GSP+ with the European Union

Prepared by the Georgian National Investment Agency

January 23, 2009

The EU GSP+ Scheme

Georgia is a beneficiary of the European Union’s GSP regime since 1995;
The renewed Generalized System of Preferences (GSP+) came into effect on July 1, 2005 and included Georgia together with a number of other countries;
The new GSP+ is intended for the vulnerable countries that are in particular need of assistance. It covers 7200 products that can be exported to the EU market customs duty free (Document 1, Document 2).
Until 2009 only Georgia and Moldova enjoyed the GSP+ regime in the CIS space. However, from January 1, 2009 the GSP+ scheme spread over to Azerbaijan and Armenia as well;
The total value of Georgian exports to the EU in January-November 2008 made 322 million USD, which is 22% of Georgia’s total exports;
The main products Georgia exports to the EU under the GSP+ regime are: hazelnuts, ammonium nitrate, nonalcoholic beverages, isotopes, and ferroalloys;
The Georgian exporters that use GSP+ include: Caucasian Nut Company, JSC Delidor (vegetables), JSC Mina (glass bottles), LLC Samgori (vegetable cans), LLC Iolita Argo (bay leafs), LLC Spectra Gases Georgia (isotopes), JSC Energy Invest (ammonium nitrate, sodium cyanide), LLC Aromaproduct (fruit juices, tkemali, spices), LLC Niderlands-Georgia Orthopedix (orthopedic shoes), LLC Blanks (mushroom), LLC Geowood (walnut, chestnut wood), LLC Lomisi (nonalcoholic beverages), etc.
For the first time in 2007 Georgia exported greeneries, honey and eucalyptus brooms to the EU under the GSP+ regime;
After Georgia became the beneficiary of the GSP+ scheme Georgia’s exports to the EU has registered a significant growth. Namely, in 2006 the exports grew by 15%, in 2007 – by 42% and in the first 10 months of 2008 – by 36%.

Trade Agreements between Georgia and the European Union

Since 1999, Georgia has been a beneficiary of the EU General System of Preferences (GSP) that removed customs duties for some Georgian exports to the EU market. In 2005 Georgia became a beneficiary of the second arrangement under the EU General System of Preferences known as Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+). Out of the post-Soviet countries, only Georgia and Moldova have been granted this arrangement (Armenia and Azerbaijan joined this group in 2009).

GSP+ and Georgia

The GSP+ is a special arrangement accorded by the European Union to promote good governance and support sustainable development in Georgia by granting non reciprocal tariff reduction or duty free access to Georgian exports to the European Union. It brings to Georgian exporters:

Cost advantage and higher comparative competitiveness by means of tariff reduction
Greater opportunities for export market penetration
Greater ability to fulfill export potential
Greater profit opportunities as a result of cost reduction
Further investment and growth opportunities
Increased potential for foreign direct investments
Economic benefits passed onto business and local community at large (companies, workers, employees and consumers).

How does GSP+ work?

The EU GSP+ scheme covers 7200 products. Georgian exports of these products to the EU are subject to no or reduced custom duties. There are several types of import duties for goods and products entering the European Union:

Ad valorem tariff

An ad valorem tariff is a duty paid as a percentage of the import price. If for a certain product the ad valorem tariff is 10%, to import €100 worth of this product, one will have to pay €10 to import this product into the European Union.

Specific tariff

A specific tariff is a duty paid per physical unit: e.g. kilogram, litre, percentage of alcohol content. If for a certain product the specific duty is €1 per kilo, to import 100 kg of this product into the European Union, one will have to pay €100. In many instances both ad valorem and specific tariffs are applied in a combined manner.

GSP+ provides:

For goods and products liable to pay only the ad valorem tariff, the GSP+ provides for the suspension of such duty. For goods and products liable to pay only the specific tariff, GSP+ provides for the suspension of such duty. For goods and products liable to pay both ad valorem and specific duties, GSP+ provides for the suspension of the ad valorem duty only.

Examples relevant to Georgia’s current and potential exports to the EUORT DUTI

Description	Import Duties without GSP+	Import Duties under GSP+
Mineral water	0 (exempt)	0%
Nuts	3,2%	0%
Beer	0 (exempt)	0%
Men’s and boys’ shirts (all fabrics)	12%	0%
Leather suitcase and briefcase	3%	0%
Mattress (all kinds)	3,7%	0%
Ammonium sulphate	6,5%	0%

Certain products are not covered by the GSP+ and are therefore liable to pay full duties when entering the European Union.

Examples relevant to the Georgian economy: Sparkling wine: €32 per 100 litres (equal to €0.32cent per litre). Wine (red and white; % vol. less than 13%): €13,1 per 100 litres (equal to €0.131cent per litre).

GSP+ checklist

Establish the right 8 digit Combined Nomenclature code product classification according to the EU Customs Code and the product’s preferential rate duty using the EU Export Help Desk’s website: Website: http://exporthelp.europa.eu

Check the origin criteria: ensure that the product complies with the origin criteria set by EU regulations.
Check the consignment conditions: ensure that the modalities governing the transport of goods from Georgia to the European Union market comply with the relevant EU rules of origin.
Prepare documentary evidence: correctly fill-in the certificate of Origin Form A or the invoice declaration; these are the official documents on which EU customs authorities rely to grant GSP+ benefits to imported products.
Ship product and submit documents to customs authorities in the EU: comply with the direct transport modalities and customs formalities at EU point of entry.

Prospects for the Free Trade Agreement between EU and Georgia

The EU fact finding mission visited Georgia in October 13-15, 2008 to study the prospects and feasibility of the Free Trade Agreement between the EU and Georgia. The report of the mission will be ready in 4-6 months and the negotiations on the FTA are to start in summer.

Useful contacts:

Georgian National Investment Agency:
www.investingeorgia.org
(995 32) 433-433 ; (995 32) 306-202
Department of Foreign Trade and International Economic Relations, Ministry of Economic Development
http://www.economy.ge/geo/departments.php?key=6&sub=9
(995 32) 93-10-53 ;
For the Council Regulation of June 27, 2005 applying a scheme of GSP, please visit:
http://www.economy.ge/allfiles/GSP+EN.pdf
For the list of the products covered by the GSP+ scheme, please visit: http://www.economy.ge/allfiles/GSP+GE.pdf
Delegation of the EU Commission to Georgia:
http://www.delgeo.ec.europa.eu/en/publications/GSP+.pdf