September 5, 2022
UK announces new trading schemes to cut tariffs on goods from developing countries
On 15 August 2022, the UK Department for International Trade announced the launch of the new Developing Countries Trading Scheme which will extend tariff cuts to hundreds more products exported to the UK from developing countries. The scheme aims to benefit the economies of the developing countries and UK businesses and consumers, by lowering the price of imported goods and making it easier to trade internationally, through simplifying and liberalizing the product specific rules of origin (PSRs). For example, many of the Tariff chapters allow for 75% non-originating content in the PSRs, and almost all PSRs allow for alternative “or” rules.
The DCTS will come into effect in early 2023 and will replace the UK’s Generalised Scheme of Preferences (GSP). It will cover 65 countries across Africa, Asia, Oceania and the Americas. Under the scheme, a wide variety of products that are not widely produced in the UK will benefit from lower or zero tariffs. The goods covered range from clothes and shoes to foodstuffs, including olive oil and tomatoes. The DCTS will also remove some seasonal tariffs and simplify complex trade rules, such as rules of origin.
The DCTS applies to countries that currently benefit under the UK’s GSP. The GSP includes 47 countries in the GSP Least Developed Country (LDC) Framework and 18 additional countries or territories classified by the World Bank as low income countries (LIC) and lower-middle income countries (LMIC). It does not apply to countries classified by the World Bank as upper-middle income for three consecutive years, or to LICs and LMICs with a free trade agreement with the UK.
Businesses that currently use the UK’s GSP tariffs should assess any changes that may apply under the new scheme and identify if the new provisions may bring additional benefits. Businesses that do not currently use the UK’s GSP tariffs should also now assess if they could benefit from the DCTS in the future, in order to prepare in time for the introduction of the new provisions in 2023.
More details of the new scheme, including a list of countries covered by it may be found in the UK Government’s Developing Countries Trading Scheme (DCTS): new policy report.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United Kingdom), Indirect Tax