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June 22, 2023 UK Government announces new 'Developing Countries Trading Scheme'
United Kingdom Government has announced a new Developing Countries Trading Scheme (DCTS), which will replace the current Generalised Scheme of Preferences (GSP) from 19 June 2023. The new scheme allows goods that originate in Less-Developed Countries (LDCs) to be imported into the UK at reduced or nil customs duty rates. As with GSP, to benefit from these preferential duty rates at import, the DCTS requires that these imported goods meet specific rules of origin and comply with the requirements of the agreement. Like GSP, DCTS has three tiers of countries. On the first tier are LDCs; the second tier consists of countries classified by the World Bank as a low-income (LICs) or lower-middle income countries (LMICs); and the third tier includes countries that are economically vulnerable LICs or LMICs due to a lack of export diversification. There are some important differences in the new agreement that taxpayers should note. These include:
Under the new agreement, access to the enhanced preferences is based purely on the economic vulnerability of LICs and LMICs, which is considered to be a more generous approach, with eight countries becoming immediately eligible for enhanced preferences. The DCTS retains power to suspend any country that violates human rights or labor rights. In addition, this power has been broadened to include violations in relation to anti-corruption, climate change and environmental conventions. Overall, the DCTS appears to offer more generous benefits than the existing GSP. Any business currently utilizing GSP should review the application of the DCTS frameworks. ——————————————— For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (United Kingdom), Indirect Tax
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor | |||