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The European Commission has approved a regional accumulation between Sri Lanka and Indonesia, focusing on selected textile and apparel projects. This key decision stems from the joint efforts of both countries and now allows them to export these goods to all 27 EU member States under the Generalised System of Preferences (GSP). This strategic initiative is expected to significantly boost Sri Lanka's textile and apparel exports to the lucrative EU market.

Following a meticulous evaluation process, the European Commission has determined that the prerequisites for the establishment of accumulations between these two different regional blocs have been satisfactorily met. Effective August 8, 2024, Sri Lanka is authorized to apply origin accumulation to certain materials under HS Chapters 51 to 55, 58 and 60 from Indonesia. This arrangement enables Sri Lanka to manufacture textiles under Chapters 61 to 63 of HS using these materials, subject to the regional cumulative guidelines, provided that both countries remain within the framework of the GSP.

This decision marks an important milestone for Sri Lanka and Indonesia in promoting deeper economic cooperation, enhancing the competitiveness of both countries in the global textile market.

By facilitating easier access to raw materials and improving supply chain efficiency, this initiative is not only expected to expand trade opportunities, but also underscores the EU's commitment to promoting sustainable development and economic integration in its partner countries at all costs.

"This decision not only strengthens trade relations with the EU, but also underlines the commitment of both countries to adhere to strict rules of origin and administrative cooperation," Sri Lanka's Foreign Ministry said in a press release.

Dhammika Fernando, President of the Free Trade Zone Manufacturers Association, added that Indonesia is the main source market for Sri Lanka's imports of fabrics used in the production of garments for the EU.

While Sri Lanka is already negotiating a free trade agreement with Indonesia, this new regional cumulative agreement concretises the fruits of trade with the EU under the GSP Plus Scheme.

Accumulation rule

The international interpretation of the accumulation rule allows countries to use components produced in specific third countries without complying with the usual requirements of origin, provided that such components have been further processed in the preferential exporting country. Allowing a preferential trade Arrangement member to process a product using materials of non-origin from another preferential trade Arrangement member does not forfeit the preferential treatment of the final product. Domestic and foreign definitions, although phrased differently, contain the following basic elements:

(1) The preferential exporting country uses parts of non-exporting country origin;

(2) such parts have been further processed in the country of export;

(3) The products thus produced do not forfeit preferential treatment under the preferential agreement