Sri Lanka to be officially withdrawn from GSP+ list

29 July 2010

Over the past year or so, the European Commission has been conducting investigations into the eligibility of Sri Lanka to continue to benefit from Tariff reductions offered under the GSP+ arrangements.

However, Sri Lanka has been deemed to be not complying with its obligations and as such, all goods that are imported from Sri Lanka will revert back to the standard GSP rate of duty from midnight of 14 August 2010. Please note that there will be no transitional arrangements for goods that will be in transit or in warehouse from that date.

What is GSP+?

The GSP+ scheme is one of the most political and controversial areas of the EC’s beneficial origin regimes. In exchange for generous Tariff concessions, beneficiaries must have ratified and effectively implemented 27 specified international conventions in the field of human rights, core labour standards, sustainable development and good governance. Some argue that this is an intrusion on the sovereignty of the beneficiaries whilst others argue it is an effective way of effecting human rights reform in less developed states.

Why will Sri Lanka be removed from the GSP+ list?

The EU has concluded that Sri Lanka is in breach of 3 agreements, the International Covenant on Civil and Political Rights, the Convention against Torture and the Convention on the Rights of the Child. This is mainly a consequence of Sri Lanka’s military campaign that defeated the Tamil Tigers.

Who will this affect?

In 2008, Sri Lankan exports to the EU totalled 1.24 billion Euro’s (approx. £1 billion). The biggest losers in this area will be the Sri Lankan garments industry. For example, imports on certain garments under the GSP+ system attract no duty. However, the same garments under the GSP system attract between 5-9.6% import duty. Importers will therefore have to budget for these additional duties and some may be locked into contracts that previously benefitted from the GSP+ regime and will therefore result in smaller profits or even losses in some cases.

Next Steps

Companies importing goods from Sri Lanka will be facing a sudden significant hike in landed costs.  There are a number of planning opportunities that may be available to mitigate these duty increases, including stripping out non-dutiable elements from the customs value.

Other companies may choose to start looking at other alternative countries to source from.  Care needs to be taken to fully understand the customs origin rules relating to these purchasing decisions.  Some countries exports are subject to commercial policy measures such as Anti-Dumping Duties resulting in much higher duty rates.  On the other hand, preference may be available from alternative sources but only where the detailed conditions are met.

International Trade Solutions has over 18 years experience in advising on these matters, helping companies minimise costs and compliance risks.  For more information on how we could assist you and your business call us on (01905) 619229 or email us at mail@internationaltradesolutions.co.uk. Alternatively you can visit our website and sign up to our free monthly publication “Anything to Declare?” for all the latest developments in EC Customs Law.

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