The European Commission proposes a new EU GSP

12/11/21

The Commission’s proposal is maintaining the three existing structures of GSP arrangements, as well as a continued applicability to the same countries. However, the GSP is now being updated to bring the scheme closer in line with the EU’s commitment to sustainable development by aligning the GSP Regulation with the EU Green Deal objectives. In addition, the new GSP will be coherent with other EU policies, in particular development cooperation and promotion of human rights.

The current GSP Regulation requires all beneficiaries to respect 15 core human and labour rights conventions. As such, the proposal updates this existing list of international conventions and incorporates environmental and good governance conventions by adding, among others, the Convention on the Rights of Persons with Disabilities, and the Paris Agreement.

Additionally, the Commission seeks to improve the “withdrawal procedure” of preferential tariffs by introducing a rapid response mechanism that can be activated in cases of serious and systematic violations of the principles of the international conventions. As a result, the revised EU GSP system would reinforce the incentive for beneficiary countries to respect a wider range of human rights, labour rights, environmental protection, and good governance.

Background

The European Union Generalised Scheme of Preferences (GSP) is a unilateral preferential tariff scheme granted by the EU to in total 67 vulnerable low-income countries as a means of supporting their economic and social development, as well as promoting human rights, sustainable development, and their participation in the global economy. The current GSP Regulation provides a sliding scale of preferences within three schemes according to the different needs of developing countries:

The general arrangement: for low and lower-middle income countries. This means a partial or full removal of customs duties on two thirds of the products;
The Special Incentive Arrangement for Sustainable Development and Good Governance ("GSP+"): granting extended tariff preferences and only accessible to vulnerable countries that ratify and implement specific international environmental and human rights-related conventions; and
EBA (Everything But Arms) for least developed countries (LDC’s): the special arrangement for least developed countries, providing them with duty-free, quota-free access for all products except arms and ammunition.

The Regulation currently governing the scheme expires on 31 December 2023. The new proposal allows for a renewal of the GSP scheme for the period 2024 – 2034.

What’s next?

The European Parliament and the Council will now discuss the proposal, adoption could take place in the last quarter of 2022. The new GSP Regulation is expected to enter into force on 1 January 2024.

The adoption of the new GSP Regulation will likely not have immediate far-reaching consequences for companies with international supply chains and/or companies exporting to the EU from developing countries. However, these companies should be aware that when beneficiary countries will not obey the newly imposed conditions, the EU Commissions will have more instruments to enforce these, as a result of which the preferential duty rates may be (temporarily) withdrawn.

Should you need any advice on how to assess the impact of the Proposal on your business model, please contact your usual PwC customs and international trade specialist at PwC.