As of 1 January 2020, Indonesia no longer qualifies for Generalised Scheme of Preferences (GSP) tariff rates on Wood and Wood Products which means you will now be charged an additional 3.5% duty on direct imports of timber from Indonesia.
This change brings the total duty charged on imports of timber from Indonesia to 7%. Below we’ve sought to answer some of the questions you might have around GSP, including where it comes from, how it will affect you, and whether it may change.
What is GSP and where does it come from?
The European Union’s GSP allows developing countries to enjoy a partial or full removal of customs duties on two third of tariff lines across defined product sectors, including wood products. The purpose of GSP is to alleviate poverty and create jobs while encouraging international values and principles. The EU offers three different kinds of GSP’s for developing countries:
- Standard GSP for low and lower-middle income countries. This means a partial or full removal of customs duties on two third of tariff lines.
- GSP+: the special incentive arrangement for sustainable development and good governance. It slashes these same tariffs to 0% for vulnerable low and lower-middle income countries that implement 27 international conventions related to human rights, labour rights, protection of the environment and good governance.
- EBA (Everything But Arms): the special arrangement for least developed countries, providing them with duty-free, quota-free access for all products except arms and ammunition.
Why has Indonesia lost its GSP status?
The EU GSP scheme has ‘graduation mechanisms’ which mean that once certain conditions are met, a country is no longer eligible for GSP status. One such mechanism is when the average value of imports from a GSP beneficiary country (divided by the total value of all GSP imports for that Section) over three years exceeds the general threshold of 57%.
Indonesia has lost its GSP status as a result of surpassing this threshold for three consecutive years 2015/2016 to 2017. Notice was given one year ago that Indonesia would graduate from GSP on 1 January 2020.
How will this affect my business?
With the GSP tariff reduction of 3.5% duty removed for Indonesia full duty will now be payable on such imports (e.g. 7% on Plywood), so please do prepare accordingly. We already have heard from various members that these charges have already been implemented, so do expect to pay them on your imports at this time and factor these additional costs into your margins.
Will this change after Brexit?
Currently, the UK remains a part of the EU and subject to the common rules of the EU market. The most current news from Government suggests that the UK will leave the EU on 31 January with the Brexit deal tabled by Prime Minister Boris Johnson, and a transition period which will end on 31 December 2020. While there is speculation that the UK will differentiate from the EU on GSP, it will likely be some time before we see any true departure in trade policy.
Source: Timber Trade Federation