Presentation on theme: "A presentation on EU GSP Plus: Opportunities for Pakistan"— Presentation transcript:
1 A presentation on EU GSP Plus: Opportunities for Pakistan Pakistan Institute of Trade and Development, Islamabad.
2 Scheme of the Presentation: (Contnd) IntroductionQualification CriteriaPakistan’s Position under Qualification CriteriaList of GSP+ beneficiary countriesPakistan’s Export Profile to EUSectoral Coverage under GSP PlusPotential for Pakistan’s Exports under GSP Plus along with tariff rates vis-a-vis other countries
3 Scheme of the Presentation: Key AdvantagesRules of origin in EURequired Standards and Regulations in EUOpportunities for PakistanGSP+ ChallengesSector Specific Challenges
4 Introduction: (Contd) GSP+ is a scheme of preferential tariffs, unilaterally extended with the objective of increasing trade capacity among developing nations.The EU GSP is extended through three arrangements: GSP, GSP Plus and Everything But Arms (EBA).GSP+ is not extended automatically, countries have to apply and then it is subject to the EU Parliament’s approval under the given eligibility criteria which is binding on the requesting state.The EU Parliament passed the Scheme and final count of voting was 409 in favor and 182 against.EC introduced GSP in 1971.GSp benificiaries…..GSP Plus : 10EBA:The European Parliament is made up of 766 Members elected in the 28 Member States of the enlarged European Union. Since 1979 MEPs have been elected by direct universal suffrage for a five-year period.To beef up the lobbying effort further Minister of State for Commerce Engr. Khurram Dastgir Khan toured various EU Capitals to meet with EU Ministers and other stakeholdersHe also spent two days meeting MEPs in Strasbourg where EU Parliament was in session.Governor Punjab also came to Strasbourg to lobby with MEPs
5 Introduction:Government of Pakistan through its diplomatic and trade circles made intensive efforts to get this legislation passed through EU ParliamentUnder GSP Plus, 6274 tariff lines are eligible, of which 6269 are duty free. Textile products are classified as “sensitive” (HS Code chapters and 61-63) under GSP Plus.GSP Plus will result in duty free access in EU for 91% of its total importsGSP Plus beneficiaries must ratify and implement 27 international conventions. click hereGSP Plus status will be awarded for a period of 10 years and its status is reviewed after every three years.Product coverageThe general arrangement covers over 6200 tariff lines out of a total of approximately7100 tariff lines with non-zero tariffs. Roughly 2300 lines are not covered by thescheme as standard tariffs (so-called “most favoured nation” or MFN) are already at 0.Products are split into non-sensitive and sensitive categories: Non-sensitive products enjoy duty-free access, and represent about 2400 lines; Sensitive products (a mixture of agricultural, textile, clothing, apparel, carpetsand footwear items) benefit from tariff reductions (typically 3.5 percentagepoints on ad valorem duties) compared to the standard most favoured nationtariff. These represent about 3800 lines.
6 GSP Plus: Qualification Criteria Tariff preferences are conditional to commitments for ratification and implementation of 27 international conventions * (16 relating to human rights and labor rights (11 relating to governance and development issues).GSP Plus is extended to countries considered “vulnerable” in their trade profile.Share of seven largest GSP sections: For exports to the EU, the share of top 7 sections should be greater than 75% of the total exports of that country to EUShare in the total GSP imports to the EU: In order to remain eligible for GSP Plus the share of total imports from one country to EU should not be more than 2% of the total imports of EU.Regulation (EU) No 978/2012 of the European Parliament and of the Council of applying a scheme of generalized tariff preferences and repealing Council Regulation (EC) No 732/20081 establishes eligibility criteria for special incentive arrangement for sustainable development and good governance (GSP+). According to point (a) of Article 9(1) of this Regulation a GSP beneficiary country may benefit from the tariff preferences provided under GSP+ if it is considered to be vulnerable due to a lack of diversification and insufficient integration within the international trading system. The countries meeting the vulnerability criteria2, as defined in Annex VII of Regulation 978/2012 are listed below. Vulnerable countries must meet the criteria listed in Article 9(1) of the Regulation before they are granted GSP+.
7 Pakistan’s Position under Qualification Criteria GSP + criterionPakistan’s positionThe exports of beneficiary country for seven largest sections should be greater than 75%94.6%Per capita income to be less than US$ 4000 (Not to be high middle income country)US$ 1,260Import Vulnerability threshold (2%)1.60%
8 List of GSP+ beneficiary countries ArmeniaAzerbaijanBoliviaCape VerdeCosta RicaEcuadorPakistanMongoliaParaguayPeruGeorgiaGSP+ – deep tariff cuts for 10 countries which ratified and implemented international conventions relating to human and labour rights, environment and good governance;
9 Pakistan’s Export Profile to EU The total Pakistani export to the European Union in 2013 was US$ 6.58 billion.Total imports of EU-27 countries in 2012 was US$ 5.71 trillion.Pakistan has been struggling to improve its exports to the EU as compared to other developing countries.Grant of GSP Plus status is a significant development and big opportunity for Pakistan to enhance its exports to EU.Bangladesh being an LDC had duty free access and its exports to the EU were US$ Billion in 2012Our products like home textiles and garments faced tariffs up to 9.6%, fabrics etc 6.4% Footwear up to 12%, Leather up to 5.5%,Stiff competition from most of our competitors because they had more preferential access
11 Sectoral Coverage under GSP Plus: The GSP+ provides tariff concessions in 6200 plus tariff lines. These products fall in the following sectors:Agricultural ProductsMineral ProductsChemical and Related ProductsNon - Consumable Animal and Plant ProductsTextiles and ApparelNon - Metallic Mineral ProductsMetals and Manufactured Articles Made Mostly of MetalOther Highly Manufactured and Special - Purpose Goods
12 Chapters covered under GSP Plus with Pakistan’s exports and tariff Pakistan’s Exports to EU for Chapters covered under GSP Plus is US$ 5.27 billion and chapter wise tariff and Exports are given. Click here
13 Total ad valorem equivalent tariff Ecuador's Exports to EU in 2012 High Potential Chapters for Pakistan covered under GSP Plus (MFN tariffs are above 15%) All Values in USD MillionTop three competitorsS. NoProduct codeProduct labelPak's Exports to EU in 2012EU's total Imports in 2012Total ad valorem equivalent tariffPeru's Exports to EU in 2012Ecuador's Exports to EU in 2012Costa Rica's exports in 20121'04Dairy products, eggs, honey, edible animal product nes0.0538%0.160.002'02Meat and edible meat offal0.073'17Sugars and sugar confectionery9.9734%0.893.613.894'24Tobacco and manufactured tobacco substitutes4.1229%0.7414.390.155'20Vegetable, fruit, nut, etc food preparations8.7922%231.9575.5799.556'01Live animals0.087'11Milling products, malt, starches, inulin, wheat gluten1.4220%2.530.440.018'10Cereals67.8716%14.930.989'16Meat, fish and seafood food preparations nes0.9036.31525.580.4810'07Edible vegetables and certain roots and tubers5.3115%164.2926.3724.02Total98.50451.88646.94128.10
14 Considerable Potential Chapters for Pakistan' covered under GSP Plus 32 chapters covered under GSP Plus where MFN tariff ranges from 5% to 15% and Pakistan is tapping the EU market of US$ 3.74 billion. Where as the total EU imports of these chapters are of US$ 1.39 trillion. The list of trade, tariff and competitors for these chapters can access here
15 Average Potential Chapters for Pakistan covered under GSP Plus 45 chapters covered under GSP Plus where MFN tariff ranges from 0% to 5% and Pakistan is tapping the EU market of US$ 1.42 billion. Where as the total EU imports of these chapters are of US$ 3.62 trillion. The list of trade, tariff and competitors for these chapters can access here
16 Key Advantages of GSP Plus: The scheme will no longer end every 3 years,. Rather, it will last for 10 years.Better focus on those countries most in needBy getting preferential access to the Union market, the scheme will assist developing countries in their efforts to reduce poverty and promote good governance and sustainable developmentThe scheme’s tariff preferences should focus on helping developing countries having greater development, trade and financial needs.not be classified as a high middle income country and5 largest sections of its GSP exports be more than 75% of total GSP covered exports to EU (lack of diversification in exports)Its GSP covered exports to EU be less than 2% of total EU GSP covered imports
17 Rules of Origin under in EU under GSP+ Products originate in a particular beneficiary country if they are:- wholly obtained in that country, or- sufficiently worked or processed there.In general terms, products are wholly obtained in a particular beneficiary country (or in the EU, in the case of bilateral cumulation)Globalization of manufacturing processes has resulted in many products being made from parts, materials etc. coming from all over the world. Such products are not of, course, wholly obtained but they can nevertheless obtain originating status.WHAT ARE 'WHOLLY OBTAINED PRODUCTS'? (ARTICLE 75):In general terms, products are wholly obtained in a particular beneficiary country (or in theEU, in the case of bilateral cumulation) if only that country has been involved in theirproduction. Even the smallest addition or input from any other country disqualifies a productfrom being "wholly obtained".Therefore, it applies mainly to things occurring naturally and to goods made entirely fromthem. What can be considered as "wholly obtained" in a beneficiary country, or in theEuropean Union, is laid down in an exhaustive list in Article 68.WHAT ARE 'SUFFICIENTLY WORKED OR PROCESSED' PRODUCTS? (ARTICLE 76):In practice, except for naturally-occurring and related products, situations where only a singlecountry is involved in the manufacture of a product are relatively rare. Globalisation ofmanufacturing processes has resulted in many products being made from parts, materialsetc. coming from all over the world.WHAT IS MEANT BY "CUMULATION OF ORIGIN"?Bilateral Cumulation (Article 84)Under bilateral cumulation, materials originating in the EU, within the meaning of the EUGSP RoO, and further worked or processed in a beneficiary country, are considered tooriginate in the beneficiary country. However the working or processing carried out there hasto be more than the "insufficient working or processing" explained in 2.6.This concept is also known as "donor country content".• Example: for embroidered handkerchiefs (classified HS 6213) to obtain GSP origin in abeneficiary country, the one of the criteria to be applied is " Manufacture fromunembroidered fabric, provided that the value of the unembroidered fabric used does notexceed 40% of the ex-works price of the product "; meaning that non-originatingunembroidered fabric may be used but representing a value not exceeding 40% of the exworksprice of the product. However, if the fabric used originates in the EU, then thecumulation provisions allow it to be considered to be originating in the beneficiary countryas the further manufacturing process goes beyond "insufficient" within the meaning ofArticle 68. See point 4.2 below for evidence of the EU origin for materials to be used forbilateral cumulation.
18 Rules of Origin in EU under GSP+ WHAT IS THE EU GSP PROOF OF ORIGIN?There are three principal forms of proof used in the context of the EU GSP:The certificate of origin Form A, used as proof of origin at import into the EU and in regional cumulationThe Invoice Declaration, and which can be used for low value GSP exportsThe Movement Certificate EUR, which may be used as may an invoice declaration, when goods are exported to beneficiary countries from the EU in the context of bilateral cumulationHOW ARE THESE DOCUMENTS USED?The Form A and invoice declaration are used by importers in the EU for GSP imports as evidence in support of their request that the goods be imported at preferential rates of customs duty.They are therefore important documents and have a value equal to the amount of customs duty that is waived by the EU.There are three principal forms of proof used in the context of the EU GSP7:• The certificate of origin Form A, used as proof of origin at import into the EU and inregional cumulation, see point 2.7 above (Article 97l and Annex 17)8.• The Invoice Declaration, and which can be used for low value GSP exports (Article 97mand Annex 18).• The Movement Certificate EUR1, which may be used as may an invoice declaration, whengoods are exported to beneficiary countries from the EU in the context of bilateralcumulation, see 2.7 above (Article 97v and Annex 21).HOW ARE THESE DOCUMENTS USED?The Form A and invoice declaration are used by importers in the EU for GSP imports asevidence in support of their request that the goods be imported at preferential rates ofcustoms duty (often nil). They are therefore important documents and have a value equal tothe amount of customs duty that is waived by the EU. In this sense they serve a similarfunction to a cheque, a banknote or banker’s draft and must be treated with similar respect.Like a banknote, the Form A must be printed to a very precise specification in terms ofcolour and background pattern (see Annex 17) and, like a cheque or banker’s draft, it mustbe carefully completed. Guidance on the completion of the Form A is given in point 5.6below.The Form A is also used as evidence of origin for the purpose of applying the regionalcumulation of origin provisions (see point 2.7). In a regional group, goods originating in country B (of the same regional group) for further processing before being exported to theEU (Article 72a(4)).The invoice declaration must also conform to a very precise formulation (see Annex 18 andbelow) and may be used by exporters in beneficiary countries when exporting goods of a lowvalue (see point 5.12 below for further information)The movement certificate EUR.1 is used by exporters in the EU, as well as in Norway orSwitzerland, when they send originating goods to beneficiary countries.EC exporters who are "approved exporters" may use an invoice declaration (instead of amovement certificate EUR.1), when exporting materials or parts of EU origin to a GSPbeneficiary country for incorporation into a product there for export to the EU as anoriginating product under the EU GSP.
19 European Union Standards Registration, Evaluation and Authorization of Chemicals (REACH):REACH requires all chemicals produced or imported into the EU in volumes above 1 ton per year to be registered.CE Marking:To sell certain products in the 28 EU member states, as well as in Norway, Liechtenstein, Switzerland, Turkey and Iceland, U.S. exporters are required to apply CE Marketing whenever their product is covered by specific product legislation. EU Flammability Requirements:There are no harmonized EU flammability requirements for home and house textiles.Standards - European UnionEU Member States have widely differing standards, testing and certification procedures in place for some products. These differences may serve as barriers to the free movement of products within the EU and can cause lengthy delays in sales due to the need to have products tested and certified to account for differing national requirements.Registration, Evaluation and Authorization of Chemicals (REACH)--REACH requires all chemicals produced or imported into the EU in volumes above 1 ton per year to be registered. This includes, all products, such as textiles and apparel, that may contain chemicals or chemical products. For more information, see the European Community-Enterprise and Industry REACH website. U.S. exporters may also find helpful information and assistance on the U.S. Commercial Service EU REACH webpage. CE Marking--To sell certain products in the 28 EU member states, as well as in Norway, Liechtenstein, Switzerland, Turkey and Iceland, U.S. exporters are required to apply CE markingwhenever their product is covered by specific product legislation. The CE mark certifies that a product has met EU health, safety, and environmental requirements, which ensure consumer and workplace safety. All manufacturers in the EU and abroad must meet CE mark requirements where applicable in order to market their products in Europe. Once a manufacturer has earned a CE mark for its product, it may affix the CE mark to its product, and then the product may be marketed throughout the EU without having to undergo further modifications in each member state. Unfortunately, there is no comprehensive list of the products that require a CE mark. Therefore, it is the manufacturer's responsibility to determine if a product requires a CE mark from various directives issued by the European Commission. Some products require the conformance to more than one directive. For more information, see the Export.gov webpage on CE marking. Carpeting sold in the EU must have a CE marking, as required under the Construction Products Directive (89/106/EEC). Under the directive, materials intended for construction must comply with health, safety and environmental requirements as follows: mechanical strength and stability; fire safety; hygiene, health and environment; safety of use; sound nuisance; and energy savings and heat retention. Attesting the conformity of a floor covering with the requirements of EN must be done in part by the producer, but may also require third party testing and certification. A construction product is defined as any product that is produced for incorporation in a permanent manner in a construction project, thus various other textile products could be covered. For more information, see the U.S. Commercial Service report on The European Union’s Directive on Construction Products. EU Flammability Requirements--There are no harmonized EU flammability requirements for home and house textiles. Whereas curtains and drapes are not addressed by EU-legislation, carpets and rugs must meet specific flammability requirements. Where EU law is not available, national law is applied. For example, in Austria, certain textile products must meet OENORM standards, which are either defined by the Austrian Standards Institute or adapted from EU legislation. Textile floor coverings or curtains, for example, must pass several fire tests before they are admitted to the Austrian market.
20 European Union Standards Product Liability and Product Safety:The General Product Safety Directive (GPSD) aims to ensure that products placed on the market are safe, and places the obligation to place only safe products on the market on producers and to some extent on distributors.Biocidal products:Whenever biocidal products are added to textile and apparel products to give them specific properties (e.g. repel insects or avoid allergens) the provisions of the Directive 98/8/EC must be followed.Emission Trading System (ETS):The European Emission Trading System aims to improve and extend the greenhouse gas emission allowance trading scheme of the Community.Product Liability and Product Safety--The General Product Safety Directive (GPSD) aims to ensure that products placed on the market are safe, and places the obligation to place only safe products on the market on producers and to some extent on distributors. For more information, see the EUROPA Consumer Affairs GPSD webpage. The GPSD provides the framework that covers flammability, though it does not specifically address requirements. The use of voluntary standards helps comply with the law. See the Consumer rights for child safety products - European Child Safety Alliance European Consumer Safety Association. The European standards:BS EN Textiles - Burning Behaviour of Children’s Nightwear - Specification describes the requirements.BS EN 1103 Textiles - Fabric For Apparel - Detailed Procedure for Determination of the Burning Behaviour describes how to burn fabrics for compliance with ENBiocidal products--Whenever biocidal products are added to textile and apparel products to give them specific properties (e.g. repel insects or avoid allergens) the provisions of the Directive 98/8/ECmust be followed. For more information, see the European Commission Environment website on biocidal products. Emission Trading System (ETS)--The European Emission Trading System aims to improve and extend the greenhouse gas emission allowance trading scheme of the Community. In this framework, textile companies can be impacted by the ETS directive if they have combustion installations with a total rated thermal input exceeding 20MW. Local standards organization and other resources: European Committee for Standardization - CEN European Commission - Enterprise and Industry European Standards Commission’s Technical Regulations Information System - TRIS (technical regulations) U.S. Commercial Service-U.S. Mission to the European Union: EU Standards and CE Marking.
21 Testing and Certification Mechanism in Pakistan Pakistan National Accreditation Council (PNAC) has achieved a milestone of Mutual Recognition Arrangements (MRAs) with International Laboratory Accreditation Cooperation (ILAC) and Asia Pacific Laboratory Accreditation Cooperation (APLAC).Now Pakistan is included in the list of countries having equivalence status for accreditation of testing and calibration laboratories all over the world.Accredited In Pakistan, Accepted Everywhere In The World can access hereTesting & Calibration LabsEngineering & Calibration Labs The department of Engineering and Calibration labs is headed by a director to undertake the following activities.The accreditation of calibration and testing labs in different disciplines including but not limited to Engineering, metrology, electronics, mechanical, Textile etc. in accordance to ISO/IECMatters pertaining to APLAC.Industrial Labs The department of industrial labs is headed by a director to undertake the following activities.The accreditation of testing labs in different disciplines including but not limited to chemical, microbiological, pharmaceuticals, food, agriculture, vetenary, fuel etc. in accordance to ISO/IECMatters pertaining to ILAC.
22 Opportunities for Pakistan (Cntnd…) Pakistan can earn more than USD 1 billion worth of goods by expansion of product lines through the GSP Plus duty-free status.Competitors in the T&C sector; China, India, Vietnam, Thailand, Indonesia have no duty free access as well as no preferential access – 10% to 14% duty advantage.In chapters 61 and 62 (knitted and woven apparel), an additional US$280 million can be earned in the first year (13.5% of current exports of products within the 6% threshold.In leather products (chapters 41 & 42), an additional US$97.1 million (17.5% of existing import levels) in the first year can be earned.For all other products, an additional US$ 250 million in the first year (17.5% of current exports) can be earned.
23 Opportunities for Pakistan Massive opportunities to provide employment due to increase in exports.Increased revenue for the exchequer in form of taxes from enhanced trade opportunities.Massive possibilities to earn foreign investment by inviting entrepreneurs from China and other countries to invest in industries with potential for rapid export expansion through GSP Plus.China’s dwindling share in the global textile and clothing business, because of surging cost of production there, and Pakistan’s expected duty-free access to the European Union (EU) from next year, are being viewed by the textile industry as a ‘once-in-a-lifetime’ kind of opportunity for the country.
24 Challenges…Pakistan has been a large supplier of textile and leather goods to the EU for long time but quality control and product standards remain a concernProduct concentration in textiles and clothing sector and leather sectorThe key challenges to increasing Pakistan’s exports to the EU are found to lie primarily within the border. Which includecosts of productionlower productivityvolatile prices of raw materials in the textiles and plastics sectorsdifficulty in achieving the required market standardscosts of certificationlack of customer confidence due to the poor security environmentChallenges for Pakistan:Pakistan has long been a supplier of textile and leather goods to the EU and other global destinations andtherefore has quality and safety standards in place with deviations resolved at firms’ level, but no sector orregulatory level complaints of note. While quality control and product standards remain a concern for theproducers, as indicated in the stakeholder consultations, product quality and testing will not be consideredas specific to GSP+.
25 GSP Plus: Sector Specific Challenges Textile sectorVoluntary Social Standards (VSS) are compliance challenge for manufacturers and exportersQuality standards and certificationOeko-Tex 100 certification is awarded in four product classes onlytextile items for babiestextiles used away from the skinfurnishing materialsIncreasing demands for the EU Eco-LabelChallenges of Textile sectorVoluntary Social Standards (VSS) also known as “Private Standards” are also compliance challenge formanufacturers and exporters. These are social standards applied by major global buyers which theirvendors globally are required to maintain as a condition for trade relationship. In general, these privatestandards more or less is in conformity with the buying or buyer’s country own legal requirements,especially in the areas of basic respect for worker rights, gender promotion and avoidance of child labour.According to the Small and Medium Enterprises Development Authority (SMEDA) the European Eco-Labelis said to compare to Oeko-Tex 100, but reportedly less well known and less asked for in purchaserequirements by European buyers.
26 GSP Plus: Sector Specific Challenges Tanneries and leather sectorNTB, Product standards are imposed on HS 4201, HS 4202, HS 4203.Lack of harmonization at the HS 8 digit level in leather goods and garments sectorsMaximum Residue Levels (MRLs) standardsLabor and environment related standardssocial accountability standardsChallenges of Tanneries and leather sectorThe leather sector comprises a number of processes ranging from processing to finished goods and, assuch, the sector is subject to different legislation covering agriculture, environment public health andconsumerism. From the exporters’ perspectives, as in textiles, quality standards are the most importantNTB. Product standards are imposed generally on saddler and harness products (HS 4201); trunks andsuitcases, etc. (HS 4202); articles of apparel and clothing (HS 4203); and footwear (HS 64). There are alsoglobal standards on products such as safety shoes.There is no general obligatory labelling requirement covering all leather products at European level. EUlabels borne by other leather products indicating leather as materials exists in some member states and ona voluntary basis. The EU leather association (COTANCE) has discussed the idea of harmonization ofleather goods and garments sectors.Challenges of Ethanol sectorOn the regulatory side, Pakistan’s Ethanol sector is affected by REACH, as indicated by feed-back fromthe stakeholder review. Given the complications involved, leading ethanol manufacturers in Europe haveformed an Ethanol REACH Association to enable the joint submission of a high quality dossier forregistration. Ethanol manufacturers (EU and non-EU), importers and other entities that have interest in theregistration of ethanol may join the Association. This platform would provide the Pakistan ethanol industrywith technical input.On the production side, a number of sugar factories in Pakistan were cited in the last two years onenvironmental grounds and for posing a risk to public health (violations under Pakistan’s EnvironmentalAct) with COD (chemical oxygen demand), BOD (biochemical oxygen demand), TSS (total suspendedsolids) and oil and grease higher than national environmental quality standards (NEQS). This aspect canbe addressed under the existing mechanisms.
27 GSP Plus: Sector Specific Challenges Plastic sectorLack of production compliancesTesting and certification facilitiesCosts of complianceHeath Safety and Environment (HSE) and Occupational Health and Safety (OHAS)Frequent Asked QuestionsClick here for FAQ’sChallenges of Plastic sectorExporters to the EU will need to ensure compliance with the relevant legislation covering safety, health andenvironmental concerns. As for all other identified sectors, plastics will be subject to REACH, which has adirect impact on every member of the plastic supply chain, including additives producers, plasticsproducers, plastics converters and retail businesses.The Plastics Exposure Scenario Team (PEST) formed by the key associations representing the plasticssupply chain has produced a list of Generic Exposure Scenarios that cover most of the known plasticsuses and has translated them into “REACH use descriptors”.