GSP CERTIFICATES OF ORIGIN - A GUIDE FOR EXPORTERS
1.0 INTRODUCTION
Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries (also known as preference giving countries or donor countries) to developing countries (also known as preference receiving countries or beneficiary countries). It involves reduced MFN Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.
2.0 BENEFITS OF GSP
2.1 Indian exporters benefit indirectly - through the benefit that accrues to the importer by way of reduced tariff or duty free entry of eligible Indian products
2.2 Reduction or removal of import duty on an Indian product makes it more competitive to the importer - other things (e.g. quality) being equal.
2.3 This tariff preference helps new exporters to penetrate a market and established exporters to increase their market share and to improve upon the profit margins, in the donor country.
3.0 COUNTRIES THAT EXTEND GSP BENEFITS
3.1 GSP is presently extended by 29 developed countries.
Australia Republic of Bulgaria * EU Member States
Canada Republic of Hungary Austria Italy
Czech Republic Republic of Poland Belgium Luxembourg
European Union* Russian Federation Denmark Netherlands
Japan Slovakia Finland Portugal
New Zealand Switzerland France Spain
Norway Republic of Belarus United States of America Germany Sweden
Greece United Kingdom
Ireland
3.2 In addition, it is understood that Kazakhstan, Kyrgyzstan. Lithuania and Ukraine may also be allowing preferential tariff treatment to select Indian goods.
4.0 ELIGIBILE PRODUCTS
4.1 Only such products of a beneficiary country (like India) that fulfil the requirements of the rules of origin laid down by the importing country, are considered eligible for preferential tariff treatment on import into the markets of donor countries detailed under point 3. For example, in the case of 15 member states of European Union, an Indian product is considered eligible only if it fulfils the requirements of Rules of Origin laid down in the Community legislation, namely in Regulation (EEC) No. 2454 / 93, as amended by Regulation (EC) No. 12 / 97 and Regulation (EC) No: 1602 / 2000.
5.0 RULES OF ORIGIN
5.1 Rules of origin comprise a set of requirements laid down by the importing country, which must be fulfilled by a product to be eligible for preferential tariff treatment upon import in that country.
5.2 The rules of origin are aimed at reserving, as far as possible, the benefit of the preferential system to the country for which it is intended, and to prevent third countries' goods from unduly exploiting the system. This may be of particular, importance in case the national quotas and ceilings are reintroduced. On the other hand, the need of the industries to source raw materials and semi-manufactured products or parts' from other countries are taken into account, by accepting, in many cases, a third country content.
5.3 There are three components of rules of origin :
(a) Origin Criteria - which determine whether a product can be considered to be originating in the beneficiary, country, the country from where the goods are being exported, (see point 6)
(b) Transport Conditions - which specify mode of transportation from the country of export to the country of consignee in. order that the goods in question qualify for preferential tariff treatment upon import in the country of consignee, (see point 11)
(c) Documentary Evidence - that will serve as the proof for goods to be granted GSP benefits at the border of the donor country, (see point 12)
5.4 In addition to the above there may be a few Supplementary Rules that may have a bearing on the origin of product under consideration, (see point 10)
6.0 BENEFITS OF GSP
6.1 Products exported from India can be divided into two groups - WHOLLY OBTAINED PRODUCTS and PRODUCTS WITH IMPORT CONTENT
6.2 WHOLLY OBTAINED PRODUCTS are those, which have been entirely
(a) Grown,
(b)Extracted from the Soil,
(c) Harvested within the country, or
(d) Manufactured exclusi
vely from the above.
6.3 WHOLLY OBTAINED PRODUCTS qualify for GSP benefits by virtue of total absence of any materials or components of imported / unknown origin in their manufacture.
6.4 PRODUCTS WITH IMPORT CONTENT are manufactured wholly or partially from materials, parts or components imported into India or of unknown origin.
6.5 PRODUCTS WITH IMPORT CONTENT qualify for GSP if the materials, parts or components of imported or unknown origin used in their manufacture have undergone SUFFICIENT WORKING OR PROCESSING in India (see point 8). On the other hand, a product using imported materials is non-originating if the imported materials have only been subject to MINIMAL OPERATIONS in India, (see point 9)
6.6 Materials of unknown origin are treated as though they were imported
6.7 Criteria laid down for acquisition of originating status must be satisfied without interruption in the beneficiary country
7.0 WHOLLY OBTAINED PRODUCTS
7.1 Any product obtained without the use of materials of imported or unknown origin is called a WHOLLY OBTAINED PRODUCT.
7.2 WHOLLY OBTAINED criterion is interpreted strictly. Even a MINIMAL content of "materials, parts or components of imported or unknown origin" makes the finished product loose its qualification as wholly obtained.
7.3 Following categories of goods are considered wholly, obtained in India:
(a) Mineral products extracted from its soil or from its sea-bed: or, in the case of Bulgaria, Czech Republic. Hungary, Russian Federation and Slovakia, mineral products extracted in the Indian territory or from its continental shelf;
(b) Vegetable products harvested in India;
(c) Live animals born and raised in India;
(d) Products obtained in India from live animals;
(e) Products obtained from hunting or fishing conducted in India;
(f) Products obtained of sea fishing and other products taken from the sea by its vessels; and also, in the ease of Bulgaria, Czech Republic, Hungary, Russian Federation and Slovakia, by vessels chartered by India;
(g) Products made on board its factory ships exclusively from the products referred to in (0 above; and also. in the case of Bulgaria, Czech Republic, Hungary, Russian Federation and Slovakia, factory ships chartered by India;
(h) Used articles collected in India fit only for the recovery of raw materials;
(i) Waste andscrap, resulting from manufacturing operations conducted in India; and
(j) Products obtained in India exclusively from products specified' in (a) to (i) above (such as iron sheets & bars produced from Iron ore; cotton fabrics woven from raw cotton; recovery of lead from used motor car batteries; recovery of metal from metal shavings, etc.).
European Union, Norway, Poland and Switzerland have defined terms "vessels" or "factory ships", used in (f) & (g) above, in detail.
7.4 New Zealand accepts goods completely produced in India from imported un-manufactured raw materials, irrespective of their source, as wholly obtained.
8.0 SUFFICIENT WORKING OR PROCESSING
8.1 Need for sufficient working or processing arises only when a product is manufactured, either wholly or in part, from materials, parts or components of imported or unknown origin.
8.2 The donor countries follow two main criteria for achieving Sufficient Working or Processing. These are PROCESS CRITERIA and PERCENTAGE CRITERIA.
8.3 PROCESS CRITERIA is followed by 19 countries - 15 member states of European Union, Japan, Norway, Poland and Switzerland. In general, sufficient working or processing takes place when the conditions prescribed for the product in a LIST by the importing country are fulfilled.
8.4 Conditions set out in the LIST represent the minimum amount of working or processing required and the carrying out'of more working or processing also confers originating status; conversely, the carrying out of less working or processing cannot confer originating status.
8.5 PERCENTAGE CRITERIA is applied by remaining 10 countries - Australia, Belarus, Bulgaria, Canada, Czech Republic, Hungary, New Zealand, Russian Federation, Slovakia and the United States of America (USA). Percentage criteria is applied by Belarus, Bulgaria, Czech Republic, Hungary, Russian Federation and Slovakia in terms of maximum value (in percentage terms) of materials, parts or components of imported. / tin-determined origin used in the manufacture of export product, while Australia, Canada, New Zealand and USA apply it in terms of minimum value (in percentage terms) of the domestic materials which must be used in the manufacture of the export product.
8.6 It is important to note that only those materials, parts of components which are of imported / unknown origin are to be subjectd to sufficient working or processing for the finished product to be considered as originating in India. In other words, materials, parts and components that are wholly obtained in India need not be sufficiently worked or processed for the finished product to be considered originating in India.
9.0 MINIMAL OPERATIONS
9.1 If a product is not "wholly obtained" (see point 7) and is produced using imported material, the first thing to check is if the imported material has only undergone one of the so-called MINIMAL or INSUFFICIENT operations listed below:
(a) Operations to ensure the preservation of products in good condition during transport and storage (ventilation; spreading out; drying; chilling; placing in salt, sulphur dioxide or other aqueous solutions; removal of damaged parts, and like operations);
(b) Simple operations consisting of removal of dust, sifting or screening, sorting, classifying, matching (including the making-up of sets of articles), washing, painting, cutting up;
(c) (i) Changes of packing and breaking up and assembly of packages;
(ii) Simple placing in bottles, flasks, bags, cases, boxes, fixing on cards or boards, etc., and all other simple packing operations;
(d) The affixing of marks, labels or other like distinguishing signs on products or their packaging
(e) Simple mixing of products, whether or. not of different kinds, where one or more components of the mixture do not meet the conditions laid .down in the rules to enable them to be considered as originating products;
(f) Simple assembly of parts of products to; constitute a complete product;
(g) A combination of two or more operations specified in (a) to (f);
(h) Slaughter of animals except in case of Japan, which considers slaughter of animals as sufficient process.
9.2 If above (point 9.1) is the case, the product is not originating, because it has been substantially obtained in a third country.
9.3 However, it has to be noted that complex operations of mixing, blending or assembling may confer origin, when they go beyond the simple ones mentioned at 9.1 above.
9.4 The difference between simple and complex operations may be determined in general on the basis of the special skill, equipment, control and precision needed-or otherwise-to carry them out. For example, mixing salt and water to obtain a saline solution is a simple operation, while mixing pharmaceutically active elements under controlled temperature, pressure and sterile conditions may be quite a complex process.
10.0 SUPPLEMENTARY RULES
10.1 Following supplementary rules are of importance as they may have a bearing on the origin of the final product; namely
(i) Donor Country Content Rule,
(ii) Cumulation,
(iii) The "Two Steps" Rule,
(iv) Returned Articles,
(v) Neutral Elements and
(vi) Unit of Consideration.
10.2 Under DONOR COUNTRY CONTENT RULE, raw materials, parts and components originating in a donor country and used in the manufacture o'f export goods meant for the same donor country are treated as though they have originated in the beneficiary country (say India) provided such raw materials, parts and components are subjected to working or processing going beyond that described as minimal operations (see point 9). Value of such products is added on to the domestic content for determining the origin. . Australia, Canada, EU, Japan, New Zealand, Norway, Poland, Switzerland,-. Belarus, Bulgaria, Czech Republic, Hungary, Russian Federation and Slovakia apply this rule. Some of the donor countries like EU, Japan, Norway, Poland and Switzerland may require documentary evidence of originating status of materials imported from them.
10.3 CUMULATION allows a product to be manufactured and finished in a beneficiary country (say India) with labour, materials, parts and components from other beneficiary countries without affecting the originating status. Cumulation is applied in two different manners by the preference giving countries.
(a) Under GLOBAL CUMULATION, all beneficiary countries are regarded as one ;single area for determining origin. In other words value added and / or manufacturing-process performed, in various beneficiary countries are added together in order to meet the origin requirement for products being exported by the country where the last working or processing was carried out (say India). Value of products added / manufacturing process performed in other beneficiary countries is added on lo the domestic content for determining the origin. Australia, Canada, New Zealand, Poland, Belarus, Bulgaria, Czech Republic, Hungary, Russian Federation and Slovakia allow Global Cumulation.
(b) Under REGIONAL CUMULATION, member countries of a recognised regional group are regarded as one for determining origin. Accordingly, products originating in any of the member countries of the recognised regional group, if used in further manufacture in other member countries of the same regional group, are treated as originating in the country of further manufacture. In other words, goods finally exported by one beneficiary member country (say India) are considered to be originating even if value, is added and / or manufacturing process are performed in other member countries of the same regional group. EU, Japan, Norway, United States and Switzerland apply this rule. Some of the examples of the regional groupings that are eligible are:
(i) The Association of South-East Asian Nations (ASEAN) comprising Brunei - Darussalam, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam;
(ii) The Central American Common Market (CACM) comprising Costa Rica, Honduras, Guatemala, Nicaragua, Panama and El Salvador;
(iii) The Andean Community (Andean Group) comprising Bolivia, Colombia, Ecuador, Peru and Venezuela;
(iv) Caribbe an Common Market (CARICOM) comprising Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St.Christopher-Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago;
(v) The South Asian Association for Regional Cooperation (SAARC) comprising Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
India, as a member of SAARC Regional Group, is eligible for regional cumulation treatment under the schemes of European Union, Norway and Switzerland. GSP Form A issued, by a designated authority is, however, required as documentary evidence of originating status of materials imported' from member countries of SAARC Regional Group.
10.4 THE "TWO STEPS" RULE
When an imported material A istransformed in India into another product B in accordance with the origin rule for B, and then B is embodied into still another product C, the whole product B is considered originating when the origin of C has to be determined.
10.5
RETURNED ARTICLES
If originating goods exported from India to a country are returned back to India, they are to be treated as imported (or non-originating) unless it can be satisfactorily demonstrated that
- the goods returned are the same as those exported, and
- the goods returned have not undergone any operation beyond what was necessary to preserve them in good condition in that country.
10.6
NEUTRAL ELEMENTS
Goods which do not enter, and which are not intended to enter, into the final composition of a product, do not affect origin of that product. In other words, origin of Power, Fuel, Plant, Equipment, Machines or Tools used to obtain a product are not to be taken into account while determining the origin of the product;
10.7 UNIT OF CONSIDERATION
(a) For the purpose of determining the origin of goods, EACH ARTICLE in a consignment is to be considered separately except that -
(i) where a group, set or assembly of articles is classified in a tariff item or code, the group, set or assembly is considered to be one article, and
(ii) tools, parts and accessories - that are imported with an article, that constitute the standard equipment customarily included In the sale of articles of that kind, and the price of which is included in that of the article and for which no separate charge is made are considered as forming a whole with the article.
(b) An UNASSEMBLED .article that is despatched in more than one shipment because it is not feasible for transport or production reasons of the importer is considered as one article.
(c) SETS OF ARTICLES as defined in General Rule 3 of the Harmonised System are regarded as originating when the component articles are originating products. If a set is composed of originating and non-originating articles, the set as a whole shall be regarded as originating provided the value of the non-originating articles does not exceed 15% of the ex-works price of the set.
Section 4
Special arrangements to combat drug production and trafficking
Article 10
Common Customs Tariff ad valorem duties on products which, according to Annex IV, are included in the special arrangements to combat drug production and trafficking referred to in Title IV and which originate in a country that according to Column 1 of Annex I benefits from those arrangements, shall be entirely suspended. For products of CN code 0306 13, the duty shall be reduced to a rate of 3.6%.
Common Customs Tariff specific duties on products referred to in paragarph 1 shall be entirely suspended, except for products for which Common Customs Tariff duties also include ad valorem duties. For products of CN codes 1704 10 91 and 1704 10 99, the specific duty shall be limited to 16% of the customs value.
Section 5
Common provisions
Article 11
Tariff preferences on products which are subject to anti-dumping or countervailing measures under Regulations (EC) no. 384/96 (1) of EC) No. 2026/97 (2), imposed after the entry into force of this Regulation and based on the injury margin, shall be limited to the tariff preferences reflected by the import prices from which that injury margin was derived.
Article 12
The tariff preferences referred to in Articles 7 and 10 shall be removed in respect of products originating in a beneficiary country, of a sector which has met, during three consecutive years, either of the following criteria :
(a) - the country’s development index, as defined in Annex II, is higher than – 2, and
- Community imports from the country of all products of the sector concerned and included in the arrangements enjoyed by that country exceed 25% of Community imports of the same products from all countries and territories listed in Annex 1:
(b) - the country’s development index, as defined in Annex II, is higher than – 2, and
- the specialization index of the sector concerned is higher than threshold corresponding to that country’s development index, as defined in Annex II, and
Community imports from that country of all products of the sector concerned and included in the arrangements enjoyed by that country exceed 2% of Community imports of the same products from all countries and territories listed in Annex 1.
Where a sector, in respect of which tariff preferences had been removed according to column D of Annex 1 or to a decision taken subsequently in accordance with this Article, has not met, during three consecutive years, either of the criteria set out in paragraph 1, the tariff preferences shall be re-established.
On the basis of the most recent data available on 1 September of each year, the Commission shall establish which sectors meet the conditions laid down in paragraphs 1 and 2.
The Commission shall publish a notice in the Official Journal of the European Communities, listing the sectors which meet the criteria set out in paragraph 1 in respect of the most recent year for which data are available.
Upon the entry into force of this Regulation, and before the end of each year, the Commission shall decide, in accordance with the procedure referred to in Article 38, to remove tariff preferences in respect of sectors which meet the condition set out in paragraph 1 and to re-establish tariff preferences for sectors which meet the conditions set out in paragraph 2.
The first decision taken in accordance with paragraph 5 shall enter into force on 1 January 2003. Subsequently, decisions taken in accordance with paragraph 5 shall enter into force on 1 January of the second year following the one during which they were taken.
The Commission shall notify a decision taken in accordance with paragraph 5 to the beneficiary country concerned and inform it of the date on which that decision enters into force.
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