UK trade scheme to save £20M tariff for Phl exports

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THEPHILBIZNEWS FILE PHOTO

Filipino exporters to the United Kingdom could realize tariff savings of more than £20 million (P1.4 billion) every year from the UK’s newly launched trade preferences scheme.

The UK government introduced the Developing Countries Trading Scheme (DCTS) in the Philippines on June 7, 2023, replacing the UK Generalised Scheme of Preferences (UK GSP).

Ambassador to the Philippines Laure Beaufils in her welcome remarks at the launch event said the DCTS will come into effect on June 19, 2023, representing a major milestone in new trade and investment opportunities between the two countries.

UK Ambassador to the Philippines Laures Beaufils (Photo from THEPHILBIZNEWS)

“The DCTS will cut tariff, remove conditions and simplify trading rules. It will increase trade and strengthen the trade relationship between the UK and the Philippines,” Beaufils said. “I strongly encourage businesses to take full advantage of this new scheme.”

Philippine Trade Secretary Alfredo Pascual in his opening message said: “The UK DCTS, as one of the most generous trade preference schemes in the world, enables the Philippines to have continued access to enhanced preferences.

“We look forward to our country having access to duty-free, quota-free trade on 92% of our eligible goods—or 99% of our exports to the UK,” he added.

The DCTS will replace the UK GSP with the aim to promote free and fair trade with selected countries. It also demonstrates the UK’s commitment to building long-term, mutually beneficial relationship with the Philippines, according to UK trade preferences policy advisor Sabiha Ahmed.

The Philippines, as a current beneficiary of the UK GSP, will maintain its eligibility status under the DCTS, Ahmed said in her presentation of the key benefits of the program. 

Philippine-UK trade reached an all-time high of £2.4 billion in 2022. The Philippines exports a range of high-value products to the UK, including tuna, shirts, and starch, which will benefit from significant tariff reductions under the DCTS, said Ahmed.

Philippine exports to the UK can benefit from an additional 150 plus tariff cuts under the program. DCTS Enhanced Preferences offer generous tariff preferences and facilitate access to the UK market for Philippine businesses across a wide range of industries.

These perks offer an estimated tariff saving of £21 million a year for businesses in the Philippines, said Ahmed. 

Meanwhile, rules of origin or ROO benefits for Filipino exporters include maintenance of regional cumulation, in which countries in regional groups under the DCTS can source materials within the region and claim originating status on those goods.

In addition, all other countries under the DCTS can cumulate with the Philippines in goods that are duty-free and quota-free under the scheme.

There are also the simplified trade conditions that Filipino exporters can look forward to. Qualifications for Enhanced Preferences are simplified and purely based on economic variables. And the requirement to ratify restrictive international conventions with limited evidence of effectiveness is waived.

More broadly, all DCTS beneficiaries can take advantage of the large opportunities in the UK market. Ahmed said the UK economy is seeing increasing demand for imports, driven by changes in consumer preferences and by global disruptions.

Overall, the DCTS is expected to benefit 65 developing countries and support over £20 billion of exports to the UK each year, Ahmed continued.

Compared to the European Union GSP, the DCTS has a more generous unilateral offer through simpler ROO requirements, lower tariffs, and simplified conditions to help beneficiary countries diversify their exports and grow their economies, she added.

Beneficiaries are categorized under three preference tiers. The Comprehensive Preferences tier encompasses the least developed countries such as Bangladesh, Cambodia and Myanmar, and offers duty-free trade for 99% of products and more generous ROO requirements.

The Enhanced Preferences tier provides duty-free status or zero rating for 85% of products. Aside from the Philippines, other developing countries entered here include Mongolia, Pakistan and Nigeria.

The third tier, Standard Preferences, covers countries and goods subject to graduation and grants duty-free status to 33% of products and reduced duties to 51% of goods. India and Indonesia occupy this tier.

The DCTS updates and improves upon the UK GSP scheme, said Ahmed. Changes include the cutting of more than 150 new tariff lines for Enhanced Preferences countries, removal of all tariffs below 2%, and lifting of some seasonal tariffs.

In terms of ROO, the threshold of non-originating content is increased to 75% across a wider range of product areas. ROO determine which exports from a country qualify as “originating” and therefore eligible for preferential tariff treatment.

Moreover, graduation from the scheme now applies to a smaller range of countries and goods.

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