No custom tariffs, result from Georgia-EU free trade
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Georgia and EU to cancel all custom tariffs on products result from Georgia-EU free trade that is expected to be implemented directly, the parties sign the Association Agreements including Deep and Comprehensive Free Trade Areas (AA/DCFTAs) this June.
Zero custom tariffs is one of the main benefit that Georgian exporters will reap off as soon as the DCFTA is adopted.
All customs duties on goods, with minor exceptions, is believed to boost Georgia’s trade volume with EU countries, said Mikheil Janelidze Deputy Minister at the meeting with trade sector insiders including exporters, importers, business association representative and experts to discuss the DCFTA’s new opportunities for trade and economic growth.
Ultimately, Georgia and the EU will eliminate duties on 100 % and 99.9 % (in trade value), respectively, of their imports from the other party.
The head of Georgia’s Export Development Association Gvantsa Meladze, who assists the development of entrepreneurs and exporters willing to practice highest standards of business management, believed the zero custom tariffs would further stimulate cross-border trade.
"The boost from tariff eliminations will be primarily to Georgia’s benefit. As a result we expect an increase of trade in Georgia,” she said.
Using an example of Georgian wine, Meladze calculated that to export regular Georgian wine to Poland, the exporter must pay €13.1 for every 100 litres (hectolitre), which was equivalent to €0.131 per litre and €0.09 EUR per 0.75 bottle of wine (regular bottled volume).
In 2013, more than 1640 tonnes of wine (46,468 hectolitres) was exported from Georgia to Poland. In this case, the DCFTA enforcement would see exporters save around €608,730.
Products subject to annual duty free tariff-rate quotas
For industrial goods, the DCFTA involves the immediate removal of import duties on both sides. Trade in agricultural products will be also fully and immediately liberalised, but with the exception of trade in garlic imports, for which a duty-free tariff-rate quota is established.
"Garlic is the only vegetable item included in the so-called annual duty free tariff-rate quota. This means in cases when more than 220 tonnes of garlic is exported from Georgia in a year, the exporter will have to pay custom taxes,” Mariam Gabunia, the Deputy Head of the department of Foreign Trade and International Economic Relations of the Ministry of economy and Sustainable Development.
A duty-free tariff-rate quota is established by DCFTA for garlic import. Photo by Nino Alavidze/agenda.ge
The EU will also monitor import volumes of some agricultural products.
Annual volume of fixed products of exports from Georgia
The DCFTA set the annual volume of exports from Georgia into the EU for 15 categories of products. Some products are subject to anti-circumvention mechanism including beef, pork, sheep meat, dairy products, sweet corns, cigarettes and others.
Dairy products, cereals, bran, sharps and other residues also include in the list of fixed products of exports from Georgia. Photo by Nino Alavidze/agenda.ge
But when the volume of imports of one or more categories of these products reach 70% of the volume, the EU will notify Georgia about the volume of imports of the products(s) concerned.
"In return, Georgia shall provide the EU with a sound justification that Georgia has the capacity to produce the products for export into the EU in excess of the volumes,” Gabunia said.
Product subject to entry price
However, the DCFTA has set entry prices for 28 categories of products. These are: Tomatoes, cucumbers, globe artichokes, courgettes, sweet oranges, clementines, monreales and satsumas, mandarins and wilkings, tangerines, tangelos, ortaniques, malaquinas and similar citrus hybrids, lemons, table grapes, apples, pears, apricots, sour cherries, cherries, nectarines, peaches, plums and grape juice.
28 categories of products including apples are exempt to the ‘ad valorem tax’ component of the import duty. Photo by Nino Alavidze/agenda.ge
"But these products are exempt to the ‘ad valorem tax’ component of the import duty,” Gabunia said.
The industry insiders considered that DCFTA would help the governance and policy making in Georgia more open and inclusive, by aligning it with EU standards and practice.
Tbilisi based Economic Expert Irakli Lekvinadze is among those who believe the transition period for adopting the EU standards in companies would be costly for businesses.
"There is very few companies that can fully fulfill the EU standards for free trade in EU and I am certain the business companies have to invest in order their products to be recognized by EU. But if they are producing the quality product they have to have to "pay” for it,” Lekvinadze said.
The business representative attended the discussion eager to enter the EU market and would like to receive the detail information about the procedures.
The Head of at Sheep breeders association of Georgia Beka Gonashvili desired Georgia to produce the bio sheep that would be exported to EU market.
But said that sector needed the consultation from international experts how to implement the requirements that was needed for bio sheep production.
"Georgian sheep are feed by bio product in supper but it is not possible in winter by the existing infrastructure. There is need the fund to invite the experts to give us some recommendations in order to receive the international bio certifications. This will happen in the next two-three years,” Gonashvili said.
He believed before now Georgia exported the sheep in Asia and Middle East countries where such kind of requirements were not needed.
Editor’s note: The topic discussed in this article is only the one issue outlined in the DCFTA document. On the following days, agenda.ge will offer you a summary of other topics what’s been agreed in the DCFTA, the commercial opportunities it offers, and the reforms that will bring Georgia closer to the EU.