Generalized System of Preferences is a preferential tariff system granted by bunch of developed countries to developing or least developed countries.
Under Generalized System of Preferences schemes less developed countries or developing countries would benefit from reduced or zero tariff rates when exporting permitted products to GSP donor countries.
Today I would like to explain the fundamentals Generalized System of Preferences (GSP), who could get benefited from GSP incentives and how to get benefited from reduced GSP tariffs.
Let us start with the fundamentals of the Generalized System of Preferences.
Fundamentals of Generalized System of Preferences
Generalized System of Preferences (GSP) aims to increase developing countries export earnings; promote their industrialization; and accelerate their rates of economic growth by providing them a favorable tariff rates for the goods they export to developed countries.
Which countries offer preferential tariff rates to developing countries or less developed countries via GSP system?
According to UNCTAD secretariat 13 countries have been granting GSP preferences. These countries are known as GSP Donor countries.
Generalized System of Preferences (GSP) aims to increase developing countries export earnings; promote their industrialization; and accelerate their rates of economic growth by providing them a favorable tariff rates for the goods they export to developed countries.
History of GSP:
The idea of granting developing countries preferential tariff rates in the markets of industrialized countries was originally presented by Raul Prebisch, the first Secretary-General of UNCTAD, at the first UNCTAD conference in 1964. The GSP was adopted at UNCTAD II in New Delhi in 1968.
GSP Donor countries:
- Australia
- Belarus
- Bulgaria
- Canada
- Estonia
- European Union
- Japan
- New Zealand
- Norway, the Russian Federation
- Switzerland
- Turkey
- United States of America
In general Generalized System of Preferences (GSP) aims developing countries and least developed countries. But each donor country has its own beneficiary country list under its own GSP programme.
As a result beneficiary countries may differ from one donor country to another. For example Country X may be benefited from GSP of USA, may not be covered in GSP of Australia.
Exporters must check whether their countries are listed under the GSP scheme of the importing country before they are starting to export operations.
As an exporter you have to pass through country, product and documentation criterias in order to be benefited from reduced tariff rates under Generalized System of Preferences.
- GSP - Handbook on the scheme of the United States of America
- GSP - Handbook on the scheme of Canada
- GSP - Handbook on the Scheme of the EU
- GSP - Handbook on the Scheme of Australia
- GSP - Handbook on the Scheme of Japan
- GSP - Handbook on the Scheme of New Zealand
- GSP - Handbook on the Scheme of Republic of Korea
- GSP - Handbook on the Scheme of Turkey
Just like beneficiary countries, covered products change from one donor country to another. Exporters must make sure that their products are covered under the GSP scheme of the importing country before starting export procedures.
You can use above links for product determination under various GSP schemes of donor countries.
How to get benefited from reduced GSP tariff rates?
- First of all you should be exporting one of the donor countries, which applies GSP schemes in favor of the developing countries and least developed countries. Currently Australia, Belarus, Bulgaria, Canada, Estonia, European Union, Japan, New Zealand, Norway, Russian Federation, Switzerland, Turkey and United States of America are applying GSP schemes to their import tariff rates.
- Secondly you have be an exporter, who is located in a beneficiary country as defined in the respected GSP donor country's regulations.
- Thirdly the product you would like to export must be covered under GSP schemes of the donor country's regulations.
- Finally you have to prove country and product eligibility with requested documentation. The key document under Generalized System of Preferences schemes is GSP certificate of origin: Form A.
Form A is a special certificate of origin, which needs to be presented to the importing country's custom in order to be benefited from reduced tariff rates under GSP schemes.
Form A is a preferential certificates of origin, in technical term.
Exporters should be aware that the certificate of origin Form A is one of the official documents on which GSP donor country authorities rely in order to grant GSP benefits to the exporter’s goods.