DCTS is now live!
The Developing Countries Trader Scheme (DCTS) officially entered into force on 19 June 2023. The scheme, which has replaced the UK Generalised Scheme of Preferences, offers developing countries non-reciprocal trade preferences in the form of reduced and eliminated tariffs, among other benefits. Key features of the new scheme are covered in our latest update.
On 16 August 2022, the then Secretary of State for International Trade, Anne-Marie Trevelyan, announced plans to launch the “Developing Countries Trading Scheme”, also known as “DCTS”, with the scheme designed to succeed the existing UK Generalised Scheme of Preferences (GSP) which was first introduced post-Brexit, largely based on the equivalent EU scheme which preceded it.
In the initial announcement, DCTS was set to become live in early 2023, and after a short delay, will now come into effect on 19 June 2023, at which point the UK GSP will cease to have effect.
What is the DCTS and how will it differ from the existing UK GSP?
As with GSP, DCTS will allow for developing countries to benefit from non-reciprocal trade preferences. By offering reduced or eliminated tariffs for certain exports to the UK, DCTS will assist in enhancing the economic growth of developing countries participating in the scheme.
Like its predecessor UK GSP, DCTS comprises of three tiers, each of which grant access to different levels of trade benefits, as below:
- Standard Preferences (SP) – previously General Framework
- Enhanced Preferences (EP) – previously Enhanced Framework
- Comprehensive Preferences (CP) – previously Least Developed Countries (LDC) Framework
Simplified Rules of Origin
One of the main upgrades featuring in DCTS are the simplified Rules of Origin, which will primarily apply for LDCs. The Government have set out plans to liberalise product-specific rules by removing unnecessary complexity from the existing rules and making them easier to comprehend. Additionally, there will also be greater opportunities available for DCTS countries to cumulate with one another, increasing the scope for materials from different DCTS countries to be considered as ‘originating’ when being used in the production of final products.
Tariff preferences
Tariff preference is one of the core benefits available in DCTS and the Government has pledged to lower or remove tariffs on over 150 additional products within the Enhanced Preferences tier. Fifteen seasonal tariffs (mainly consisting of fruit and vegetables) have also been simplified, now offering nil duty throughout the year for beneficiaries of Enhanced Preferences. Meanwhile within the Standard Preferences tier, all tariffs currently at 2% or below, referred to as ‘nuisance tariffs’ have been reduced to 0%, which covers 33 different commodity codes.
Goods ‘graduation’ removes access to tariff preferences in scenarios where a country has become exceedingly competitive in the export of particular products. In DCTS, the only tier subject to goods graduation is Standard Preferences, of which only two countries currently belong, India and Indonesia.
DCTS is also allowing all economically vulnerable lower income countries and lower-middle income countries to access Enhanced Preferences. In total, eight countries are moving into this category, and it is expected in the coming years that more countries will follow suit. The Government will maintain its power to remove benefits for countries with inadequate human rights and labour rights records and there will now also be added scrutiny on countries’ anti-corruption and climate change policies.
Vietnam
One country which has been subject to interest is Vietnam. In December 2020, the UK and Vietnam signed a Free Trade Agreement (FTA), and since then Vietnam has been able to access the benefits of both the FTA and UK GSP.
When DCTS comes into force, Vietnam will no longer be a beneficiary country and traders will therefore only be able to access trade preferences for Vietnamese goods via the FTA.
Evidence requirements and preparation
Currently under UK GSP, traders are required to hold either a valid GSP Form A certificate or an Origin Declaration issued by the supplier to prove that the goods qualify as having GSP origin status. These are types of evidence which are issued in the country of export and valid evidence must be held by the importer when claiming preferential tariffs.
Under DCTS, the format of the Form A certificate is expected to remain the same, though the wording of the origin declaration however is subject to change to instead include reference to the DCTS.
For goods which are eligible for tariff preferences under DCTS, UK GSP proof of origin will be accepted as valid, if the proof of origin was issued on or before 31 December 2023. This grace period allows traders to continue using UK GSP origin declarations for the remainder of 2023. This will also apply to retrospective DCTS preference claims, within the specified period.
Likewise, for goods which are currently under the customs warehousing procedure, or for goods which will be entering a customs warehouse before 31 December 2023, DCTS preference can be claimed upon release to free circulation using UK GSP proof of origin.
Act now!
If you are a UK business currently importing from GSP countries, you should consider how these changes may impact your business, and most importantly, ensure your suppliers are aware of the proposed changes and are ready to provide you with valid evidence of origin under the new scheme going forward.
For more information or to discuss these changes further, please contact Ian Worth or your usual Crowe contact.
