On 19th June 2023, the UK's landmark Developing Countries Trading Scheme (DCTS) came into effect. This post-Brexit initiative aims to simplify trading rules and reduce tariffs on products imported from 65 developing countries, offering strong benefits to businesses from both the UK and the participating nations. With the potential to save UK businesses over £770 million annually while simultaneously boosting prosperity in developing countries, the DCTS is being heralded as something of a game-changer in international trade.
The DCTS covers 65 countries, representing over 3.3 billion people, with a particular focus on African nations. In order to qualify for the scheme, the nation must be one of the following:
- Least developed countries (LDCs) as defined by the United Nations
- Low income and lower middle-income countries as defined by the World Bank
The scheme will provide these qualifying countries with a generous trade agreement by removing or reducing tariffs and streamlining their trading regulations with the UK. The DCTS offers an opportunity for developing countries to diversify their exports, enhance economic growth, and hopefully decrease their reliance on foreign aid.
“The UK’s new trading scheme for 65 developing countries, DCTS, shows how we can use trade to deliver development.
It will benefit traders around the world, including small and women-owned businesses which we are supporting through UK Trade Partnership programme.
- - - Foreign, Commonwealth and Development Office Minister for Africa, Andrew Mitchell
A key advantage of the DCTS is the significant reduction in import costs for UK businesses, achieved through the removal or reduction of tariffs on over £9 billion worth of imports. UK consumers will feel the ripple-effect benefits of this scheme, as it’ll increase their product choices and has the potential to lower prices on various items, such as clothing, food, and children's toys. Additionally, the DCTS opens doors for UK businesses to engage in international trade more easily with these 65 nations, which will facilitate not just individual business growth but also for the UK economy as a whole.
“This scheme is a brilliant example of the UK taking advantage of its status as an independent trading nation and I am excited to see it implemented today.
It will create opportunities for businesses around the world, supporting livelihoods, creating jobs and diversifying local and international supply chains. It will also benefit UK businesses and consumers by lowering import costs on a whole range of products.”
- - - Minister for International Trade, Nigel Huddleston
Minister Huddleston unveiled the scheme during a visit to Ethiopia, emphasizing the UK's commitment to becoming an independent trading nation. Ethiopia already enjoys a trading relationship worth £838 million with the UK and pays zero tariffs on 100% of goods exported into the UK. However under the scheme, they will now have even greater opportunities to expand its exporting economy, as Ethiopia (along with 46 other countries) will be able to produce goods using components from multiple countries.
“The revised rules of origin under the Developing Country Trading Scheme will be hugely beneficial for Least Developed Countries and companies who are sourcing products from them. Under the previous regime many articles were precluded from benefitting from 0% duties due to the complexity of the rules of origin.
The further liberalisation and rule options that have been introduced under the DCTS are incredibly helpful and will support business and economic growth in some of the poorest countries. A great example of this is camping equipment, such as tents, from developing countries in Southeast Asia.”
- - - Head of International Logistics & Trade Compliance, Halfords, Ben Price
The DCTS demonstrates how trade can be leveraged to drive development. By providing trading opportunities to small and women-owned businesses, the scheme supports livelihoods, creates jobs, and promotes the diversification of local and international supply chains. The UK Trade Partnership program further aids these businesses in accessing international markets and reaping the benefits of the DCTS.
Key Takeaways
- DCTS covers 37 countries in Africa, 26 in Asia/Oceania/Middle East and 2 in the Americas, representing varied and exciting trade opportunities around the world.
- The scheme was announced last year, and legislation has since been finalised to bring it into force as of 19th June 2023.
- The UK imported an average of £22.8 billion worth of goods from DCTS countries over the last three years, and the scheme is promising to offer savings of up to £770 million per year.
- When considered alongside the UK’s network of 8 Economic Partnership Agreements, the DCTS now means over 90 developing countries benefit from duty-free or nearly duty-free trade.
- The customs processes themselves should not have any changes to the current preferential trading arrangements, however new tariffs and rules of origin for Least Developed Countries will apply.
- For more information about the DCTS, visit the official government website, and watch the video explainer on YouTube
- You can review the full legislation which was published on 22 May 2023 here:
Interested in learning even more? Why not check out The Developing Countries Trading Scheme Visualisation Tool for a dynamic, interactive look at this new agreement.
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