Revision of the EU Generalised Scheme of Preferences

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Revision of the EU Generalised Scheme of Preferences

Focus on sustainability, human rights and flexibility

The European Commission has adopted the legislative proposal for the new Generalised Scheme of Preferences (GSP) for the period 2024-2034. The proposal seeks to improve some of the key features of the scheme to promote its focus on sustainability, and to better respond to the evolving needs and challenges of developing countries.

The GSP (“General Scheme of Preferences”) is a unilateral trade and development policy instrument of the European Union (EU) that provides for a complete elimination or a substantial reduction of import tariffs on goods exported from certain developing countries. The current EU GSP Regulation has been in operation since 2012 and is set to expire at the end of 2023. Therefore, on 22 September 2021, the European Commission adopted the proposal for a new GSP Regulation for the period 2024-2034.

Goal of the proposal

The GSP is one of the key EU trade and development instruments. Its aim is to help developing countries integrate into the world economy and reduce poverty. The GSP also supports sustainable development through the promotion of core human and labour rights, environmental protection, and good governance. The overarching goal of the revised GSP Regulation is to maintain the essential features of the current Regulation, while also improving some of its aspects.

Main proposed changes of the revised GSP: focus on flexibility, sustainability and compliance

The proposal for the new GSP aims to accomplish improvements in different areas of the scheme, particularly with respect to sustainability, compliance with the human rights and social standards, and adjustment to the evolving needs and challenges of beneficiary countries.

In the area of sustainability, the proposal:

  •  Introduces the possibility of withdrawing GSP benefits for serious and systematic violations of the principles of the conventions on climate change and environmental protection;
  • Extends the current list of international conventions that GSP+ countries must ratify, including among them the Paris Agreement.

In the area of human rights and social standards, the proposal:

  • Adds to the list of conventions that beneficiary countries must comply with conventions on the rights of people with disabilities and the rights of the child, two labour rights conventions on labour inspections and tripartite dialogue, and one governance convention on transnational organised crime;
  • Provides for a new urgent withdrawal of preferences procedure in exceptionally grave circumstances in a beneficiary country, such as grave violations of international standards.

With respect to flexibility, the proposal includes changes that enable the adjustment of the scheme to the evolving needs and challenges of beneficiary countries, such as:

  •  Revised eligibility criteria for GSP+ in order to allow easier access for the Least Developed Countries that commit to strong sustainability standards;
  •  Lower product graduation thresholds for highly competitive products in order to better focus beneficial arrangements on less competitive products and countries;
  •  The mechanism for the European Commission to grant regional cumulation of origin between beneficiary countries belonging to different regional groups or extended cumulation of origin, taking into account the economic needs of the country requesting such cumulation.

Impact on business

The revised GSP proposal needs to be approved by the European Parliament and the Council, which could take place at the end of 2022. Once approved, it is expected to enter into force on 1 January 2024.

The new GSP could result in significant advantages for businesses importing products originating in developing and least developed countries into the EU. However, as outlined above, the availability of these advantages would become increasingly dependent on the adherence by the GSP beneficiary countries to sustainability, human rights and social standards, as well as the type of products at stake and their level of competitiveness in the market. This means that if these requirements are not or no longer met, products originating from these countries may no longer benefit from the preferential duty rates provided for by the GSP.

How we can help

Deloitte’s Global Trade Advisory specialists are part of a global network of professionals who provide specialised assistance in global trade and customs matters. If you have questions about the new Generalised Scheme of Preferences and whether your products can benefit from preferential duty arrangements under the new GSP, do not hesitate to contact us.

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