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By Charumini de Silva
Sri Lanka will push for high level discussions with the European Union (EU) Commission to resolve issues pertaining to Country of Origin criteria under the Generalised Scheme of Preferences Plus (GSP+) to support exporters to reap the maximum benefit of the agreement.
“To address the rules of Country of Origin criteria, apparel sector in Sri Lanka has submitted as a joint request to the EU Commission for cross regional cumulation for raw material origin from Indonesia. A high-level discussion with the EU Commission to get approval for this joint request of Sri Lanka and Indonesia on regional cumulation for apparel products is an important matter that will be attended to in the near future,” Department of Commerce Acting Director General Ananda Dharmapriya said recently at a webinar titled ‘GSP+ for Enhanced Market Access’ organised by the International Trade Centre (ITC) in collaboration with the Department of Commerce.
He also said that they expected to make a formal submission to the EU Commission to source fabric from Vietnam, in the backdrop of its recently-inked Free Trade Agreement (FTA) with the EU.
Although there has been a gradual increase in exports to the EU after regaining GSP+ from 2017, the utilisation of EU GSP+ by Sri Lanka was only 62% in 2019. Despite the fact that GSP+ has generally been observed as a positive co-relation, with over 7,000 product lines eligible for duty-free under the GSP+, Sri Lankan exporters are concentrating only on few sectors due to the cost of compliance included in Country of Origin criteria.
He pointed out that rules of origin was the key reason and it had nothing to do with awareness.
“It is very clear when you look at the average utilisation of GSP+ 62% and the sectoral utilisation. It is somewhat different — apparel 52%, rubber 96%, seafood 99%, processed food 96%, apparel accessories 77%, bicycle 96%, electrical 41%, head gear parts 87% and tea and spices 70%. Considering these sectoral utilisation, can we say apparel sector is unaware of GSP+? No!” he said.
The apparel and textile industry is the second largest contributor to the national Gross Domestic Product (GDP). Sri Lanka last year earned $ 5.3 billion from apparel exports, an increase of 5.1% from 2018. As a result of the COVID-19 pandemic, total exports in the first nine months dropped by 21.97% to $3.1 billion compared to the same period last year, where exports to the EU also fell by 21.36% to $1.3 billion during the first nine-months of the year.
“The main reason for the underutilisation is due to the issue with Country of Origin criteria faced particularly by the apparel exporters. Utilisation of EU GSP+ by the apparel sector is only 52% as Sri Lanka’s apparel are made of fabric imports from outside the South Asian Association for Regional Cooperation (SAARC) and the EU region which are not eligible for EU GSP+ concession,” he said.
The cost of compliance involved with the Country of Origin criteria, which is far out from the tariff concessions, was also highlighted as another reason for underutilisation of the GSP+ by Sri Lankan exporters.
“The EU importers as direct beneficiaries of the tariff concession require GSP+ certification or self-declarations to be sent along with other shipping documents, which exporters are not aware of,” he claimed.
