1. EU-Project: Trade and Private Sector Development (TPSD)
The EU Generalised Scheme of Preferences (GSP) and the related GSP Rules of Origin: an overview
Achim Seiler, Trade Consultant and Capacity Building Specialist, Kathmandu
EU-Project: Trade and Private Sector Development (TPSD)
TPSD is implemented by
in cooperation with
and

2. Historical Background (I)
The idea of the Generalized System of Preferences was adopted in New Delhi, in 1968, in the context of UNCTAD II. As stated in UNCTAD Resolution 21(II), „...the objectives of the generalized, non-reciprocal, non-discriminatory system of preferences in favor of the developing countries, including special measures in favor of the least advanced among the developing countries, should be:
To increase their export earnings;
To promote their industrialization;
To accelerate their rates of economic growth“.

3. Historical Background (II)
The „Agreed Conclusions“ adopted by the UNCTAD Trade and Development Board in October 1970, established the legal status of the tariff preferences to be accorded to the beneficiary countries by each preference-giving country:
The tariff preferences are temporary in nature
Their grant does not constitute a binding commitment and, in particular, it does not in any way prevent:
- their subsequent withdrawal in whole or in part, or
- the subsequent reduction of tariffs on an MFN basis
c) Their grant is conditional upon the necessary waiver or waivers in respect of existing international obligations, in particular the General Agreement on Tariffs and Trade

4. Historical Background (III)
In order to permanently insert the GSP preferences into the general body of GATT law, the contracting parties decided to adopt the 1979 Enabling Clause (Decision of 28 November 1979 on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries) as a supplementary rule which permits them, for an indefinite time, to derogate from the MFN clause in order to contribute to the economic development of the developing countries.

5. Three Arrangements within the EU GSP (I)
To accomodate developing countries´ trade, development and financial needes, the EU GSP provides three different preference arrangements: a general GSP arrangement and two special arrangements
The Standard GSP
The GSP ´PLUS´ Arrangement
EBA (Everything But Arms)

6. Three Arrangements within the EU GSP (II)
The general arrangement (Standard GSP) grants duty reductions for ca. 66% of all EU tariff lines to countries of low or lower-middle income, which do not benefit from other preferential trade access to the EU market. There are currently 30 Standard GSP beneficiaries (source: COM(2016) 29 final)

7. Three Arrangements within the EU GSP (III)
The Special Incentive Arrangement for Sustainable Development and Good Governance, (´GSP+´) grants complete duty suspension for essentially the same 66% tariff lines, as the Standard GSP, for countries especially vulnerable in terms of their econoomies´ diversification and import volumes. In return, beneficiary countries must ratify and effectively implement 27 core international conventions, as listed in Annex VIII of the GSP Regulation. These conventions cover human and labour rights, environmental protection, and good governance. There are currently 13 GSP+ beneficiaries (source: COM(2016) 29 final)

8. Three Arrangements within the EU GSP (IV)
The special arrangement Everything But Arms (`EBA´) grants full duty-free, quota-free access for all products except arms and ammunition, for countries classified by the UN as LDCs. There are currently 49 EBA beneficiaries (source: COM(2016) 29 final)

9. 34 Standard EU-GSP Beneficiaries
Botswana, Cameroon, China (People´s Republic), Colombia, Congo, Cook Islands, Cote d´ Ivoire, Fiji, Ghana, Honduras, India, Indonesia, Iraq, Kenya, Kyrghistan, Maldives, Marshall Islands, Micronesia, Namibia, Nauru, Nicaragua, Nigeria, Niue, the Philippines, Sri Lanka, Syria, Swaziland, Tajikistan, Thailand, Tonga, Turkmenistan, Ukraine, Uzbekistan, Vietnam (source: EU-GSP Info package, Oct. 2014)

10. 13 EU-GSP + Beneficiaries
Armenia, Bolivia, Cape Verde, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Mongolia, Pakistan, Panama, Paraguay, Peru (source: EU-GSP Info package, Oct. 2014)

11. 49 EU-EBA – Beneficiaries (I)
Africa: Angola, Benin, Burkina Faso, Burundi, Central African Rep., Chad, Comoros, Congo (Dem. Rep.), Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Sao Tome & Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Zambia (source: EU-EBA Info Sheet, April. 2013)

12. 49 EU-EBA – Beneficiaries (II)
Asia: Afghanistan, Bangladesh, Bhutan, Cambodia, Lao PDR, Maldives, Myanmar, Nepal, Timor-Leste, Yemen (source: EU-EBA Info Sheet, April 2013)

13. 49 EU-EBA – Beneficiaries (III)
Australia & Pacific:
Kiribati, Samoa, Solomon Islands, Tuvalu, Vanuatu
Carribean:
Haiti
(source: EU-EBA Info Sheet, April 2013)

14. Criteria to Benefit form the EU-GSP
In order for goods to benefit from the EU GSP upon importation
into the EU, three conditions must be fulfilled:
The goods must originate in a beneficiary country in accordance with the EU GSP RoO,
during transportation from a beneficiary country to the EU, the goods must not be altered, transformed or subjected to operations other than operations performed to preserve them in good condition; and
a valid proof or origin must be submitted (certificate of origin Form A, or invoice declaration)
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

15. The Basic Structure of the EU GSP RoO
Products originate in a particular beneficiary country if they are:
wholly obtained in that country, or
sufficiently worked or processed there
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

16. Four Methods to achieve the status of sufficient working or processing (I)
a) The change of heading criterion
b) The value or ad valorem criterion
c) the specific process criterion
d) working or processing on wholly obtained materials
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

17. Four Methods to achieve the status of sufficient working or processing (II)
The change of heading criterion
This means that a product is considered to be sufficiently
worked or processed when the product obtained is classified in a 4-digit heading of the Harmonised System Nomenclature which is different from those in which all the non-originating materials used in its manufacture are classified.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

18. Four Methods to achieve the status of sufficient working or processing (III)
The change of heading criterion (Example)
The manufacture of a straw basket, classified under heading 4602 of the HS. The list shows for the whole of chapter 46 the criterion „manufacture in which all the materials used are classified within a heading other than that of the product“. As the basket is classified under 4602, while the straw material was imported under 1401, the origin crtiterion is clearly satisfied.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

19. Four Methods to achieve the status of sufficient working or processing (IV)
The value or ad valorem criterion
The value of non-originating materials used may not exceed a given percentage of the ex-works price of a product.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

20. Four Methods to achieve the status of sufficient working or processing (V)
The value or ad valorem criterion (Example)
The manufacture of umbrellas of HS heading 6601, where column 3 in the list reads „manufacture in which the value of all materials used does not exceed 70% of the ex-works price of the product“. Here a comparison has to be made between the ex-works price of the product and the value of all non-originating materials.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

21. Four Methods to achieve the status of sufficient working or processing (VI)
The specific process criterion
Certain operations or stages in a manufacturing process have to be carried out on any non-originating materials used
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

22. Four Methods to achieve the status of sufficient working or processing (VII)
The specific process criterion (Example)
Many examples of this kind of origin criterion can be found in the textile sector, e.g. woven fabrics of cotton of headings 5208 to 5212 of the HS, for which column 3 in the list reads among other „weaving accompanied by dyeing or by coating“. For example the manufacture of a garment starting from non-originating yarn confers origin. This means that weaving and all subsequent manufacturing stages must be carried out in the beneficiary country. A process criterion of this kind implies that starting from an earlier manufacturing stage (e.g. chemical material or natural fibers) also confers originating status, while starting form a later stage (e.g. dyeing only) does not.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

23. Four Methods to achieve the status of sufficient working or processing (VII)
Working or processing is carried out on certain wholly obtained materials
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

24. Four Methods to achieve the status of sufficient working or processing (VIII)
Working or processing is carried out on certain wholly obtained materials (Example)
The manufacture of preparations used in animal feeding of heading According to the list rule applicable to this product, all the materials of Chapters 2 (Meat and edible meat offal) and 3 (fish) used in the manufacture of such products are to be wholly obtained.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

25. Cumulation of Origin under the EU GSP-RoO
Generally, all working and processing for origin purposes must have been carried out in the individual beneficiary country of export. However, there are two exceptions to this principle:
Bilateral Cumulation
Regional Cumulation
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

26. Bilateral Cumulation of Origin
Under bilateral cumulation, materials originating in the EU, within the meaning of the EU GSP RoO, and further worked or processed in a beneficiary country, are considered to originate in the beneficiary country. However, the working or processing carried out there has to be more than „insufficient working or processing“.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

27. Regional Cumulation of Origin
This operates between the countries of one of the regional groups recognised by the EU GSP. Materials originating in one country of the group are considered to originate in the latter country. Cumulation is also possible between individual countries of cumulation Group 1 and Group III, upon request and under certain conditions.
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

28. Regional Cumulation of Origin (II)
Group 1: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar/Burma, Philippines, Thailand, Vietnam
Group 2: Bolivia, Columbia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Peru, Venezuela
Group 3: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka
Group 4: Argentina, Brazil, Paraguay, Uruguay
(source: The EU Rules of Origin for the GSP: A Guide for Users, May 2016)

29. How to Benefit from the GSP Schemes (I)
Step 1: Check the product coverage
Establish the tariff classification of the product according to the Harmonised System (HS)
Ascertain that the product is covered by the individual GSP scheme
Check the country- or country/sector-graduation mechanism, since certain sectors or certain countries may be excluded from the GSP scheme
(Source: UNCTAD)

30. How to Benefit from the GSP Schemes (II)
Step 2: Identify the correct GSP rate
Identify the conventional MFN rate which applies to the product in the customs code of the individual preference-giving country
Apply the reduction granted to the product category in which the HS product is listed. The GSP tariff preference may be in the form of a percentage reduction of the MFN rate of duty or a total elimination of customs duties

31. How to Benefit from the GSP Schemes (III)
Step 3: Investigate the possibility of obtaining additional
preferences
There are usually provisions for special treatment for the least developed beneficiary countries

32. How to Benefit from the GSP Schemes (IV)
Step 4: Check the origin criteria
Ensure that the product complies with the origin crtiteria applicable under the individual GSP scheme

33. How to Benefit from the GSP Schemes (V)
Step 5: Check the consignment conditions
Ensure that the modalities governing the transport of goods from the preference-receiving country to the preference-giving country´s market fulfill the provisions laid down in the relevant regulations

34. How to Benefit from the GSP Schemes (VI)
Step 6: Prepare documentary evidence
Fill in the certificate of origin Form A or the invoice declaration correctly, or any other document as required by the relevant regulations in the individual schemes. These are the official documents on which the customs authorities of the preference-giving country rely to grant GSP benefits to products.