, and Vietnam, will see some changes to tariff rates based on updated product classifications as new amendments to the GSP come into effect in January 2014.

The GSP is meant to help emerging countries by providing them with easier access to the EU market through reduced tariffs. Given the nature of this mechanism, it is necessary to regularly update eligibility criteria to reflect changes in the global economic makeup.

Updated Beneficiary Countries

The updated GSP reduces the number of beneficiary countries from 177 down to 90. Countries that have been newly excluded from the GSP include overseas and offshore territories, countries where equivalent trade agreements exist, and countries of high and upper-middle income status. For example, given that for the past three years Brunei and Malaysia have been classified as upper-middle income economies by the World Bank, they will no longer be beneficiaries in this scheme. China, India, Indonesia, the Philippines, Thailand and Vietnam are among the remaining 90 GSP beneficiaries.

The Everything-but-Arms (EBA) grouping is a subcategory within the GSP which provides all 49 UN-recognized Least Developed Countries with duty-free and quota-free access to the EU’s 7000+ tariff lines. Laos and Cambodia are included in this classification.

In particular, exporters and manufacturers in Asia should note the new rules relating to graduated and de-graduated sectors.

Graduated Sectors

Some product groups in certain countries have become competitive on a global scale, and consequently have been classified as “graduated sectors,” meaning they will now be subject to import duties. Companies exporting these product groups to the EU, however, can still avoid duties if they ship their goods earlier than January 2014. Looking forward, companies may have to consider re-evaluating product classifications and/or customs valuation for their products.

Listed below are some newly graduated sectors in the GSP for India, Indonesia, Thailand and China:

India

  • S-5 Mineral products
  • S-6a Inorganic and organic chemicals
  • S-6b Chemicals, other than organic and inorganic chemicals
  • S-8a Raw hides and skins and leather
  • S-11a Textiles
  • S-17b Road vehicles, bicycles, aviation and space, boats and parts thereof

Indonesia

  • S-1a Live animals and animal products excluded fish
  • S-3 Animal or vegetable oils, fats and waxes
  • S-6b Chemicals, other than organic and inorganic chemicals

Thailand

  • S-4a Preparations of meat and fish
  • S-4b Prepared foodstuffs (excl. meat and fish), beverages, spirits and vinegar
  • S-14 Pearls and precious metals

China

  • S-1a Live animals and animal products excluded fish
  • S-1b Fish, crustaceans, mollusks and aquatic invertebrates
  • S-2b Vegetables and fruit
  • S-2c Coffee, tea, maté and spices
  • S-2d Cereals, flour, nuts, resins and vegetable plaiting
  • S-4b Prepared foodstuffs (excl. meat and fish), beverages, spirits and vinegar
  • S-6a Inorganic and organic chemicals
  • S-6b Chemicals, other than organic and inorganic chemicals
  • S-7a Plastics
  • S-7b Rubber
  • S-8a Raw hides and skins and leather
  • S-8b Articles of leather and fur skins
  • S-9a Wood and wood charcoal
  • S-9b Cork, straw and plaiting
  • S-11a Textiles
  • S-11b Apparels and clothing
  • S-12a Footwear
  • S-12b Headgear, umbrellas, sun umbrellas, sticks, whips, feathers and down
  • S-13 Articles of stone, ceramic products and glass
  • S-14 Pearls and precious metals
  • S-15a Iron, steel and articles of iron and steel
  • S-15b Base metals (excluding iron and steel) and articles of base metals (excluding articles of iron and steel)
  • S-16 Machinery and equipment
  • S-17a Railway and tramway vehicles and products
  • S-17b Road vehicles, bicycles, aviation and space, boats and parts thereof
  • S-18 Optical, clocks and watches, musical equipment
  • S-20 Miscellaneous

De-graduated Sectors

Preferential duty treatment has been restored or ‘de-graduated’ for certain textile products such as footwear and headgear from Vietnam. Companies with goods that will benefit from restored preferential tariff rates can consider delaying shipments until the amended rules come into effect. These updated changes, however, may affect demand for imported goods from Southeast Asian nations under the graduated sectors. Nonetheless, imported manufactured goods from Asian nations under this sector will benefit from reduced duty rates in the long term.

Preferential trading schemes can provide great cost-cutting opportunities for international businesses, as well as potential investment opportunities into new markets. In addition to the GSP, many countries also have multilateral and bilateral trade agreements with the EU.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email asia@dezshira.com, visit www.dezshira.com, or download the company brochure.

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