gsp

Generalized System of Preferences

Trade preferences play an important role in facilitating exports of developing countries to major export markets.

The Generalized System of Preferences (GSP), instituted in 1971 under the aegis of UNCTAD, has contributed over the years to creating an enabling trading environment for developing countries. The following 15 countries grant GSP preferences: Armenia, Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey, United Kingdom and the United States of America.

Challenges arise for beneficiaries in fully exploiting the market access opportunities available under these schemes, including in effectively meeting the rules of origin requirements. Following the WTO Hong Kong Ministerial Decision in 2005 in which members agreed that developed countries and developing countries in a position to do so would grant duty-free and quota-free market access for exports of LDCs, improvements were made to various GSP schemes and/or new schemes for LDCs were launched. Subsequent ministerial decisions, including that taken at MC10 in Nairobi, 19 December 2015, reaffirmed the continued importance of this issue for LDCs’ trade and development prospects. The provision and utilization of trade preferences is a key goal the Istanbul Program of Actions adopted at the UN LDC IV in 2013, as further reaffirmed in SDGs Goal 17.

The objective of UNCTAD’s support on GSP and other preferential arrangements is to help developing countries – particularly LDCs – to increase utilization of GSP and other trade preferences and in turn promote productive capacity development and increased trade. Such support includes raising awareness and enhancing understanding among exporters and government officials in beneficiary countries of the trading opportunities available under the schemes; strengthening understanding of technical and administrative regulations and laws governing preferential market access, particularly rules of origin; and disseminating relevant information for users of GSP and other preferential schemes. Support is also provided to providers of preferences in improving their preferential schemes.

The document contains a list of beneficiaries for each of the GSP schemes currently in operation according to notifications received from UNCTAD member States.  Its part of a series of publications aimed at helping exporters, producers and government officials to utilize the trade opportunities available under the various GSP schemes.

While every effort has been made to ensure the accuracy of the list, the UNCTAD secretariat would appreciate being notified of any errors.  We update the list periodically to reflect any modifications that may be made by preference-giving countries.  The terminology used in the list for the designation of the countries and territories benefiting from the GSP schemes is that of the respective preference-giving countries.

GSP Certificate of Origin, Form A

The claim for GSP treatment must be supported with the appropriate documentary evidence. The GSP Certificate of Origin Form A is used for this purpose.

The Form A was adopted in 1970 by the UNCTAD´s Working Group on Rules of Origin as a common certificate of origin for the purposes of the GSP (TD/B/AC.5/38).

Most recently, changes to the Form A were made:

  • In September 2013 to take into account the accession of Croatia to the European Union as well as the introduction by Iceland of unilateral duty-free and quota-free market access for imports of certain products originating in least developed countries (Notes 2013)(TD/B/GSP/FORM/4)
  • In July 2007 to take into account the European Union´s enlargement and to include the Principality of Liechtenstein, leading to a revision of the note on the Back of the form (Notes 2007) (TD/B/GSP/FORM/3)
  • In July 2005 to take into account the new GSP scheme of Turkey, leading to a revision of the note on the back of the form (Notes 2005) (TD/B/GSP/FORM/2/Rev.1)
  • In April 2004 to take into account the European Union´s enlargement, leading to a revision of the note on the back of the form (Notes 2004) (TD/B/GSP/FORM/1)

The Trade and Development Board, at its forty-first session of the Trade and Development Board, held from 18 to 20 April 2007, agreed that the old Form A with notes dated 1996, 2004 and 2005 will remain valid until existing stocks are exhausted.

Certifying Authorities

The beneficiary countries should inform the preference-giving countries, either directly or through the UNCTAD secretariat, the names and addresses of the governmental authorities issuing the GSP Certificate of Origin Form A together with specimens of stamps used by these authorities.

However, it is not required to notify the specimen of signatures or the names of persons authorized to issue Form A.

Download:

FORM A – certificate of origin (Combined declaration and certificate)
English | French

The Generalized System of Preference (GSP) is a unilateral scheme wherein
custom duty preferences or concessions are granted by developed countries to
export of specified products from developing countries. The preferences are in
the form of either elimination or reduction in customs duty when the list of
eligible products from the beneficiary developing country (BDC) are exported
to the developed country.
The major countries who grant GSP preferences to developing countries are
i. Armenia
ii. Australia
iii. Azerbaijan
iv. Belarus
v. Canada
vi. European Union (EU)
vii. Japan
viii. Kazakhstan
ix. Kyrgyz Republic
x. New Zealand
xi. Norway
xii. Russian Federation
xiii. Switzerland
xiv. Tajikistan
xv. Turkmenistan
xvi. Turkey
xvii. United Kingdom (UK)
xviii. United States (US) and
xix. Uzbekistan
The GSP is a unilateral customs duty preference scheme i.e. there is no need for
India or other beneficiary developing countries to provide reciprocal customs
duty preferences for the developed country. Therefore, there is lesser leeway to
negotiate for amending the parameters or structure of a GSP scheme.
Each of these developed countries has its own regulatory framework under
which it provides the GSP tariff preferences. The GSP provided also varies in
terms of the products on which preferences are provided and the developing
countries exports to which the tariff preferences are granted.
In terms of trade volumes, the GSPs granted by the EU and the US are the most
comprehensive and hence the most important for developing countries. Some
of the GSP schemes also provide additional tariff preferences to a specified
class of developing countries with most providing the largest coverage of GSP
customs duty preferences to exports from Least Developed Countries (LDCs).
Around 40% of India’s exports to the EU are under the EU GSP while prior to
the US GSP withdrawal, around 10% of India’s total exports to the US were
under the GSP.
After BREXIT, UK has started its own GSP scheme from 1.1.2021. They have
borrowed the elements of the EU GSP scheme in terms of the rules of origin
and the margin of preferences available. However, the pre BREXIT situation
would not exist despite the complete free trade agreement between EU and UK.
This would mean that UK would be treated as a separate entity given its
different tariff schedule from the EU and there would be specific rules of origin
between the UK and EU. Non originating goods would be levied normal
customs duty when it moves from the UK to EU border and vice versa.
How will GSP benefit exporters?
GSP provides customs duty reduction for exports made by beneficiary
developing countries like India to GSP granting developed countries like the
European Union (EU), UK and others. The GSP customs duty is lower than the
normal customs duty (or MFN duty) of the developed country. In the case of
exports to EU under the GSP, this could be either zero duty (in case of nonsensitive products) or a reduced duty (in case of sensitive products)
However, an exporter under the GSP is required to fulfil the rules of origin
under the GSP scheme. The rules of origin are the criteria required to ensure
that the product exported originates from the country of export and is not being
diverted from another country. While the rules vary for each product, some of
the commonly used criteria to determine the origin are whether the product or
its inputs are wholly originating, whether there is a change in tariff
classification of the imported input and the final product and what is the
quantum of value addition that has occurred in the beneficiary country? The key
objective of these rules is to ensure that there is substantial processing and
transformation occurring in the exporting country so as to ensure that it
originates from that country.
For example, in the case of EU, if an Indian entity exports frozen sardines fish
(HS Code 03035310) to the EU, the normal customs duty levied at the EU
border is 23%. However, under the EU GSP, he is required to pay only 19.5%.
Hence, if the landed price of say, any consignment of sardines at the EU port is
say € 100, if the exporter avails of the EU GSP preferences, he would pay only
€19.5 as customs duty instead of € 23.0 that he would normally pay and thereby
save € 3.5 for the consignment. That makes him more competitive in the EU
market. It would also ensure that any customs duty preferences given to
competitors from other countries getting GSP is nullified and Indian exporters
have a level playing field.
The rules of origin for frozen sardine’s exports under the EU GSP is that it must
have been wholly obtained (WO) from the beneficiary country. Hence, the
sardines should have been fished in the territorial waters of India or it should
have been caught outside the territorial waters by an Indian vessel.
Similarly, in the case of the UK, if an Indian entity exports stuffed toys (HS
95030041) to the UK, the normal customs duty is 4%. However, under the UK
GSP, the preferential duty would be 0% for those originating from India. Hence
for a GBP100 landed price, there would be no customs duty and he would hence
save GBP4, thereby making him more competitive in that market.
The rules of origin would be that the non-originating material used in the
manufacture of the stuffed toy would be from a different heading (at the HS 4-
digit level) and the value of this non originating material would not be more
than 70% of the ex-works price of the stuffed toy (can be interpreted as 30%
value addition in India).

Historical Evolution of GSP
The concept of GSP evolved in the United Nations Conference on Trade and
Development (UNCTAD) and was adopted during the UNCTAD II Conference
in New Delhi in 1968. The objective of the GSP is given in Resolution 21
(ii) which was adopted at the UNCTAD II Conference. The three objectives
given in this Resolution for beneficiary developing countries (BDCs) are
a) to increase their export earnings;
b) to promote their industrialization; and
c) to accelerate their rates of economic growth
The legal provision for the grant of GSP was negotiated during the erstwhile
GATT (General Agreement on Tariffs and Trade) and adopted on 28
November, 1978. This is known as the “Enabling Clause” which in legal
parlance is called the “Differential and More Favorable Treatment Reciprocity
and Fuller Participation of Developing Countries”.
The specific reference to the GSP is given in para 2(a) of the Enabling Clause:
and is as under:
Preferential tariff treatment accorded by developed contracting parties to
products originating in developing countries in accordance with the
Generalized System of Preferences

A generalized System of Preferences (GSP) is a preferential trade arrangement extended by developed countries to developing countries. Developed countries give GSPs to imports from India. GSP involves reduced tariffs on eligible products exported by India to the markets of GSP-providing countries. GSP promotes sustainable development in India by helping our country to increase and diversify trade with developed countries. India is one of the primary beneficiaries in terms of export volume realized under GSP. This article will look in detail at the Generalized System of Preferences (GSP).

Know more about Agricultural Export Policy

Objective of GSP

The Generalized System of Preferences aims to provide development support to developing countries by promoting exports to developed countries. The Generalized System of Preferences furnishes opportunities for many of the world’s poorest countries to use trade to grow the economy and climb out of poverty.

Benefits of GSP

The benefits of the Generalized System of Preferences (GSP) for Indian traders are explained in detail below:

  • Indian traders benefit indirectly through the benefit that accrues to the importer by way of reduced tariff or duty-free entry of eligible Indian products
  • Removal of import duty on Indian goods makes it more competitive to the importer – other things being equal.
  • This tariff preference helps the new exporters penetrate a market and established exporters to increase their market share and improve the donor country’s profit margins.

Under GSP, there was zero/low concessional tariff on imports from India. The developed countries’ government selects a group of developing countries and a set of products. It offers lower-than-normal taxes than it applies to imports from all other WTO (World Trade Organization) countries.

Difference between GSP and the Usual Trade Law

As per the regular trade arrangement, the World Trade Organization members must give equal preferences to trade partners. There should not be any discrimination between the countries. This trade arrangement under the WTO is known as the Most Favored Nation (MFN) clause. The World Trade Organization allows members to give unique and differential treatment for developing countries like zero-tariff imports. This is an exemption for Most Favored Nation.

Products Covered under GSP

The products covered under the GSP are explained in detail below. Products exported from India will be divided into two groups as follows:

  • Wholly obtained products
  • Products with Import Content

Wholly Obtained Products

The wholly obtained products have been entirely manufactured and produced in India. The following products are considered wholly obtained products:

  • Grown
  • Mineral products extracted from its soil or its sea-bed
  • Vegetable products harvested in India
  • Live animals born and raised in India
  • Products obtained in India from live animals
  • Products obtained from hunting in India
  • Recovery of lead from used motor car batteries
  • Products obtained from fishing conducted in India
  • Products obtained from sea
  • Goods manufactured exclusively from the items mentioned above
  • Used articles collected in India
  • Scrap and Waste resulting from manufacturing operations conducted in India
  • Products obtained in India exclusively from products specified, such as iron sheets and bars produced from Iron ore
  • Cotton fabrics are woven from raw cotton
  • Recovery of metals from metal shavings

Products with Import Content

Products with Import Content are goods manufactured wholly or partially from materials imported from other countries into India.

  • Products with Import Content qualify for the benefit of GSP if imported or unknown origin materials are used in manufacturing such products. The manufacturing process should have undergone processing in India.

Note: The exported goods of unknown origin will be treated as if they were imported. New Zealand accepts products produced in India from imported raw materials, irrespective of the source, as wholly obtained.

Rules of Origin for Qualify GSP

The exported goods must fulfill the requirements of the rules of origin laid down by the importing country to benefit from the Generalized System of Preferences (GSP). The Rules of origin comprise a set of requirements laid down by the importing country, which the Indian product must fulfill to be eligible for preferential tariff treatment upon import in that country. The three components of the rules of origin are listed as follows:

Origin Criteria: The origin criteria determine whether the product can be considered to originate in the country of export (beneficiary country).

Transport Conditions: The transport conditions specify the mode of transportation from the country of export to the developed country so that the goods in question qualify for preferential tariff treatment upon import in the land of the consignee

Documentary Evidence: The documentary evidence will serve as the proof for products to be granted a Generalized System of Preferences benefits at the border of the importing country

In addition to the rules mentioned above, a few Supplementary Rules may have a bearing on the origin of the product under consideration.

Other Rules of GSP

Below mentioned supplementary rules may have a bearing on the origin of the final product to qualify for GSP:

  • Donor Country Content Rule
  • Cumulation
  • The Two Steps Rule
  • Returned Articles
  • Neutral Elements
  • Unit of Consideration

Donor Country Content Rule

According to this rule, if a product was manufactured in India using the raw materials of the donor country (developed country) and exported to the same country, then such products will be considered the product. Originating in India. The Donor Country Content Rule applies to the following countries:

EU, Japan, New Zealand, Australia, Canada, Norway, Poland, Bulgaria, Czech Republic, Hungary, Russian Federation, Switzerland,- Belarus, and Slovakia apply this rule. Switzerland, The trader, need to provide documentary evidence of the originating status of materials imported from them. Note: Some of the donor countries like the EU, Japan, Norway, Poland and

Cumulation Rule

This rule allows a product to be manufactured in India with labor and materials from other beneficiary countries without affecting the originating status.

The Two Steps Rule

According to The Two Steps Rule, when an imported material is transformed in India into another product following the origin rule for this product, and when this product is embodied into still any other product, the whole effect is considered originating when the origin of C has to be determined.

Returned Articles

Suppose an originating product is exported from India to a country and returned to India. In that case, the product will be to be treated as non-originating unless it can be satisfactorily demonstrated the following:

  • The product returned are the same as the exported product
  • The product returned has not undergone any operation beyond what was necessary to preserve them in good condition in the importing country.

Neutral Elements

The origin of Power, Plant, Equipment, Fuel, Machines, or Tools used to produce a product will not be considered while determining the product’s source for getting the benefit of GSP.

Unit of Consideration

According to this rule, each article in a consignment will be considered separately for determining the origin of goods