Generalized System of Preferences (GSP)

TEAM Antony Salvin Dina Michele Ishwarya Nagarajan Praveena KS 27062 27069 27074 27099

Why GSP?
Economic theory - preferential tariff rates in developed country markets could promote export-driven industry growth in developing countries Developed nations - the most-favored-nation principle should be the fundamental principle Lesser-developed countries special and differential treatment Differences in developed countries economic structures and tariff programs GSP became a system of individual national schemes based on common goals and principles

What is GSP
A system of generalized, non-reciprocal and nondiscriminatory preferences beneficial to the developing countries.

United States, the European Union and other developed countries implemented such programs in the 1970s - to promote economic growth in developing countries by stimulating their exports

History
1965 - the GATT Parties added Part IV to the General Agreement-principle of non-reciprocity 1968 GSP first adopted internationally by the United Nations Conference on Trade and Development (UNCTAD) at the UNCTAD II Conference 1971 - waiver of Article I for GSP programs -more favorable tariff treatment to the products of developing countries for ten years 1979 - Tokyo Round of Multilateral Trade Negotiations Enabling Clause 1994 - Enabling Clause was incorporated into the GATT

Benefits
Exporters of developing countries benefit indirectly through the benefit that accrues to the importer by way of reduced tariff or duty free entry of eligible Indian products Reduction or removal of import duty on a GSP-eligible product makes it more competitive to the importer - other things (e.g. quality) being equal Tariff preference helps new exporters to penetrate a market and established exporters to increase their market share and to improve upon the profit margins, in the donor country

Product Groups
Wholly Obtained Products Products With Import Content

Wholly Obtained Products

Grown Extracted from the Soil Harvested within the country Manufactured exclusively from the above

Categories
Absence of any materials or components of imported / unknown origin in their manufacture. PRODUCTS WITH IMPORT CONTENT qualify for GSP if the materials, parts or components of imported or unknown origin used in their manufacture have undergone SUFFICIENT WORKING OR PROCESSING in India A product using imported materials is non-originating if the imported materials have only been subject to MINIMAL OPERATIONS in India Materials of unknown origin are treated as though they were imported Criteria laid down for acquisition of originating status must be satisfied without interruption in the beneficiary country

Categories Of Goods
Mineral products extracted from its soil or from its sea-bed. Vegetable products harvested in India. Live animals born and raised in India and Products obtained from live animals. Products obtained from hunting or fishing conducted in India. Products obtained of sea fishing & products from sea. Products made on board its factory ships exclusively from the products. Used articles collected in India fit only for the recovery of raw materials. Waste and scrap, resulting from manufacturing operations

SUFFICIENT WORKING OR PROCESSING

The donor countries follow two main criteria for achieving Sufficient Working or Processing.
PROCESS CRITERIA PERCENTAGE CRITERIA

PROCESS CRITERIA
Sufficient working or processing takes place when the conditions prescribed for the product in a LIST by the importing country are fulfilled. Conditions set out in the LIST represent the minimum amount of working or processing required and the carrying out of more working or processing also confers originating status conversely, the carrying out of less working or processing cannot confer originating status

Percentage Criteria
Percentage criteria is applied in terms of maximum value (in percentage terms) of materials, parts or components of imported. / tin-determined origin used in the manufacture of export product. While some countries apply it in terms of minimum value (in percentage terms) of the domestic materials which must be used in the manufacture of the export product.

Countries that extend GSP benefits

Australia Republic of Poland Russian Federation Slovakia Canada Czech Republic European Union Japan New Zealand Republic of Hungary Switzerland United States of America

Eligible beneficiaries
 About 154 eligible beneficiaries (140 countries and 14 territories)  49 Least Developed Countries Afghanistan Bhutan Uganda

Certificate of origin
States from what country the shipped goods originate ( where the goods are actually made). There are two categories of Certificate of Origin (1) Preferential and (2) Non-Preferential

Preferential COO

NonPreferential

Prescribe rules of origin which have to be met for exports to be eligible for tariff preference. Eg: gsp,gsat,fta

Merely evidences the origin of goods from a particular country and does not bestow any tariff benefits for exports to the importing nations nation

Preferential Certificate of origin

Known as GSP Form A Used for exportations to the donor countries from the beneficiary countries The beneficiary countries are responsible for supplying the Form A. Available at the government foreign trade office or the chamber of commerce of the beneficiary country. The Form A must be properly filled out and signed by the exporter. The designated certifying authority usually is the government foreign trade office or the Chamber of Commerce of the beneficiary country. The certification normally requires payment of a fee.

THE GENERALIZED SYSTEM OF PREFERENCES (GSP) A COMPARISON ON THE SCHEME OF THE USA and EU United States The Generalized System of Preferences (GSP) The African Growth and Opportunity Act (AGOA) The European Union The Generalized System of Preferences (GSP) GSP Plus (GSP+)

Unilateral Preference Programs Offered The Andean Trade Partnership and Drug Eradication Act (ATPDEA) The Caribbean Basin Initiative (CBI) and The Caribbean Basin Trade Partnership Act (CBTPA) GSP January 1, 1976 AGOA Date Implemented ATPDEA CBI & CBTPA October 1, 2000 1991 Everything But Arms (EBA)

GSP GSP Plus (GSP+) Everything But Arms (EBA)

1971 January 1, 2006

March 5, 2001

January 1, 1984 October 1, 2000 GSP Expiration Date AGOA Ended on December 31, 2010 September 30, 2015

GSP GSP Plus (GSP+)

December 31, 2011* 2015

UNITED STATES - GSP

Countries Covered : Approximately 129 countries and territories.

Product Coverage: Out of approximately 6,700 dutiable tariff lines, close to 3400 products from developing countries receive duty-free treatment, with LDCs receiving preferential treatment on more than 1,400 additional items.

Rules of origin :Product must be a product of beneficiary country i.e wholly the growth, product or manufacture of beneficiary country OR substantially transformed in the beneficiary country into a new article of commerce.

US GSP Losing Benefits

Countries lose benefits upon classification as a high-income country by the World Bank, or if a country has entered into a FTA with the U.S. or a bilateral agreement with another country (e.g.by joining the European Union).

Specific products may lose GSP benefits if imports from a country exceed a dollar threshold/import threshold - if U.S. imports of that product surpass the designated CNL (Competitive Need Limit)

Eligibility Criteria to be covered under US GSP

The country: is not a communist country (with some exceptions) is not part of a cartel that withholds vital resources does not grant reverse preferences to other developed countries has not nationalized or expropriated U. S. property does not aid or abet individuals or groups that have committed international terrorism is taking steps to provide internationally recognized worker rights has implemented commitments to eliminate the worst form of child labor does not exceed the per capita income threshold for designation

Top 10 sources of GSP imports

EUROPEAN UNION - GSP

Countries Covered - 176 Countries and Territories

Product Coverage: Approximately 6,350 products (of 7357 dutiable products) receive preferential treatment.

Rules of Origin : Final product must provide a change of tariff heading from the materials used to produce it and the value of imported inputs must not exceed 40 percent of the value of the finished product

Eligibility Criteria : Benefits could be temporarily withdrawn in whole or in part if countries engage in activities such as employing slave or forced labor, prison labor, systematic violation of the freedom of association etc

EU GSP Losing Benefits

Sectors may lose benefits if imports of the sector exceed 15 percent of all imports from all beneficiaries or a country's trade in a specific sector exceeds thresholds calculated by the EU.

Countries lose GSP benefits upon classification as a high-income country by the World Bank for three consecutive years.

EU stats
In 2007, the total GSP preferential imports amounted to 58.6 billion Euro, with the largest users being India ( 11.7b), Brazil ( 4.4b), Thailand ( 4.2b), Bangladesh ( 3.6b), Vietnam ( 3.2b), Indonesia ( 3.0b), Malaysia ( 2.7b), Pakistan ( 2.6b) and the Ukraine ( 2.2b)

Countries that extend GSP benefits to India

Australia Canada Czech Republic European Union* Japan New Zealand Norway Republic of Belarus Republic of Bulgaria Republic of Hungary Republic of Poland Russian Federation Slovakia Switzerland United States of America United Kingdom Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden