Special Report: Exporters urged to increase EU GSP+ utilization

MANILA, Philippines — As the window to take advantage of duty free access of certain products to the European Union (EU) becomes smaller for the Philippines given its time-bound Generalized Scheme of Preferences Plus (GSP+) beneficiary status, the Department of Trade and Industry (DTI) wants to increase its utilization of the program this year and next.

Getting more businesses to avail of benefits under the EU GSP+, however, is a challenge for the DTI with the trade preference offered by the program not attractive enough for some exporters. 

DTI Export Marketing Bureau director Senen Perlada, in an interview, said the government wants to see the percentage of the country’s exports benefitting from the EU GSP+ to rise. 

Of the €1.9 billion worth of total Philippine exports to the EU in 2017, Perlada said, only 26 percent benefitted from the EU GSP+. 

Coconut oil and canned tuna, he said, are among the country’s major exports to the bloc which benefit under the scheme.

“Coming from 26 percent, I think if we are able to achieve something in the vicinity of 40 to 45 percent for 2019, then that would be a good figure already. Of course, we want to keep growing that,” the DTI official said.

By 2020, Perlada is hopeful the country can double the current percentage of exports benefiting  from the program.

The DTI wants more Philippine exporters to take advantage of the the EU GSP+ as the scheme is time-bound and available only to low or lower-middle income countries. 

“It would be a waste not to use it. There is a 10-year timeline. Not only that, but beyond that, the more important thing is when we reach our GDP (gross domestic product) per capita of $4,000, which is not too far of in the future, we will not be eligible anymore to GSP+. Our window is becoming smaller,” he said. 

EU Ambassador to the Philippines Franz Jessen, for his part, said the bloc is hopeful of seeing greater Philippine utilization of trade benefits under the scheme. 

Expanded zero duty

In December 2014, the EU Parliament granted GSP+ status to the Philippines, allowing the country to enjoy zero duty for 6,274 products entering the trade bloc. 

The Philippines became a GSP+ beneficiary after satisfying requirements set by the EU such as ratification and implementation of 27 international conventions on human and labor rights, environment and governance principles, as well as acceptance of regular monitoring on such by the trade bloc. 

Prior to securing GSP+ status,  the country was a beneficiary of the regular GSP covering 6,209 products, with 2,442 products subject to zero duty and the rest slapped with lower tariffs.

To avail of the zero tariff benefit under EU GSP+, an exporter must check if the product to be shipped is part of the

list of eligible goods and secure a certificate of origin from the Bureau of Customs (BOC) to attest to the origin of the product.

While the Philippines is a beneficiary of the EU GSP+, Perlada said utilization of the trade preference under the program is only at 26 percent due to various factors affecting businesses’ decisions to avail of the benefit. 

Among the reasons why some exporters do not find the zero tariff provided under the GSP+ attractive enough to export to the EU is pricing. 

“One of the difficulties we have at the DTI, for those products that are being exported to the EU, there might be competing markets they can sell to also. Probably, prices are better there, so they can sell that elsewhere rather than to the EU,” he said. 

Philippine Exporters Confederation Inc. president Sergio Ortiz-Luis Jr. said high costs of raw materials and shipping, in particular, prevent some exporters from shipping goods to the EU. 

“We see high cost of raw materials and shipping, so some are just opting to cater to the domestic market,” he said.

Others, Ortiz-Luis said, prefer to go to more familiar markets. 

Supply is another factor affecting firms’ decision to ship goods to the EU and avail of the GSP+ benefit. 

Low output

While some exporters want to bring shipments to the EU to enjoy the zero tariff benefit under the GSP+, they cannot do so because of the country’s low output.

“One beneficiary (of GSP+) is fruits. But we don’t have enough production. It is nice to calculate the benefits, but the fact remains that you have no products. That’s very important,” Ortiz-Luis said. 

Even as the EU GSP+ offers duty free entry to certain products, it is not enough to draw exporters because there are still non-tariff measures being imposed which include accreditation of exporters and securing certification from a third party body. 

For instance, Perlada said firms which want to sell food products as private label goods in retail stores in the EU would need to get certification from the British Retail Consortium which created a common standard to enable retailers to evaluate suppliers and ensure high level of protection for clients.

As securing the certification involves costs, some exporters opt to just bring their products to other markets where they would not have to spend for certification.

Also affecting the decision of firms not to use the EU GSP+ is their lack of awareness on the program and process of how to avail of the scheme.

“In terms of information, some are saying they don’t know much about it (GSP+). There are those who say they don’t understand, and some who say they find it difficult to deal with the BOC. The BOC issues the certificate of origin. Sometimes, just sheer thought of having to deal with BOC, they are turned off,” Perlada said. 

To address the concerns on lack of information on the EU GSP+, he said the DTI conducts information sessions, as well as one-on-one meetings with companies interested to avail of the EU GSP+ benefit so they could learn about documentation, rules of origin and other procedures. 

For the one-on-one meetings, he said the DTI focuses on firms that are seen to be ready to export to the EU and use the GSP+ program.

On concerns with dealing with the BOC, he said the DTI helps arrange meetings between the agency and the firm.

EODB Act

Ortiz-Luis said implementation of the Ease of Doing Business (EODB) Act, which aims to cut bureaucratic red tape in government by providing a period for government transactions to be completed, would help in encouraging more firms to export to the EU and use the GSP+

“That has to take off. When it is implemented then, it makes sense for people to venture into import, export, and use GSP+ because they can calculate the difference. Right now, it’s difficult to do that,” he said. 

While the EODB was signed into law by President Duterte in May last year, a director general for the Anti-Red Tape Authority, which would oversee the implementation of the measure, has yet to be appointed. 

 Ortiz-Luis said steps to address high shipping costs and congestion at the ports would also be helpful in encouraging higher utilization of the GSP+. 

The DTI, along with other government agencies such as the Department of Finance, Department of Transportation, BOC,  Bureau of Internal Revenue, Maritime Industry Authority, Philippine Ports Authority, and the Subic Bay Metropolitan Authority are coming up with a joint administrative order to regulate and specify the rules and regulations to govern the fees and charges of shipping lines, port operators, truckers, and port users to lower operating costs and improve logistics efficiencies. 

As the EU GSP+ is available to the Philippines for a limited period, Perlada said the DTI is pushing for the EU-Philippines free trade agreement (FTA) so the country could enjoy trade benefits under a permanent set-up. 

Jessen likewise wants to see progress in negotiations for the FTA to promote stronger trade ties and attract more investments from the EU to the Philippines.  

So far, no schedule has been set for the next round of talks.

The first round of negotiations for the EU-Philippines FTA was held in May 2016 in Brussels in Belgium.

In February 2017, the parties conducted the second round of talks in Cebu.

“It is important we were able to conclude the Philippines-EFTA (European Free Trade Association) FTA because that can provide leverage to learning, negotiating and getting more basis for Philippines-EU FTA,” Perlada said. 

Under the Philippines’ FTA with EFTA which groups Switzerland, Iceland, Liechtenstein and Norway, industrial products, as well as fish and marine products can enter the EFTA states at zero tariff. 

In addition, concessions are provided on basic and processed agricultural goods from the Philippines.