Merchandise exports from LDCs benefit from duty free, quota free market access and from more favourable rules of origin (see also “Basis for preferential treatment of merchandise exports from LDCs by WTO members“).
The WTO´s Database on Preferential Trade Arrangements contains information for each country providing or benefitting from these arrangements.
Duty free, quota free market access
Most developed countries grant either full or nearly full duty-free, quota-free (DFQF) market access to LDCs, and an increasing number of developing countries have or are in the process of extending DFQF treatment to a significant share of imports from LDCs.
- Australia: DFQF for LDCs since 2003, 100% coverage.
- Canada: Generalized System of Preferences Least Developed Country Tariff Programme (LDCT) since 2000. Currently extended until 2024. Covers 98.6% of tariff lines (excludes dairy and other animal products, meat, meat preparations, cereal products).
- Chile: DFQF for LDCs since 2014. Covers 99.5% of tariff lines (excludes cereals, sugar and milling products).
- China: DFQF for LDCs since 2010. Covers 96.6% of tariff lines .
- European Union: Everything But Arms (EBA) initiative under the Generalised System of Preferences, since 2002. Covers 99.8% of tariff lines (excludes arms and ammunition)
- Iceland: GSP – Tariff preferences for the world’s poorest countries, since 2002. Covers 91.8% of tariff lines.
- India: Duty-Free Tariff Preference Scheme (DFTP), since 2008. Covers 94.1% of tariff lines.
- Japan: GSP – Enhanced duty‑ and quota-free market access, since 2007. Currently extended to 2021. Covers 97.9% of tariff lines.
- Republic of Korea: Presidential Decree on Preferential Tariff for LDCs, since 2000. Covers 89.9% of tariff lines.
- Morocco: Since 1 January 2001, Morocco grants duty free access to 33 African LDCs on 61 products.
- Montenegro: Since 1 January 2017, Montenegro grants duty free access for LDCs on 93.8% of tariff lines
- New Zealand: GSP – Tariff Treatment for LDCs since 2001. 100% coverage.
- Norway: GSP – DFQF, since 2002. 100% coverage.
- Russian Federation, Kazakhstan, Belarus: GSP scheme in the context of the Customs Union between Belarus, Kazakhstan and the Russian Federation, since 2010. Covers 37.1% of tariff lines.
- Switzerland: GSP – Revised Preferential Tariffs Ordinance, since 2007. 100% coverage.
- Chinese Taipei: Duty-free treatment for LDCs, since 2003. Covers 30.8% of tariff lines.
- Thailand: DFQF scheme for LDCs, since 2015. Covers 74.7% of tariff lines.
- Turkey: GSP for Least Developed Countries (harmonized with the EU).
- United States: GSP for Least Developed Beneficiary Developing Countries (LDBDC). Covers 82.4% of tariff lines. The African Growth and Opportunity Act (AGOA) extends DFQF treatment to African LDCs (and other countries) and covers 97.5% of tariff lines
Under regional agreements:
- South Asian Free Trade Area (SAFTA) and Asia-Pacific Trade Agreement (APTA) grant greater preference (coverage and tariff margins) to LDCs within the group.
Preferential rules of origin
LDCs are also subject to less stringent preferential rules of origin in certain markets, particularly since the decisions taken on this issue at the Bali and Nairobi WTO Ministerial Conferences in 2013 and 2015. Rules of origin are the criteria used to define where a product was produced and thereby determine which products benefit from preferential treatment. Strict rules of origin can be a barrier to utilizing preferential market access. The following are a few examples:
- In the EU, since 2011, the general threshold for non-originating materials is 70 per cent for LDCs and 50 per cent for other Generalized System of Preferences (GSP) beneficiaries; and product-specific origin requirements are more lenient. In textile and apparel products, the rules of origin permit single-stage processing for LDCs while for developing countries they require double transformation;
- In the United States, an article produced in an LDC beneficiary of its GSP may count inputs from least developed and other beneficiary countries in its regional association towards the 35 percent domestic content requirement for satisfying the rules of origin on certain articles;
- In Canada, up to 60 per cent of import content is allowed for the product to benefit from the LDC tariff, as opposed to 40 per cent for non-LDC products to benefit from the general preferential tariff. Also, all beneficiaries of the LDC preferential tariff are regarded as one single area for cumulation purposes, while all beneficiaries of the General Preferential Tariff are regarded as a single area. There are special rules in place for LDCs on textiles and clothing.
- In China, among other measures and simplified administrative procedures, products completely manufactured in the beneficiary country with materials originating elsewhere and regulated by the 2017 Decree that establishes the rules are considered as originating in the beneficiary country. (See also China’s Rules of Origin for LDCs)
Under regional agreements:
- Under the South Asian Free Trade Area (SAFTA), the general criteria are Change of Tariff Heading (CTH) plus 30 per cent for LDCs, vs. 40 per cent for non-LDCs.
- Under the Asia Pacific Trade Agreement (APTA), the value-addition threshold for LDCS is 35 per cent as opposed to 45 per cent for non-LDCs, and regional cumulation is allowed where the regional value addition is 50 per cent for LDCs as opposed to 60 per cent for non-LDCs.
Utilization by LDCs:
The WTO Committee on Rules of Origin regularly reviews utilization rates under preferential trade arrangements for LDCs: see WTO, Committee on Rules of Origin, Utilization Rates Under Preferential Trade Arrangements for Least Developed Countries Under the LDC Duty Scheme, Note by the Secretariat, 9 May 2019 (G/RO/W/185) and Further evidence from utilization rates, Note by the Secretariat 8 May 2019 (G/RO/W/186).
Smooth transition procedures:
The European Union’s EBA scheme provides for a transitional period of at least three years for a country that is removed by the United Nations from the LDC list, which is contained in Article 11(8) of Regulation (EC) No 732/2008.
The South Asia Free Trade Area (SAFTA) contains a provision in its Article 12 that the Maldives will be accorded LDC treatment even after its graduation from the LDC category.
Other preference schemes do not contain provisions for the smooth transition, but in practice, former LDCs remain beneficiaries for some time in most schemes.
References and resources:
United Nations, Handbook on the Least Developed Country Category: Inclusion, Graduation and Special Support Measures, Third Edition, Sales No. E.18.II.A.1
UNCTAD, Handbook on Duty-Free and Quota-Free Market Access and Rules of Origin for Least Developed Countries (United Nations publication, UNCTAD/ALDC/2017/3 and UNCTAD/ALDC/2017/4) and the series of UNCTAD Handbooks on GSP Schemes.
WTO, Market Access for Products and Services of Export Interest to Least Developed Countries. Note by the Secretariat. 24 October 2017 (WT/COMTD/LDC/W/65/Rev.1)