Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries (also known as preference giving countries or donor countries) to developing countries (also known as preference receiving countries or beneficiary countries). It involves reduced MFN Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.
BENEFITS OF GSP
- Indian exporters 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 an Indian product makes it more competitive to the importer – other things (e.g. quality) being equal.
- This 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.
COUNTRIES THAT EXTEND GSP BENEFITS
GSP is presently extended by 29 developed countries.
Australia, Republic of Bulgaria, EU Member States, Canada, Republic of Hungary, Austria, Italy, Czech Republic, Republic of Poland, Belgium, Luxembourg, European Union*, Russian Federation, Denmark, Netherlands, Japan, Slovakia, Finland, Portugal, New Zealand, Switzerland, France, Spain, Norway Republic of Belarus, United States of America, Germany, Sweden, Greece, United Kingdom, Ireland
In addition, it is understood that Kazakhstan, Kyrgyzstan. Lithuania and Ukraine may also be allowing preferential tariff treatment to select Indian goods.
- Only such products of a beneficiary country (like India) that fulfil the requirements of the rules of origin laid down by the importing country, are considered eligible for preferential tariff treatment on import into the markets of donor countries detailed under point 3. For example, in the case of 15 member states of European Union, an Indian product is considered eligible only if it fulfils the requirements of Rules of Origin laid down in the Community legislation, namely in Regulation (EEC) No. 2454 / 93, as amended by Regulation (EC) No. 12 / 97 and Regulation (EC) No: 1602 / 2000.
RULES OF ORIGIN
- Rules of origin comprise a set of requirements laid down by the importing country, which must be fulfilled by a product to be eligible for preferential tariff treatment upon import in that country.
- The rules of origin are aimed at reserving, as far as possible, the benefit of the preferential system to the country for which it is intended, and to prevent third countries’ goods from unduly exploiting the system. This may be of particular, importance in case the national quotas and ceilings are reintroduced. On the other hand, the need of the industries to source raw materials and semi-manufactured products or parts’ from other countries are taken into account, by accepting, in many cases, a third country content.
There are three components of rules of origin:
(a) Origin Criteria – which determine whether a product can be considered to be originating in the beneficiary, country, the country from where the goods are being exported, (see point 6)
(b) Transport Conditions – which specify mode of transportation from the country of export to the country of consignee in. order that the goods in question qualify for preferential tariff treatment upon import in the country of consignee, (see point 11)
(c) Documentary Evidence – that will serve as the proof for goods to be granted GSP benefits at the border of the donor country, (see point 12)
- In addition to the above there may be a few Supplementary Rules that may have a bearing on the origin of product under consideration, (see point 10)
BENEFITS OF GSP
- Products exported from India can be divided into two groups – WHOLLY OBTAINED PRODUCTS and PRODUCTS WITH IMPORT CONTENT
- WHOLLY OBTAINED PRODUCTS are those, which have been entirely
(b) Extracted from the Soil,
(c) Harvested within the country, or
(d) Manufactured exclusively from the above.
- WHOLLY OBTAINED PRODUCTS qualify for GSP benefits by virtue of total absence of any materials or components of imported / unknown origin in their manufacture.
- PRODUCTS WITH IMPORT CONTENT are manufactured wholly or partially from materials, parts or components imported into India or of unknown origin.
- 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. On the other hand, a product using imported materials is non-originating if the imported materials have only been subject to MINIMAL OPERATIONS in India, (see point 9)
- 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