The GSP (Generalized System of Preferences) Rules Governing Imports into the European Community
1 GSP Rules of Origin (General)
The origin of preferential concessions according to the EU rules in favour of developing countries, contained in Article 67 to 97 of [EEC] Regulation 2454/93 as amended by regulation (EC) No. 12/97 and 1602/2000, apply to all products covered by the GSP provisions. Restrictions have been placed for textile products that constitute the bulk of exports from a large number of developing countries. The following rules apply in order for the finished goods to acquire the origin of the country for the relevant textile products in order to be processed and imported into the European Community, duty free or at a reduced rate.
Knitwear products - Chapter 61
In a beneficiary country, any material imported for the manufacturer of an article of apparel [e.g. T-shirt of CN code 61.09] must be at a stage no later than yearn. Accordingly the following two stages of processing must be completed in order to qualify for GSP:
- The fabric for the T-shirt
- The T-shirt itself
Woven products - Chapter 62
In a beneficiary country, the processing requires two stages as material imported for the manufacturer of an Article of Apparel [eg. Men's shirt of CN62.05] must be at a stage no later than yarn. The two stages required for processing in the beneficiary country are:
- The woven fabric and
- the garment itself
2 Regional Cumulation of Origin
The origin applicable to GSP according to the EU rules provide for regional cumulation to apply inter alia to those countries that are members of the SAARC. Designed to encourage regional cooperation amongst the countries of GSP beneficiaries and members of the group, "regional cumulation" is an option for the purpose of origin, which offers more flexibility accepted as such by the EU in terms of Article 72 of the relevant EEC regulation.
For garments, if a beneficiary country uses an intermediate product, there is less processing involved provided that it originates in a member country of the regional group.
In practical terms, this means the processing required for knitwear products of chapter 61 and woven products of chapter 62 is reduced from two stages to one stage. Under regulation (EC) 1602/2000 SAARC countries enjoy the benefit of regional cumulation effective 1st October 2000.
2.1 Definition of Regional Cumulation
Article 72a of Regulation 1602/2000 states:
1. When goods originating in a country which is a member of a regional group are worked or processed in another country of the same regional group, they shall have the origin of the country of the regional group where the last working or processing was carried out provided that,
a. the value added there as defined in para 3 is greater than the highest customs value of the products used, originating in one of the other countries of the regional group and
b. the working or processing carried out there exceeds that set out in Article 70 and in the case of textile products, also those operations referred to in Annex16*
2. When the conditions of origin in para1 (a) and 1(b) are not satisfied, the product shall have the origin of the country of the regional group, which accounts for the highest customs value of the originating products coming from other countries of the regional group.
3. Value added means the Ex- works price minus the customs value of each of the products incorporated, which originated in another country of the regional group.
4. Proof of the originating status of goods exported from a country of a regional group to another country of the same group to be used in further working or processing or to be re-exported where no further working or processing takes place shall be established by a certificate of origin Form A issued in the first country.
5. Proof of the originating status acquired or retained in terms of Article 72, this Article and Article 72(b) of goods exported from a country of a regional group to the community, shall be established by a certificate of origin Form A issued according to the provisions of para 4
6. The country of origin shall be marked in box 12 of the certificate of origin Form A or on the invoice declaration, that country being
a in the case of products exported without further working or processing according to para 4 the country of manufacture
b in the case of products exported after further working or processing, the country of origin as determined in accordance with para 1."
Definitions on Customs Value, Ex- Works Price and value of materials
"Customs Value" means the value as determined in accordance with the 1994 Agreement on Implementation of Article VII of the GATT on Customs Valuation. The primary basis for customs value under this agreement is "transaction value" that is the price actually paid or payable for the goods when sold for export to the country of importation, subject to the following adjustments specified in Article 8 of the agreement:
a) To the extent they are incurred by the buyer but not included in the price:
- Commissions and brokerage except buying commission
- Cost of containers
- Cost of packing, labour and materials
b) The value apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at a reduced cost for use in connection with the production and sale for export of imported goods to the extent that such value has not been included in the price:
- Materials, components, parts and similar components included in the goods
- Tools, dyes, modules, and similar items
- Material consumed in the production of imported goods, engineering, development, artwork, etc.
"Ex-works price" means the price paid for the products ex-works to the manufacturer in whose undertaking the last working or processing is carried out, provided that the price includes the value of all the materials used, minus any internal taxes which are or may be repaid when the product obtained is exported.
Value of Materials
Value of materials means the customs value at the time of importation of the non-originating materials used.a
Working Excluded from GSP Regional Cumulation
Working such as:
- Fitting of buttons and /or other types of fastenings
- Making of button holes
- Finishing off the ends of the trouser legs and sleeves or the button hemming of skirts and dresses etc.
- Hemming of handkerchiefs, table linen etc.
- Fittings of trimmings and accessories such as pockets, labels, badges, etc.
- Ironing and other preparations of garments for sale "ready made"
- Or any combination of such working.
Sri Lanka Pakistan Free Trade Agreement
The Sri Lanka Pakistan Free Trade Agreement became effective from July 2005.While there has been increase in value of overall trade between the two countries since the implementation of the agreement Sri Lanka is yet to see a marked improvement in the utilization of the small tariff rate quota allowed for export to Pakistan under the agreement.
The provisions of the Agreement applicable to export of apparel products to Pakistan are the following:
1 Tariff Rate Quota at Preferential Rate of Duty
Three million pieces per annum (July/June) with a maximum two hundred thousand pieces allowed for each of 21 tariff lines
2 Margin of Preference
35% on all 21 tariff lines. Based on the current general rate of duty of 25% the preferential duty would be 16.25%
3 Rules of Origin
35% value addition and change of tariff heading
4 Tariff Lines covere
.HS Chapter 61 - 13 tariff lines
HS Chapter 62 - 8 tariff lines
(Please see details below)
Ch 61- Articles of Apparel or Crocheted
6107.11 Men's and Boys' under pants and briefs of cotton
6107.12 Men's and boys' under pants and briefs of MMF
6107.19 Men's and boys' under pants and briefs of other textile materials
6108.21 Women's and girls' briefs and panties of cotton
6108.22 Women's and girls' briefs and panties of MMF
6108.29 Women's and girls' briefs and panties of other textile materials
6108.31 Women's and girls' night dresses and pyjamas of cotton
6108.32 Women's and girls' night dresses and pyjamas of MMF
6108.39 Women's and girls' night dresses and pyjamas of other textile materials
6109.10 T-shirts singlets and other vests of cotton
6109.90 T-shirts singlets and other vests of other textile materials
6112.31 Men's and boys, swimwear of synthetic fabrics
6112.30 Men's and boys, swimwear of other textile materials
Ch 62 - Articles of Apparel not knitted or crocheted
6207.11 Men's and boys' under pants and briefs of cotton
6207.19 Men's and boys' under pants and briefs of other textile materials
6208.21 Women's and girls' night dresses and pyjamas of cotton
6208.22 Women's and girls' night dresses and pyjamas of MMF
6208.29 Women's and girls' night dresses and pyjamas of other textile materials
6216.00 Gloves, mittens and mitts