IntroductionInternational trade under preference allows you to import and/or export goods at a lower or nil rate of customs duty and/or levy charge. The rate of duty payable depends on the type of goods, whether youre importing or exporting, where the goods are deemed to have come from - the originating country - and their destination. The preference agreements that apply in the UK are applicable across the European Union (EU).
IntroductionTrade preference agreements are principally, but not exclusively, designed to enable developing countries to have greater access to export markets such as the EU.If youre importing or exporting under preference, its essential that you keep up to date with developments in the EU and the originating or destination country. This guide shows you how to find advice on the preference agreements with those countries or regions of the world that are most appropriate for your business.
What preferences are & how they workEuropean Union (EU) member states have multiple Free Trade Agreements (FTAs) or Economic Partnership Agreements (EPAs) in place with third countries and with blocs of countries acting together under bilateral or regional agreements of their own.In general, agreements enable preferential importing and/or exporting conditions to be placed on goods that meet prescribed rules of origin and other criteria.
What preferences are & how they workFTAs and EPAs are constantly evolving, with countries graduating from one scheme to another, being de-graduated and/or products being removed or added to the list of preferences and/or being restricted under temporary or permanent limits or tariff quotas. As a result, those whose businesses are likely to be affected are advised to keep abreast of developments.
What preferences are & how they workThe following agreements relate only to goods being imported into the EU: The Generalised System of Preferences (GSP) under which the EU - and other developed countries - offer developing countries lower tariffs on their exports into the EU. GSP+ extends even lower tariffs to 15 vulnerable countries that implement certain labour and human rights agreements. Everything But Arms (EBA) gives exports from Least Developed Countries (LDCs) - classified as such by stringent LDC criteria - duty and quota-free access to the EU for most goods, excluding armaments.
What preferences are & how they workTo be eligible for preferences under any of these agreements, you must: Show that the goods have met prescribed rules of origin Produce valid preference documentation Ensure the goods satisfy rules about transportationThere are also several EPAs in place between the EU and blocs of countries in certain regions.
What preferences are & how they workBefore you attempt to use any preference, the first step is to check the classification codes for your products in the UK Integrated Tariff - these codes contain key information on preferences.Once you have the correct Tariff classification for your goods and their destination, you can complete paperwork to ensure that the right rates of duty are paid.
What preferences are & how they workYou should note that trade preferences can be withdrawn once countries reach a given level of development and competitiveness in a specific sector (graduation) or for all products (exclusion). Also, countries may opt to operate under a different agreement. For example, some LDCs in the African, Caribbean and Pacific region opted in 2008 to trade under GSP EBA instead of signing up to new EPAs.
Eligibility for Import PreferencesIf you import goods, you must be clear on where the products have originated in order to manage duty and customs requirements effectively.The origin of your goods is either where they have been wholly obtained or produced or where the last significant work essential to the manufacture was undertaken.
Eligibility for Import PreferencesEvery stage of the supply chain can have a significant effect on whether you can import the goods using preferences. If goods are manufactured entirely in one country, you would expect their origin to be that country. However, if components are made in one country then assembled in another non-European Union (EU) country, in combination with other components, the country of origin may be where the goods are assembled.
Eligibility for Import PreferencesYou can use preferences for goods coming into the EU that originate from many countries, the following being a list of the main countries: Norway, Iceland, Switzerland and Liechtenstein The Faroe Islands Andorra - only for specific goods as outlined in the Tariff Algeria, Morocco and Tunisia Ceuta, Melilla, Egypt, Jordan, Lebanon, Syria, Israel, the West Bank and Gaza Strip the Balkan countries of Albania, Bosnia-Herzegovina, Serbia and Kosovo Montenegro, Croatia and Macedonia
Eligibility for Import PreferencesYou can use preferences for goods coming into the EU that originate from many countries, the following being a list of the main countries: African, Caribbean and Pacific States (ACP) - included within the EU-ACP Economic Partnership Agreements Overseas Countries and Territories (OCTs) of European Community (EC) member states - eg Aruba, an OCT of the Netherlands, the Falkland Islands, a British OCT, or French Polynesia, an OCT of the French Republic Mexico, Chile, South Africa and Turkey
Eligibility for Import PreferencesYou can find a more complete list of countries - and the preferences that apply - in Volume 1 Part 7 of the HMRC printed Tariff. However, if your business requires that you keep abreast of detailed changes on an EPA, country-by-country or product-by-product basis.Preferences with these countries are normally part of bilateral treaties - the individual treaties with each of these countries.
Generalised System of Preferencesand GSP+The Generalised System of Preferences (GSP) allows originating products from a range of countries to be imported into the European Union (EU) at a reduced or zero rate of duty.GSP+ is an extension to the GSP system - it includes developing countries which have proved their commitment to sustainable development and good governance. Most duty rates are zero under this part of the scheme.
Generalised System of Preferencesand GSP+Under GSP, preferences are non-reciprocal. This means that goods imported into the EU from a number of developing countries are liable to reduced or nil rates of duty. The GSP system does not apply to exports from the EU.However, if youre exporting goods to a GSP country that are going to be processed there, and the finished products will then be imported into the EU under preference, your supplier may be able to count them as originating in that country under a procedure called donor country content.
Generalised System of Preferencesand GSP+Some GSP countries are grouped together so that goods can be processed in countries within the group and still be eligible for import into the EU under GSP preference.
Generalised System of Preferencesand GSP+The groups are: The Association of South East Asian Nations of Brunei-Darussalam, Laos, Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam The Central American Common Market countries of Costa Rica, Panama, Honduras, Guatemala, Nicaragua and El Salvador The Andean Community of Bolivia, Colombia, Ecuador, Peru and Venezuela The South Asian Association for Regional Co- operation countries of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka
Managing Import PreferencesOnce you have confirmed the goods you want to import, you must manage the import process carefully by completing and submitting the right paperwork and paying the correct duty.
Classification CodesYou must obtain the correct Tariff classification code for the goods you intend to import. This code indicates the rate of duty you must pay on the product and whether it will be imported under preference.If a product is changed or processed significantly during the manufacturing process, this could mean a change in its Tariff classification code and the rate of duty that applies to it when its imported.
Classification CodesIt can save you time to begin classifying your goods for preferences with a Harmonised System (HS) number, which comprises the first four digits of a Tariff classification number. Many non-European Union (EU) countries share HS codes.Once you have established the correct Tariff Code, then the rule of origin for the product must be checked to see if the product qualifies for preference.
PaperworkThe paperwork required depends on where the goods are being imported from - it must be stamped and authorised by the customs authority in the exporting country. Form EUR1 is the main certificate used for goods imported from outside the EU.If youre importing goods covered by the EUs Autonomous Generalised System of Preferences (GSP) arrangements, you need to use GSP Form A.When you import under GSP, a GSP form A has to be completed in the country of origin (or an invoice declaration if the value is less than £4,830).
PaperworkIf youre an exporter, and want to use the Donor Country content facility, then you must provide the GSP country with a Movement Certificate EUR1 or invoice declaration with your export so long as the goods qualify.If you are authorised to do so by your customs authority, you can use invoice declarations in place of an EUR1 regardless of value. These are declarations on the commercial paperwork raised by the business from which youre importing the goods - they do not need to be stamped by customs in the EU.
Eligibility for Export PreferencesIf you export goods, you can benefit from reduced or nil rates of duty on products destined for countries that have a preferential arrangement with the European Union (EU).The first step is to check the requirements of the country to which you want to export. Most countries with export preference arrangements are covered in HM Revenue & Customs (HMRC) Notice 828.
Eligibility for Export PreferencesYou need to prove the EU origin of your goods. This enables you to obtain the paperwork to prove to customs authorities in your destination country that the goods can be imported there under preference.If youre importing materials from within the EU - and EU origin needs to be confirmed - you should obtain Supplier Declarations and clarify in contracts that suppliers must notify you if any supplied goods lose their EU origin. This should protect you against unexpected duty charges when you export.
Eligibility for Export PreferencesIf youre unsure whether the origin of your goods qualifies you for preference, consider Binding Origin Information - an official and legally binding confirmation of origin.
Managing Export PreferencesIf youre exporting using preferences, you need to keep up to date with a number of paperwork requirements.You must retain any proof of origin - such as full bills of materials or supplier declarations for at least three years.Customs authorities in the destination country require documentation to allow entry of goods imported using preferences. The documents you need depend on the country to which youre exporting. You also need to complete paperwork to allow the exports
Managing Export PreferencesFor most countries, an EUR1 is the required certificate. If you fill out an EUR1, it must be stamped by the HM Revenue & Customs (HMRC) Central Processing Unit in Salford, your local Chamber of Commerce, or the Chartered Institute of Shipbrokers. The authorised EUR1 proves that the goods qualify for preferential duty status and is used at customs points to ensure the preference duty rate is charged.
Suppliers Declarations forExportersSuppliers Declarations are used to provide evidence that goods supplied to the ultimate exporter satisfy the origin criteria, so they can be considered to be of EU origin in their own right. Exporters use Suppliers Declarations to prove the originating status of components and materials used to make goods for buying or re-export. Suppliers use them to prove the originating status of the goods for their customers.
Using the UK integrated Tariff forpreferencesIf youre an importer or exporter, the Tariff has an important role in establishing the rates of duty for your goods.If you import goods, you must use the Tariff to establish whether preferences are available on imports to the European Union (EU), what the rates of duty are, and if there are quotas.
Using the UK integrated Tariff forpreferencesThe Tariff uses commodity codes to identify products. Eight-digit numbers are used for the movement of goods within the EU, and ten-digit numbers for imports from outside the EU. These codes are an essential part of your importing paperwork and duty calculations.
Using the UK integrated Tariff forpreferencesIf you have specific classification queries, you can contact the HMRC Tariff Classification Service Enquiry Line on Tel 01702 366 077. You can get a maximum of three classification codes per call, so make sure you have got as much information as possible about your product before you telephone.If youre an exporter, remember that you must check with your customer to ensure a preferential rate of duty is available in that country.
Where to get help with import andexport preferencesExport and import preferences can be complex, and there are a number of organisations that can give you practical advice.Your first port of call should be the HM Revenue & Customs (HMRC) National Advice Service, which can help with general and specific queries on preferences throughout the import and export process. You can call the HMRC VAT Helpline on Tel 0845 010 9000.
Where to get help with import andexport preferencesCorrectly classifying your goods is essential before you can generate paperwork for importing or exporting goods using preferences. You can call the HMRC Tariff Classification Service Enquiry Line on Tel 01702 366 077 for help on classification codes.If youre an importer or exporter, local Chambers of Commerce can provide practical business support. They can also check and stamp EUR1 movement certificates for exporters.
Where to get help with import andexport preferencesIf you have a complaint about how duty and preference issues have been handled by HMRC and cannot resolve them directly, you can raise the problem with the Adjudicators Office - they will examine all issues fairly and impartially.
FormalitiesAll the information provided is for informational purposes only and you should seek specialist personalised advice as required. As such, we accept no liability for the actions taken by the readers of this slideshow.All information was provided by Business Link and is covered by Crown Copyright.All information is available as shown below: BusinessLink (2012) Using trade preferences. Available at: http://www.businesslink.gov.uk/bdotg/action/layer? r.i=1079871223&r.l1=1079717544&r.l2=1087336726&r.l3=1087336842&r.l4=107 9819533&r.s=sc&r.t=RESOURCES&topicId=1079819533 [Accessed: 30th
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