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On June 19, the UK’s new DCTS entered into force, replacing its previous Generalised Scheme of Preferences (GSP) regime. Under the WTO Agreements, developed countries can grant non-reciprocal preferential treatment to products originating in developing and least developed countries, referred to as “special and differential treatment” (S&D) provisions, normally referred to as a GSP. Countries that grant preferential treatment through a GSP determine eligible countries and S&D provisions unilaterally.

Along with a rebrand, the DCTS simplifies trading rules for eligible countries and expands the S&D provisions. Applicable to 65 countries, the DCTS has three preferential tiers:

  1. Comprehensive Preferences which apply to least developed countries (LDCs) as defined by the United Nations;
  2. Enhanced Preferences which apply to low income countries (LICs) and lower middle-income countries (LMICs) as defined by the World Bank; and 
  3. Standard Preferences which apply to remaining LICs and LMICs that do not satisfy economic vulnerability criteria (assessed as export diversification)

The government guidance lists the countries in each tier along with additional information on qualifying for each tier. The UK government will review the economic vulnerability measure within 1 year of launching the Scheme.

To assist with the transition, a list of all tariff changes as a result of the DCTS coming into force has been published along with a helpful DCTS Visualisation Tool for UK importers and exporters to the UK. The Visualisation Tool allows businesses to find all relevant data for trading with a particular country within the DCTS and will enable UK importers to assess the potential impact of the DCTS on their supply-chain.

The DCTS does not apply to countries classified by the World Bank as Upper-Middle Income Countries (UMICs) for 3 consecutive years or non-LDCs with a Free Trade Agreement (FTA) or Economic Partnership Agreement (EPA) with the UK. In this regard, the example of Vietnam is useful. Vietnam and the UK have an FTA (Vietnam had an FTA with the EU prior to Brexit) but continued to have preferential treatment under the UK’s GSP until January 2023. As an Enhanced Preference country, Vietnam ‘graduated’ from the DCTS and has only benefitted from the provisions of the FTA since January 2023. Therefore, although other DCTS countries can use extended cumulation under the DCTS with Vietnam (provided that the input goods are duty-free and quota free in the Vietnam – UK FTA, and the goods meet the minimal processing rules under the DCTS), Vietnam cannot benefit from cumulation with DCTS countries.

Rules of Origin

The applicable rules of origin are set out in the new Customs (Origin of Chargeable Goods: Developing Countries Trading Scheme) Regulations 2023 and the Notice from HMRC. The DCTS simplifies product specific rules and provides more generous cumulation options for exporters in LDCs. In order to claim preference under the DCTS, an importer must have the necessary proof of origin from the exporter (origin declaration). An origin declaration must be made on an invoice or other commercial document that describes the goods in sufficient detail to enable them to be identified and is valid for 2 years from the date of issue. If preference is not claimed at the time of import for eligible goods, a retrospective claim with the necessary evidence can be made within 2 years of the date of importation to obtain a repayment of duties.

For more information on benefiting from trade rules for imports from countries in the DCTS contact a member of our team. 

Author

Jennifer Revis is a partner in Baker McKenzie's London office and co-leads our EMEA Customs Team.
Jennifer focuses her practice on the public regulation of international trade, particularly in a wide range of customs compliance issues. She regularly advises clients on import matters, including customs valuation, rules of origin, and classification. She has worked with clients designing and implementing their compliance programs, policies, procedures and risk assessments, and assisting them in customs audits. She has significant experience in managing global customs projects and disputes, particularly in the area of customs valuation (transfer pricing; assists; royalties). Jennifer also advises on FTAs and trade remedies matters.
Jennifer has been consistently recognised as a "Leading Individual" for Customs & Excise and “Next Generation Partner” for Trade, WTO Anti-Dumping And Customs. Clients describe her as "an outstanding customs lawyer and litigator with fantastic experience. She is also easy to work with and leads her team with aplomb", "without a doubt, one of the best customs lawyers in the business (…) with an exceptionally deep knowledge of customs valuation concepts, as well as considerable experience applying those concepts in a variety of jurisdictions."
Jennifer has been on secondment to the UK customs authorities (Her Majesty's Revenue and Customs) in their tax and excise litigation department and to the Firm's European Law Centre in Brussels.

Author

Lionel joined Baker McKenzie as customs lead in February 2022. He has over 23 years of experience in the field of customs, international trade, excises and energy levy. Lionel is lecturer at the UIA (Antwerp) and ULG (Liege). He is in charge of the customs, excises and international trade course at the Solvay Tax MBA.
In 2023, Lionel was appointed by the Global ICC board as Chair of the ICC Global Customs Valuation Working Group.
Lionel is also chairing the Indirect Taxes subcommitee of AMCHAM BE.
Lionel's Indirect Tax practice team has been recognized as Tier 1 Indirect Tax Team in Belgium by ITR World Tax.

Author

Rini joined Baker McKenzie after six years with the Canadian government, having worked on Brexit policy, as well in trade and tax litigation. She obtained her legal training with the Canadian government with the Trade Law Bureau and the Department of Justice. Her background in trade matters spans legal advisory, litigation and policy, having worked on free trade agreements, WTO litigation on market access and trade remedies issues. Prior to joining the Canadian government, she was a government affairs associate at one of Canada's most recognizable brands.

Author

Daniel Fragiel has been an attorney at the Firm since 2015 and is a senior associate in the Employment & Compensation Practice Group at Baker McKenzie Venezuela. He has over 17 years of professional experience in the area.

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