An estimated £92 million, or about ₱7.7 billion, worth of eligible exports to the United Kingdom (UK) were unable to benefit from lower tariffs last year, emphasizing the need for greater utilization of London’s preferential trading scheme.

In a statement by the Philippine Exporters Confederation Inc. (Philexport), UK trade adviser Ellie Parker said around £299 million, or 16 percent of Philippine goods that entered the UK last year, were eligible under the Developing Countries Trading Scheme (DCTS).

However, Parker said only £207 million in eligible exports used the scheme, leaving £92 million without the available preferential treatment.

She said this highlights an opportunity for local exporters to make greater use of the DCTS, as demand for Philippine products remains strong in the UK market.

The DCTS is a preferential trading scheme by the UK that cuts tariffs, removes conditions, and simplifies trading rules for developing countries, ranging from least-developed to lower-middle-income countries (LMICs).

Parker said exporters and traders must comply with the scheme’s rules of origin and demonstrate that their goods meet the required processing rules to qualify for the DCTS.

She noted that the UK recently introduced improved rules of origin for garments and expanded regional cumulation under the DCTS earlier this year, which are expected to benefit exporters from the Philippines.

In particular, the UK liberalized product-specific rules for garments by allowing greater flexibility in sourcing inputs from other countries for further manufacture, provided that the required processing is carried out locally.

Likewise, the UK also improved its rules on cumulation by merging and expanding existing regional cumulation groups in Asia to create a single group of 18 countries, including the Philippines.

She said this allows exporters to source materials from designated countries within a region, which may be treated as originating inputs when determining whether a finished product qualifies for preferential tariffs.

“Philippine exporters now have greater flexibility in sourcing inputs regionally,” Parker said. “The recent DCTS reforms have made it easier than ever for Filipino firms to qualify for that zero percent tariff duty.”

At present, the Philippines remains eligible for the DCTS even though it was recently designated by the World Bank as an upper-middle-income country (UMIC).

Under DCTS rules, a country that retains UMIC status for three consecutive years would be notified of the need to transition out of the DCTS. This would have an adjustment period of approximately 18 months, during which the country can continue to access tariff reductions.

After this transition period, the country will no longer be able to access the preferences and will exit the DCTS.

Should a country move from UMIC back to LMIC status, it will be re-admitted to the DCTS, according to the UK’s Department for Business and Trade.