Once Deep and Comprehensive Free Trade Agreement (DCFTA) which is part of the Association Agreement between Georgia and EU enters into force, the absolute majority of the Georgian products (99.9%) shall enter EU market without any customs duties. The only exception is garlic, for which quantity quota will be applicable – only 220 tons of garlic will be exempt from customs duties annually.
DCFTA shall enter into force from September 2014, earlier than Association Agreement. With respect to some of the products EU entry price will be applicable, while some products will be subject to trade monitoring to ensure that only Georgian products benefit from customs exemptions.
EU entry price – means that during the export to EU, for some types of agricultural products (28 tariff lines, which is only 0.3% of the whole tariff list), the sale price will be subject to review. If it is discovered that, the price of the products manufactured in Georgia is lower than the average price set by EU, the exporter shall cover the difference between invoiced and set prices.
At the same time, Georgian products will be exempted from ad valorem duties (is calculated from the value of the products), which within regular trade regime, are added to the above mentioned 28 products. In whole, Georgian business, through export to EU, will save 5.7 million euros in customs duties on basic agricultural products and 0.5 million euros on processed agricultural products.
Trade monitoring – The products exported to EU shall satisfy product origin requirements. Such requirements relate to the quantity of materials used for the manufacturing of a product. In particular, a product will be deemed to be manufactured in Georgia, if the certain quantity of the materials used in the manufacturing of the product, as set by DCFTA, is manufactured in Georgia.
Small portion of food processing and agricultural products (3% of entire tariff list) will be subject to trade monitoring so as to determine whether quantity of the exported products in EU is comparable to the Georgian manufacturing capacity, in order to identify whether non Georgian products are benefiting from the customs duties exemptions. If the export of such products shall amount to 80% of the fixed quantity, Georgia shall explain the reason for exceeding the limit (for example increase in production or increase of harvest). In case of justification, products in excess of fixed quantity will be exempt from duties.
Source of Myth: Iverioni
2 July 2014
The fact that EU customs policies will be protectionist in future is already well indicated by the agreement. If one carefully reads the list of the products subject to exemption, one would discover some strange facts.
- Exemptions are not applicable on apple and pear, which are used for production of cider;
- Exemption applies only to the grape juice that is not fermented, with such chemical composition which is impossible to ferment properly, i.e. even in case the fermentation process is done during the transportation or on European territory it will not be tasty and unsuitable for drinking