Generalized System of Preferences
EUROPEAN UNION GENERALIZED SYSTEM OF PREFERENCE PLUS (EU GSP+)
The EU GSP+ is a special incentive arrangement for sustainable development and good governance in the form of zero duties. It is a unilateral trade arrangement, which offers zero tariffs on 6,274 products or 66% of all EU tariff lines. It is a part of the broader Generalized System of Preferences (GSP) of the EU and, as a developmental tool it seeks to encourage export diversification in developing countries.
In order to qualify for the GSP+, a country must meet the following criteria:
- must be considered ‘vulnerable’ country:
- a beneficiary of the standard GSP;
- whose imports into the EU are heavily concentrated in a few products; and
- with a low level of imports into the EU (its GSP-covered imports into the EU represent less than 6.5%in value of the EU’s total GSP-covered imports from all GSP beneficiaries)
- must have ratified the 27 core international conventions in the fields of human and labor rights, the environment and good governance listed and the monitoring bodies under the conventions must not identify a serious failure to its effective implementation of any of these conventions
- must give the following binding undertakings:
- to maintain the ratification of these 27 conventions and to ensure their effective implementation;
- to accept without reservation reporting requirements and monitoring imposed by those conventions; and
- to accept and cooperate with the EU monitoring procedure.
There are currently eight (8) beneficiary countries of GSP+, namely, Armenia, Bolivia, Cape Verde, Kyrgyzstan, Mongolia, Pakistan, Philippines, and Sri Lanka.
How has the Philippines benefitted from GSP+?
Since the successful application of the Philippines to the GSP+ in 2014, the Philippines has enjoyed greater market access to the EU that led to a significant increase in exports. With GSP+, Philippine exports to the EU continue to enjoy double-digit growth rates.
GSP+ Utilization of PH 2014-2020
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
Total GSP Eligible Exports (in billion Euros) | 1.83 | 2.32 | 2.34 | 2.62 | 2.63 | 2.71 | 2.15 |
Total GSP Utilized (in billion Euros) | 1.22 | 1.60 | 1.66 | 1.93 | 1.92 | 1.95 | 1.61 |
GSP+ Utilization Rate | 67.2% | 68.3% | 70.9% | 74% | 73.2% | 71.9% | 75% |
Total PH Exports to EU (in billion Euros) | 5.27 | 6.68 | 6.23 | 7.24 | 7.50 | 7.63 | 6.2 |
Export Growth Rate
| 14% | 27% | -7% | 16% | 3% | 2% | -19% |
Source: Eurostat
For 2020, total exports to the EU amounted to EUR6.2 billion. In terms of eligible exports, EUR2.1 billion worth of PH exports are covered by GSP+, of which EUR1.6 billion availed of GSP+ preferences (or 26% of PH’s total exports). Likewise, GSP+ utilization grew by 3 percentage points from 72% in 2019 to an all-time high of 75% in 2020. The top GSP+ exports of the Philippines include: crude coconut oil, vacuum cleaners, prepared or preserved tunas, electro-thermic hair dressing apparatus, spectacle lenses, new pneumatic tires, prepared or preserved pineapples, fatty alcohols (industrial), parts suitable for use solely or principally with transmission and reception apparatus for radio-broadcasting or television, and activated carbon.
The top EU member state destinations of PH GSP exports are Netherlands (42.99%), Germany (19.08%), Italy (8.60%), France (8.19%), and Spain (6.94%).
This increase in exports has benefitted several communities including, but not limited to General Santos, Davao, Cebu, and economic zones located in cities such as Laguna, Rosario (Cavite), and Batangas, where most of the exporters that take advantage of GSP+ preferences are based
GSP+ also gives an impetus for foreign companies to invest in the Philippines. A number of companies have established their manufacturing operations in the Philippines in order to take advantage of GSP+ benefits, thereby contributing to employment generation and the developmental goals of the country. These operations cut across a range of industries including electronics, agriculture, processed foods, apparel, craft goods, travel goods, and home appliances.
As a developmental tool, GSP+ helps exporters by making it easier for them to export their products to the European Union. This is done in the form of reduced tariffs for their goods when entering the EU market. Through the additional export revenue generated, GSP+ fosters growth in income, supports employment creation, and ultimately, contributes to countryside development and inclusive economic growth.
EU-Registered Exporter System
The Registered Exporter system (the REX system) is envisioned to replace the current system of origin certification that will be applied in all unilateral, bilateral, and multilateral agreements the EU has with third countries. It is a self-certification system that will enable economic operators to issue their own statement on origin.
To be able to issue a statement on origin, an economic operator will have to be registered in a database by his competent authorities. This simplifies export formalities as the REX eliminates the need to apply for a certificate of origin. Application to be a registered exporter is a one-off formality. The exporter will then be issued a REX number, which could be used in all preferential arrangements where REX is applied.
For more information, please visit the following links:
[Clickable link]: Bureau of Customs Memorandum Order on EU REX Application Guidelines: [Clickable link]: EU Registered Exporter System webpage https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/generalised-system-preferences/the_register_exporter_system_enUNITED STATES GENERALIZED SYSTEM OF PREFERENCE (US GSP)
On 23 March 2018, US President Donald J. Trump signed the Omnibus Spending Bill which include the reauthorization/renewal of the US GSP program through 31 December 2020. The renewal includes a mechanism for refund of tariffs paid from 1 January 2018 through the reinstatement date of the program.
The US GSP is designed to promote economic growth and development in the developing world through preferential, duty-free entry to the US market for products coming from 122 designated beneficiary countries (BDCs) and territories, including the Philippines and many of the world’s poorest countries. The trade benefits, however, are tied to conditions, including intellectual property rights protection, and upholding of workers’ rights and protection against child labor. The GSP program was instituted on 2 January 1976 and authorized under the US Trade Act of 1974 for 10 years. It has been renewed periodically since then by the US Congress.
The program covers a total 5,057 products or tariff lines or roughly 47.7% of the 10,600 total US tariff lines: 3,500 of which are open for all BDCs while an additional 1,500 products are given to the least-developed beneficiary countries. Effective 1 July 2017, a total of 23 travel goods articles were added to the program.
The GSP program includes most dutiable manufactures and semi-manufactures, and selected agricultural, fishery, and primary industrial products. Certain articles are prohibited by law from receiving GSP treatment. These include most textiles, watches, footwear, handbags, luggage, flat goods, work gloves, and other leather apparel. In addition, any other articles determined to be import-sensitive cannot be made eligible for GSP such as certain products of steel, glass, and electronics.
Philippine Utilization of US GSP
2016-2020 US GSP (Data from USITC Dataweb)
YEAR | TOTAL PH EXPORTS TO US (USD Million) | PH EXPORTS TO US UNDER GSP (USD Million) | US GSP UTILIZATION RATE OF PH | ||
TOTAL ELIGIBLE PRODUCTS | GSP CLAIMED |
| |||
2016 | 10,031.44 | 2,076.36 | 1,490.57 | 72% | |
2017 | 9,661.05 | 2,217.02 | 1,491.52 | 67% | |
2018 | 10,623.00 | 2,414.34 | 1,727.64 | 72% | |
2019 | 12,886.58 | 2,524.59 | 1,870.35 | 74% | |
2020 | 11,208.81 | 2,094.39 | 1,557.29 | 74% | |
The Philippines saw a steady to increasing utilization rate of the US GSP, with an exception in 2017 due to the increased export of unclaimed GSP eligible products. Following that year, successive increase of utilization was recorded in 2018 and 2019 attributed to the expansion of additional duty-free treatment for twenty-three tariff lines of certain travel goods. While value of products which claimed US GSP decreased in 2020 at USD 1,557,286,518, mainly due to the pandemic, utilization rate remained at 74%.
In 2019, PH top exports under the US GSP includes:
- new pneumatic tires of rubber (radial) (USD 106.11M);
- handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather (USD 64.58M);
- Insulated electric conductors (USD 63.97M);
- Travel, sports and similar bags with outer surface of MMF textile materials (USD 61.08M);
- Other cane sugar, raw, in solid form, w/o added flavoring or coloring (USD 59.27M);
- Electrothermic hairdressing apparatus other than hair dryers (USD 57.44M);
- Telescopic sights for rifles not designed for use with infrared light (USD 47.96M);
- Nonalcoholic beverages excluding fruit or vegetable juices of heading 2009 (USD 41.31M)
- Electrothermic hair dryers (USD 38.43M); and
- Handbags, with or without shoulder straps or without handle, with outer surface of sheeting of plastics (USD 37.96M).
In 2020, the Philippines ranked 5th globally among the beneficiary developing countries in terms of total claimed US GSP value, only behind Thailand, Indonesia, Brazil, and Cambodia.
For more details, contact the Bureau of International Trade Relations-Bilateral Relations Division (BITR-BRD) at brd@dti.gov.ph.