Recently, the General Administration of Customs announced that, according to the Japanese Embassy in China, the Ministry of Finance of Japan decided not to grant GSP tariff preferences to Chinese goods transported to Japan as of April 1, 2019.

What is GSP tariff preference

GSP tariff preference is a general preferential tariff system, referred to as GSP, which refers to the general, non-discriminatory and non-reciprocal tariff system given by developed industrial countries to manufactured and semi-manufactured products exported by developing countries or regions. The aim is to expand the export of manufactured and semi-manufactured goods from developing countries to developed countries, increase foreign exchange earnings of developing countries, promote industrialization of developing countries and accelerate economic growth of developing countries.

According to most of the provisions of preference-giving countries, the certificate of origin of GSP must be signed by the institutions designated by the government of the beneficiary country (Note: Our government designates local export commodity inspection agencies to issue GSP certificates of origin).

Commodities enjoying GSP treatment must meet the following conditions

(1) Standards of origin. All commodities can be divided into two categories, one is "full origin". That is, the commodities are produced or manufactured entirely in the beneficiary country without any imported raw materials or components; the other is products produced wholly or partially using imported raw materials or components (including raw materials and components from unknown sources). From the perspective of GSP, if the goods exported by the beneficiary country are to enjoy GSP tariff treatment, the export goods must be produced and manufactured in the beneficiary country. The imported raw materials or components used in the export goods must be processed sufficiently to make substantial changes in the imported raw materials or components, or meet other conditions put forward to the beneficiary country.

(2) Commodities should conform to the principle of direct transportation. That is to say that the export commodities not only need to be produced or manufactured in the beneficiary country, but also must be shipped directly from the beneficiary country to the beneficiary country. Passing through the transit country, it must be under the supervision of the customs of the transit country, not put into the local market for sale or delivery for local use, let alone carry out other reprocessing there.

(3) Effective documentation must be provided. That is GSP Certificate of Origin (joint declaration and certification) format A, referred to as GSP FORM A, and other related documents. Form A Certificate of Origin is the legal evidence that the original products of the beneficiary country enjoy preferential tariff reduction and exemption treatment when they are exported to the beneficiary country. Form A certificate of origin is different from general certificate of origin, referred to as C/O. The General Certificate of origin is an effective document to enjoy MFN treatment. The GSP Form A certificate of origin is an effective document to enjoy GSP reduction and tax exemption treatment.

Which countries give preferential tariff treatment to GSP in China

There are 39 countries that have given preferential tariff treatment to China: 27 EU countries (Germany, Britain, France, etc.), Japan, Canada, Switzerland, Australia, Norway, Russia, Belarus, New Zealand, Turkey, Ukraine, Kazakhstan and the Principality of Liechtenstein. Among them, the EU cancelled the preferential treatment of GSP in China on January 1, 2015.

GSP is not permanent

GSP is not permanent. When developing countries or regions export more and more products under preferential policies, and their economic growth speeds up correspondingly to a certain extent, developed countries think that these countries or regions can graduate, they will cancel such preferences, either by canceling the national beneficiary qualification or by canceling the beneficiary qualification of a certain product.

For example, on March 4, 2019, the Office of the United States Trade Representative announced that the United States Government planned to abolish the GSP treatment given to India and Turkey on the instructions of President Trump.

Why did Japan announce the end of GSP preferences in China?

Japan is an important trading partner of our country and one of the important exporting countries. Japan has implemented the GSP scheme since 1971, and granted China GSP treatment in April 1980. It is one of the most preferential GSP schemes for China's export commodities. Japan's GSP preferences have played a great role in promoting China's export of commodities to the Japanese market.

From April 1, 2011 to March 31, 2021, the Japanese government implemented the fifth ten-year GSP period, during which Japan implemented GSP tariff preferential treatment to 151 developing countries and regions in the world.

Domestic public opinion in Japan generally believes that if Chinese goods with high international competitiveness continue to enjoy preferential tariff treatment of GSP system in the Japanese market, it will cause unfair competition to their domestic products. To this end, the Japanese government has repeatedly adjusted and reduced the preferential treatment of GSP for Chinese goods. In this case, the Japanese government cancels the preferential treatment of GSP for its own domestic economic development.

In fact, in August 2017, the former General Administration of Quality Supervision and Inspection issued an article saying that Japan's GSP system to China is about to graduate, and it will completely end its GSP policy to China in 2019.

The Impact of Japan's Ending GSP Preferences in China on the Plastic Industry

The average tariff concessions previously granted by Japan were about 3%. After the abolition of GSP tariff preferences granted to China by Japan, traditional superior products such as organic chemicals and plastics products originating in China will no longer enjoy GSP treatment in Japan, which means that the average tariff rate of Japanese exports will rise by about 3 percentage points on the whole, and some products will even rise by more than 10 percentage points. It will weaken the competitiveness of China's export products in Japanese market to a certain extent.

According to the data monitored by the Purchasing Institute of Plastics and Plastics, the volume of trade in plastics and their products and organic chemicals exported by China to Japan increased year after year from 2016 to 2018. Therefore, Japan's abolition of GSP tariff preferences for China's export enterprises is undoubtedly a bad news.

Enterprises adopt diversification strategy to cope with negative impact

In order to minimize this impact, the Academy of Purchasing, Plastics and Plastics recommends that enterprises adopt diversified strategies to deal with:

Firstly, we should make full use of the FTA to enjoy tariff relief and avoid the impact of the abolition of GSP preferences on China's export trade.

Up to now, China has signed 16 free trade agreements with 24 countries or regions. These 16 free trade agreements can be said to be based on the surrounding countries and face the world, including ASEAN members, Pakistan, Georgia, and other countries in the world, such as Peru and Chile in Latin America. This opens up a broader international market for enterprises, and export enterprises should make good use of it.

Second, we should open up other markets that give preferential treatment to our country.

For example, export products to Russia, Belarus, Ukraine and Kazakhstan to continue to enjoy GSP preferences.

Thirdly, enterprises should accelerate transformation and upgrading, cultivate competitiveness with brand, quality and service as the core, and gradually get rid of dependence on price advantages.