Generalized System of Preferences
EXPLANATORY NOTES FOR JAPAN'S SCHEME
December 15, 2016
Generalized System of Preferences (GSP), based on the agreement reached at UNCTAD, aims at contributing to the economic development of developing countries. GSP provides benefits to developing countries by enabling qualified products to enter the markets of preference - giving countries (developed countries) at reduced or free rates of duty.
Japan's GSP started on August 1, 1971, and the current scheme is effective until March 31, 2021.
Japan grants preferential tariff treatment under its GSP scheme to 138 developing countries and 5 territories "LIST OF GSP BENEFICIARIES" (PDF).
Beneficiaries are designated by Cabinet Orders from countries/territories requesting for preferential treatment, subject to meeting the following criteria:
- (1) Economy of the country or the territory must be in the stage of development.
- (2) The territory must have its own tariff and trade system.
- (3) The country or the territory desires to receive preferential tariff treatment under the GSP scheme.
- (4) The beneficiaries must be prescribed by a Cabinet Order as a country or a territory to which such preferences may appropriately be extended.
- Only beneficiary countries determined as least developed countries (LDCs) in the General Assembly of the United Nations are eligible for Special preferential treatment for LDCs.
2. PRODUCT COVERAGE (under the GSP treatment)
- (1) Agricultural and Fishery Products (HS chapters 1-24)
Japan grants GSP treatment for selected agricultural and fishery products in 408 items (9-digit base, hereinafter the same).
- (2) Industrial Products (HS chapters 25-97)
Japan grants GSP treatment for selected industrial products in 3151 items.
3. DEPTH OF TARIFF CUTS (GSP rates)
- (1) Agricultural and Fishery Products (HS chapters 1-24)
Various tariff reductions, including duty-free treatment, apply to the certain agricultural and fishery products covered by the scheme.
- (2) Industrial Products (HS chapters 25-97)
All industrial products are in principle given duty-free treatment while GSP rates on some sensitive items are 20, 40, 60 or 80 percent of Most-Favoured-Nation rates.
4. ESCAPE CLAUSE
Where increased preferential imports of a product cause or threaten to cause damage to a domestic industry, such preferential treatment on the product may be suspended temporarily.
5. GRADUATION OF ADVANCED BENEFICIARIES
Advanced beneficiaries are to be excluded from the list of GSP beneficiaries under the annual review. This process of "graduation" begins with "partial graduation," if applicable, in order to mitigate its impact on these "graduating" economies.
As to "partial graduation," a product of a beneficiary country or territory is to be excluded from the GSP treatment product coverage if : the country or territory is classified as a high income economy in the previous year's World Bank statistics (in case of our fiscal year 2011, for example, it means World Bank statistics 2010, which carries the data of 2008) or, when it is not on the World Bank statistics, recognized to have the same level of GNI (gross national income) per capita; and its exports of the product to Japan exceed 25 % of the world's exports of the product to Japan and at the same time are more than 1 billion yen.
Each country or territory and product shall be reviewed every year. If any of the above conditions is not met, preferential tariff treatment shall be given.
Furthermore, starting from 1 April 2000, a beneficiary country or territory is excluded from the list of GSP beneficiaries if it is classified as a high income economy in the previous three years' World Bank statistics in a row or, when it is not on the World Bank statistics, recognized to have the same level of GNI per capita.
When a country or territory excluded from the list of GSP beneficiaries is not classified as a high income economy for three consecutive years, such country or territory shall be subject to the GSP scheme, if such country or territory requests Japan to apply the GSP beneficiary status to them again.
6. COMPETITIVENESS-FOCUSED, PRODUCT-BY-EXCLUSION
Under the annual review, a product highly competitive in the Japanese market, of a developing beneficiary country or territory is excluded for three years from the GSP treatment product coverage, when the following criteria are met for the past three years on average: imports of a product from a developing beneficiary (except LDCs) to Japan in value term, account for more than 50% of its import from the world to Japan, and at the same time amount to over one and a half billion yen.
Preferential tariff treatment shall be re-introduced for the products that would not meet the criteria above after exclusion.
7. SPECIAL PREFERENTIAL TREATMENT FOR THE LEAST DEVELOPED COUNTRIES
The following special preferential treatment is offered to all LDCs for all products under the GSP treatment, including additional products for which preferences are granted only to LDCs (See LIST OF PRODUCTS FOR WHICH DUTY-FREE, QUOTA-FREE MARKET ACCESS IS GRANTED TO LDCS (PDF)):
- (a) Duty-free
- (b) Quota-free (Preferential imports without ceiling restriction)
8. RULES OF ORIGIN
In order for the goods exported from a preference-receiving country to be eligible for the preferential tariff treatment, they must be recognized as originating in that country under the origin criteria of the Japanese GSP scheme, and transported to Japan in accordance with its rules for transportation.
Rules for transportation (Direct Consignment)
This rule is to ensure that the goods retain their identity and are not manipulated or further processed in the course of shipment.
- (i) In principle, the goods must be transported directly to Japan without passing through any territory other than the exporting preference- receiving country.
- (ii) However, with regard to goods transported to Japan through the territories of countries other than the exporting preference-receiving country, they are entitled to preferential treatment, if
- (a) they have not undergone any operations in the transit countries other than transshipment or temporary storage exclusively on account of transport requirements, and
- (b) the transshipment or temporary storage has been carried out in a bonded area or any other similar place, under the supervision of the customs authorities of those transit countries.
- (iii) With regard to the goods exported from a preference-receiving country, for temporary storage or display at exhibitions, fairs and similar performances in another country, which have been exported by the person who has so exported the goods from the said another country to Japan, they are entitled to preferential treatment, if
- (a) the transportation to Japan from the country where the exhibition etc. has been held falls under (i) or (ii) above, and
- (b) the exhibition etc. has been held in a bonded area or any other similar place, under the supervision of the customs authorities of that country.
Goods are considered as originating in a preference-receiving country if they are wholly obtained in that country.
In the case of the goods produced totally or partly from the materials or parts which are imported from other countries, or of unknown origin, such resulting goods are considered as originating in a preference-receiving country if those materials or parts used have undergone sufficient working or processing in that country. As a general rule, working or processing operations will be considered sufficient when the resulting goods are classified under an HS tariff heading (4 digits) other than that covering each of the non-originating materials or parts used in the production. However, there are two exceptions to this rule. One is that some working or processing will not be considered sufficient when working or processing is actually so simple even if there is a change in the HS heading (see MINIMAL PROCESSES WHICH ARE NOT ACCEPTED AS OBTAINING ORIGINAL STATUS). The other is that some goods are required to satisfy the specific conditions in order to obtain originating status (see LIST OF CONDITIONS TO QUALIFY AS AN ORIGINATING GOOD UNDER JAPANESE GSP (PDF)).
[Note] When an importer applies the preferential tariff rate without complying with the preferential rules of origin, the importer may incur a penalty under the Customs Tariff Law and Temporary Tariff Measures Law.
Use of materials imported from Japan
In application of the origin criteria, the following special treatment will be given, to the materials imported from Japan into a preference-receiving country and used there in the production of goods to be exported to Japan later: ("Donor Country Content Rule")
- (1) In the case of the goods produced in a preference-receiving country only from the materials imported from Japan, or those produced in a preference- receiving country only from the materials wholly obtained in the preference-receiving country and the materials imported from Japan, such goods will be regarded as being wholly obtained in that country.
- (2) Any goods exported from Japan which have been used as part of raw materials or components for the production of any goods produced other than those goods as provided for in the above-mentioned paragraph (1) shall be regarded as wholly obtained in that country.
- However, with regard to some products obtained in a preference-receiving country (see LIST OF PROCESSED PRODUCTS TO WHICH DONOR COUNTRY CONTENT RULE IS NOT APPLIED), special treatment will not be granted.
Rules of cumulative origin
In the case of the goods produced in Indonesia, Malaysia, the Philippines, Thailand and Vietnam (hereinafter "the 5 Countries"), the 5 Countries are regarded as a single preference-receiving country for the purpose of applying the above-mentioned origin criteria and Preference-giving country content rule.
In detail, the 5 Countries enjoy the following effects when applying the substantial manufacturing standards.
- (1) When calculating the rate of use of materials not originating in the 5 Countries, the goods listed below are treated as having originated in the 5 Countries.
- All raw materials consisting only of the goods originating in the 5 Countries.
- All raw materials consisting only of the goods exported from Japan to the 5 Countries.
- All raw materials consisting only of the goods prescribed in a. and b.
- If mixed with raw materials from other countries (except goods exported from Japan), the portion of the raw materials which conform to the provisions of a. through c.
- (2) The goods are qualified to have originated in one of the countries when certain requirements as to their process or manufacture are satisfied in all these countries involved in their production.
The origin of goods which are eligible for the preferential tariff treatment according to the rules of cumulative origin is the country that exports the goods to Japan.
To make use of cumulative origin system, Cumulative Working/processing Certificate should be presented to the Customs at the time of import declaration in addition to the Certificate of Origin Form A.
De Minimis (DMI) for Textiles and Textile Articles
In application of the origin criteria, non-originating materials used in the production of a good classified under Chapter 50 through 63 of the Harmonized System that do not satisfy an applicable rule for the good shall be disregarded, provided that the totality of such non-originating materials does not exceed 10 percent in weight of the good.
(Also see FORMS OF DOCUMENTARY EVIDENCE.)
- (i) Evidence relating to origin of goods
- (a) Documentary requirements for all goods to receive GSP treatment
- In order for goods to receive the preferential tariff treatment, a Certificate of Origin (Combined declaration and certificate) Form A must be submitted to the Japanese customs authorities on importation of the goods into Japan. The Certificate shall be issued by the customs authorities (or other competent government authorities of the exporting preference-receiving country or other bodies of that country, such as chambers of commerce, which are registered as the issuers by the Japanese customs authorities) upon application from the exporter when he exports the goods concerned. However, importers are not required to submit a certificate of origin in relation to an importation of a consignment of a good whose aggregate customs value does not exceed 200,000 yen. A certificate of origin is also not required for the specific items which the Director-General of regional customs waives the submission thereof., with some exceptions (For the list of such goods and exceptions, see List of Goods (HS Code) Made Possible to Submit the Certificate of Origin)
- (b) Material imported from Japan
- When one or more of the special treatments under the "Preference-giving Country Content Rule" is sought in respect of the goods to be exported from a preference-receiving country to Japan, a "Certificate of Materials Imported from Japan" issued by the same competent authorities issuing the Certificate of Origin (Form A) will be required to prove that the materials used in the production of the goods were originally imported from Japan into that country.
- (c) Cumulative origin
- When one or more of the special treatments under the Rules of Cumulative Origin is sought in respect of goods produced in one of the countries (Indonesia, Malaysia, the Philippines, Thailand and Vietnam), a "Cumulative Working/Processing Certificate" must be submitted, on importation of the goods into Japan, to the Japanese customs authorities, together with a Certificate of Origin (Form A). The Cumulative Working/Processing Certificate shall be issued by the same authorities issuing the Certificate of Origin.
- The term reference number of the Cumulative Working/Processing Certificate must be filled in box 4 ("For official use") of the Certificate of Origin.
- (ii) Evidence relating to transport
- In the case of transportation coming under (ii) or (iii) of the Rules for transportation mentioned above, the following evidence to prove that the transportation was in conformity with the conditions specified respectively thereunder must be produced:
- (a) a through bill of lading;
- (b) a certification by the customs authorities or other government authorities of the transit countries; or
- (c) any other substantiating document deemed sufficient.
- However, with regard to consignments of customs value not exceeding 200,000 Yen, this evidence will not be required.