GSP

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The central pillar of the multilateral rule-based trading system enshrined in the GATT/WTO is the acceptance and operation of the Most Favoured Nation principle. This means that every member of GATT/WTO should invariably accord the same, identical, equal and non-discriminatory treatment to all imports irrespective of the countries of origin.

However, the Generalized System of Preferences (GSP) is an officially agreed exception to the MFN principle which was proposed at the first meeting of the United Nation Conference on Trade and Development (UNCTAD) with a view to assisting the developing countries in their exports and development efforts. In 1964, the First United Nations Conference on Trade and Development (UNCTAD) started to look into ways and means of granting special trade preferences to developing countries.

Main objectives of granting trade preferences to developing countries were:

To enhance export earnings of developing countries
To promote industrialization, and
To encourage the diversification of their economies.

In 1968, UNCTAD recommended the creation of a "Generalized System of Tariff Preferences" under which industrialized countries would grant autonomous trade preferences to all developing countries.

In order to implement the system a waiver was required from Article 1 of the GATT which prohibits discrimination. This waiver was granted in 1971 by adopting the "enabling clause" of the GATT to create the legal framework for the "Generalized System of Tariff Preferences" (GSP). Under this framework developed countries were authorized to establish individual Generalized Schemes of Tariff Preferences.

The enabling clause was adopted originally for ten years, and renewed in 1979, for an indefinite period of time thereafter.

EU GSP

The European Community was the First to implement their GSP scheme in 1971.

Until 1995 the main features of the EC GSP Scheme were quotas and ceiling for individual countries and products. Since 1995, EU's GSP did away with any quantitative limitations.

The current EU's GSP scheme entered into force from 01/01/2014 and will last until the end of 2023.

Product coverage

The general arrangement covers over 6200 tariff lines out of a total of approximately 7100 tariff lines with non-zero tariffs. Roughly 2300 lines are not covered by the scheme as standard tariffs (so-called “most favoured nation” or MFN) are already at 0.

Depth of Tariff Cuts

Tariff preferences offered by the current GSP scheme differ according to the sensitivity of the products concerned.

non-sensitive products enjoy duty-free access to the European Union market, while sensitive products benefit from tariff reductions.

The current GSP rate for sensitive products is calculated by applying one of following reductions:

A flat rate reduction of 3.5 percentage points to the most-favoured-nation duty (applicable to the ad valorem duties).
A 30 per cent reduction in the most-favoured-nation duty where only specific duties apply;
A flat rate reduction of 3.5 percentage points applicable to the ad valorem duties only, where duties are composed of both ad valorem and specific duties.

Limited exceptions apply to textiles and clothing, the most-favoured-nation duties for which shall be reduced by 20 per cent.

With respect to agricultural products listed in HS chapters 1–24, wherever customs duties comprise an ad valorem duty and one or more specific duties, the preferential reduction is limited to the ad valorem duty.

Where the customs duties specify a maximum duty, that maximum duty shall not be reduced. Conversely, where the customs duties specify a minimum duty, that minimum duty shall not apply.

EU Regulation

Click here to view 'EU GSP+ Business Guide for Sri Lankan Exporters'

Click here to view 'Handbook for Exporters Including the Information of EU GSP+'

Countries

**Sri Lanka's Major Exports under GSP (USD Mn.)**
HS Code	Description	2021	2022	2023	2024	2025	Share in 2025 (%)
61,62	Apparel and clothing accessories	2,105.40	2,322.33	1,944.46	2,025.42	2,128.17	49.13%
902	Tea, whether or not flavored	328.24	324.88	352.10	393.34	372.50	8.60%
200819	Coconut cream: Coconut milk powder: Liquid coconut milk	147.21	114.39	138.69	178.37	286.62	6.62%
401290	Retreaded or used pneumatic tyres of rubber	234.67	237.05	224.09	204.92	144.60	3.34%
401519	Articles of apparel and clothing accessories: Gloves	212.58	129.13	99.53	125.58	135.06	3.12%
380210	Activated carbon: Other of coconut shell: chemically impregnated	84.31	96.63	75.29	86.60	99.84	2.30%
151311	Coconut (copra), palm kernel or babassu oil and fractions thereof, whether or not refined, but not chemically modified	53.38	41.45	37.27	47.43	75.60	1.75%
080111	Coconuts: Desiccated: Edible Copra	56.53	38.07	27.85	45.03	68.85	1.59%
030449	Fresh or chilled fillets of other fish	38.55	31.11	30.12	41.87	41.58	0.96%
210690	Preserved hearts of palms	21.35	22.55	22.25	28.68	40.40	0.93%
530500	Coconut (coir): Moulded products for use in horticulture	51.37	38.60	33.25	39.35	40.38	0.93%
630630	Tarpaulins, awnings and sunblinds; tents; sails for boats, sailboards or landcraft; camping goods	36.00	40.45	41.37	42.07	35.28	0.81%
151319	Coconut (copra), palm kernel or babassu oil and fractions thereof, whether or not refined, but not chemically modified	6.54	8.57	7.79	14.82	34.35	0.79%
401512	Gloves, mittens and mitts: Surgical	0.00	0.00	19.57	29.69	32.98	0.76%
210120	Tea: Instant tea	21.94	22.28	25.17	22.91	30.35	0.70%
950629	Articles and equipment for general physical exercise, gymnastics, athletics, other sports	25.64	31.54	21.24	25.33	26.79	0.62%
030349	Tunas, skipjack or strip-belled bonito excluding livers and roes	53.60	42.60	37.72	16.11	22.83	0.53%
160521	Crustaceans, molluscs and other aquatic invertebrates, prepared or preserved	0.00	0.00	0.00	8.44	22.61	0.52%
401699	Other articles of vulcanised rubber other than hard rubber	31.55	27.03	20.25	21.22	22.59	0.52%
400811	Plates, sheets, strip, rods and profile shapes, of vulcanised rubber other than hard rubber	6.03	6.50	11.76	21.03	22.43	0.52%
Other exports		801.49	732.16	632.48	570.20	648.23	14.96%
Total exports under GSP		4,316.39	4,307.32	3,802.22	3,988.41	4,332.05	100.00%