Generalised System of Preferences 2006 - 2008

This Regulation sets out the Generalised System of Preferences for the period from 1 January 2006 to 31 December 2008. It simplifies the preferential import arrangements for products originating in developing countries, thereby streamlining the preferential scheme and reconciling trade and development objectives.

ACT

Council Regulation (EC) No 980/2005 of 27 June 2005 applying a scheme of generalised tariff preferences [See amending acts].

SUMMARY

This Regulation implements the Generalised System of Preferences (GSP) for the period 2006 - 2008. The GSP sets out preferential arrangements for duties on Community imports of goods originating in the beneficiary countries.

The GSP therefore applies to the countries and territories listed in Annex I to the Regulation.

The products affected by the GSP are set out in Annex II. The arrangements for originating products conform to the rules set out in Regulation (EEC) No 2454/93. Regional cumulation is also possible, provided the regional groups are respected.

Products are divided into two categories: sensitive products, and non-sensitive products. Sensitivity is determined in relation to the effect that imports into the Community could have on Community products. Common Customs Tariff specific and ad valorem duties are fixed for such products. They are, however, suspended where the rate of an ad valorem duty reduced in accordance with the provisions of the GSP is 1 % or less and the rate of a specific duty is EUR 2 or less.

The GSP sets out three arrangements. Tariff preferences therefore differ according to the arrangement applicable to the beneficiary countries, namely:

• the general arrangement;
• the special incentive arrangement for sustainable development and good governance, which targets vulnerable countries;
• the special arrangement for least developed countries.

General arrangement

The general arrangement sets out the general rules for the GSP. The principle for non-sensitive products is the complete suspension of the Common Customs Tariff duties applicable to such products, except for agricultural components.

For sensitive products, however, the Common Customs Tariff ad valorem duties applicable to the products are reduced by 3.5 %. This reduction is limited to 20 % for textiles and clothing. However, a tariff reduction of more than 3.5 % laid down by the GSP in the preceding 2002 to 2005 period (Regulation (EC) No 2501/2001) still applies. Common Customs Tariff specific duties are reduced by 30 %.

Where Common Customs Tariff duties on products listed in Annex II as sensitive products include ad valorem duties and specific duties, the specific duties are not reduced.

Agricultural products are subject to a special monitoring mechanism to avoid disturbances in the Community market. Agricultural products continue to be subject to safeguard clauses applied under the Common Agricultural Policy.

Special incentive arrangement for sustainable development and good governance

Under the special incentive arrangement for sustainable development and good governance, Common Customs Tariff ad valorem duties on products listed in Annex II are in principle suspended. Specific duties are also suspended, unless there is also an ad valorem duty. By contrast, specific duties on certain types of chewing gum are limited to 16 % of the customs value.

This arrangement replaces the special arrangements to combat drug production and trafficking in force under the previous GSP (Regulation (EC) No 2501/2001) and therefore enters into force, exceptionally, on 1 July 2005.

The countries that will benefit from this arrangement are those that are considered to be vulnerable due to their lack of diversification and insufficient integration into the international trading system. This applies to countries not classified by the World Bank as high income countries for three consecutive years. These are also countries where the five largest sections of GSP-covered imports to the Community represent more than 75 % in value of their total GSP-covered imports, and where GSP-covered imports to the Community represent less than 1 % in value of total GSP-covered imports to the Community.

These countries are listed in Annex I to the Regulation (column E). Such countries must have made a valid request to the Commission by 31 October 2005 in order to benefit from the arrangement as of 1 January 2006. The definitive list of beneficiary countries is published in the Official Journal after requests have been examined.

For the 2006-2008 period, the countries benefiting from the special incentive arrangement for sustainable development and good governance are Bolivia, Columbia, Costa Rica, Ecuador, Georgia, Guatemala, Honduras, Sri Lanka, the Republic of Moldova, Mongolia, Nicaragua, Panama, Peru, El Salvador and Venezuela.

To become beneficiaries, countries are also subject to a general obligation to ratify and effectively implement the international conventions listed in Annex III to the Regulation. Annex III distinguishes between two types of international convention:

• Core human and labour rights UN/ILO Conventions (Part A of Annex III). Ratification and effective implementation of these is in principle obligatory. If, however, a country is faced with specific constitutional constraints, and has neither ratified nor effectively implemented two of the sixteen conventions on the list, it must make a formal commitment to do so by 31 October 2005 at the latest, or 31 December 2006 if there is an incompatibility with its Constitution;
• Conventions related to the environment and governance principles (Part B of Annex III). Ratification and effective implementation of at least seven of the international conventions listed in Part B is required. The remaining international conventions must be ratified and effectively implemented by 31 December 2008 at the latest.

The Commission monitors this obligation closely, to ensure that it has been respected and applied.

Special arrangement for least developed countries

These countries are listed in Annex I to the Regulation (column D). In line with the "Everything But Arms" initiative, Common Customs Tariff duties are entirely suspended for all products except arms and ammunition.

By contrast, a gradual reduction in Common Customs Tariff duties, culminating in their total suspension, is planned for certain products, namely husked rice, some banana varieties, and white sugar. During the lead-up to total suspension, husked rice and white sugar are to benefit from a global tariff quota at zero duty. The Commission will be assisted by the management committees for the relevant common market organisations in administering these quotas.

The list of least developed countries is drawn up by the United Nations, which may also decide to remove countries from the list. In such cases the Commission removes the country in question from the list of countries benefiting from the arrangement. Removal is progressive, and involves a transitional period of at least three years.

Temporary withdrawal

Temporary withdrawal from the preferential arrangements may affect some or all of the products from the country in question. It is mainly a consequence of the behaviour of the country concerned, and may result from:

• serious and systematic violations of the international conventions listed in part A of Annex III;
• serious and systematic unfair trading practices;
• trade in drugs, or failure to comply with international conventions on money-laundering;
• serious and systematic infringements of the rules governing fisheries and fishery resources;
• export of goods made by prison labour.

A temporary withdrawal decision may be made if there are sufficient grounds for an investigation to be opened. The investigation is carried out by the Commission in liaison with the Generalised Preferences Committee, which assists the Commission in implementing the Regulation, the beneficiary country, and international organisations and agencies. Withdrawal therefore follows an enquiry and investigation procedure, and measures, and is decided by the Council. A withdrawal decision, in principle, enters into force six months after its adoption.

Failure to comply with rules of origin or provide administrative cooperation are also grounds for a Commission decision to suspend preferences. Administrative cooperation mainly concerns the information that beneficiary countries are obliged to supply regarding rules of origin and the respect thereof. As well as information supplied to the Commission, it may also involve missions or enquiries carried out by the Commission itself.

Beneficiary countries may be removed from the scheme (graduation) if the World Bank classifies them as high-income countries, or if they are bound to the Community by a preferential commercial agreement.

Tariff preferences for all products from countries benefiting from the general arrangement and the special incentive arrangement for sustainable development and good governance may also be removed. Removal may be justified by the volume of Community imports of the product concerned from the beneficiary country, i.e. if it reaches 15 % of the total volume of Community imports of the same product from countries that are beneficiaries of one of these two arrangements.

Safeguard clause

The safeguard clause entails restoring the Common Customs Tariff duties. It is generally implemented when imports of a product cause serious difficulties or create direct competition with similar products from a Community producer. Serious difficulties are assessed using criteria measuring Community producers' market share, production, stocks, production capacity, bankruptcies, profitability, capacity utilisation, employment, imports and prices.

Investigations are opened at the request of a Member State or on the Community's own initiative, and must in principle be completed within six months, unless an extension decision is granted. As with the withdrawal procedure, the Commission decision is made on the basis of an information meeting establishing the facts, and on exchanges between the parties. Preventive measures may be taken if they are justified by exceptional circumstances.

Background

Trade preferences are intended to ensure that the Common Commercial Policy is consistent with development policy. The Community aims to help eradicate poverty and promote sustainable development and good governance in developing countries, while still abiding by the rules laid down by the World Trade Organisation.

The GSP was first introduced in the 1970s. The system covered by this Regulation is part of a more generalised plan for GSP for the ten years from 2006 to 2015, the foundations of which were laid by the Commission communication of 7 July 2004 entitled "Developing countries, international trade and sustainable development: the function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015." It therefore covers the first stage, for the period 2006-2008.

RELATED ACTS

COUNTRIES BENEFITING FROM GSP

Commission Regulation (EC) No 566/2007 of 24 May 2007 removing the Republic of Chile from the list of beneficiary countries in Annex I to Council Regulation (EC) No 980/2005 applying a scheme of generalised tariff preferences [Official Journal L 133 of 25.5.2007].

Council Regulation (EC) No 1933/2006 of 21 December 2006 temporarily withdrawing access to the generalised tariff preferences from the Republic of Belarus [Official Journal L 405 of 30.12.2006].

Council Decision of 19 December 2006 on the granting of the special incentive arrangement for sustainable development and good governance beyond 1 January 2007 to the Republic of El Salvador [Official Journal L 365 of 21.12.2006].

Commission Decision 2005/924/EC of 21 December 2005 on the list of the beneficiary countries which qualify for the special incentive arrangement for sustainable development and good governance, provided for by Article 26(e) of Council Regulation (EC) No 980/2005 applying a scheme of generalised tariff preferences [Official Journal L 337 of 22.12.2005]

GENERALISED DOCUMENTS

Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee of 7 July 2004: "Developing countries, international trade and sustainable development: the function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015." [COM(2004) 461 final - Official Journal C 242 of 29.09.2004]

Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee - The rules of origin in preferential trade arrangements - Orientations for the future [COM(2005) 100 final - Not published in the Official Journal]

This communication follows the consultations launched by the Commission's Green Paper on the future of rules of origin in preferential trade arrangements. The paper shows that the preferential rules of origin need to be reviewed. This review is also important on account of the priority accorded to integrating developing countries into the world economy. This revision should be accompanied by an adaptation of the management and monitoring procedures. The Commission proposals cover:

• a review of the conditions for a product to be considered as originating in a country;
• a change in the customs procedures necessary for the proper implementation and supervision of the use of the preferences by economic operators;
• the development of instruments ensuring that the beneficiary countries comply with their obligations.

Last updated: 22.06.2007