Approaches for Trade Facilitation Initiatives in WTO and WCO

Approaches for Trade Facilitation Initiatives in WTO and WCO

February, 2005

Customs and Tariff BureauMinistry of Finance, Japan

TABLE OF CONTENTSTABLE OF CONTENTS

1. Requests, complaints on trade procedures from the private sector ・・・・・・・・・・・・ 1

2. Approaches for solution ・・・・・・・・・・・・ 2

3. Merits and demerits of each approach ・・・・・・・・・・・・ 3

4. Multi-layered approach for trade facilitation ・・・・・・・・・・・・ 4

5. Trade facilitation in WTO (Multilateral) ・・・・・・・・・・・・ 5

6. Trade facilitation in WCO (Sectoral) ・・・・・・・・・・・・ 16

1.1. Requests, complaints on trade procedures from the private sectorRequests, complaints on trade procedures from the private sectorExamples

Type of ProblemProblems related to the system Problems related to implementation

Bribery, tips （Customs）Increase of terminal handling charges by

instructions from each port authorities (Port Procedures)

Long customs clearance time (Customs)Complicated import and export procedures

(Customs)Complicated duty refund procedures, delays in

refunds (Customs)Inappropriate cargo examination at the time of

clearance (Customs, Quarantine)

Excessive documentation requirements for clearance, treatment of documents complicated (Customs)Non-acceptance of documents due to minor errors

(Overall)

Sudden revision/abolition of laws and orders other than those published in Official Notices (Overall)Sudden change in customs valuation methods

(Customs)

Complicated import and export procedures

Complicated deferred payment system for liquor tax since the provision of collateral is only admitted by each import declaring customs (Customs)

Excessive documentation requirements for import and export

Requirement of certificate of heated treatment for wooden pallets and wooden packaged cargoes (Quarantine)Excessive requirements of safety certificates

and registration certificates (Standards)Requirement for price registration documents

by exporters, making downward price adjustment difficult (Customs)

Lack of transparency and predictability

Lack of fairnessNon-transparent customs regulations

(Customs)Different system among regions (Overall)

Expensive terminal handling charges (Port Procedures)Fees and charges,

etc.

(Based on hearings from the private sector) 1

2. Approaches for Solution

Complaints from the private sector

・Agreement through bilateral consultations, negotiations (regular consultations, FTA negotiations, etc.)・Technical cooperation

・Agreement through consultations at regional level (APEC, ASEAN＋3, ASEM)・Technical cooperation

How should governments respond to and solve the

problems?

Multilateral (WTO) Bilateral (FTA, etc.) Sectoral (Customs, Port, Quarantine, etc)Regional (APEC, etc.)

・Drawing up rules in each specialized international organizations (e.g. WCO for customs, IMO for port related procedures)・Technical cooperation

・Drawing up comprehensive rule on trade facilitation in the WTO new round.・Technical cooperation

Approaches for solution

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3. Merit and Demerit of each approach

To solve the problems, multi-layered approach, meaning inter-supplementary usage of each approach is needed.

【Merits】・Possible to draw up multilateral, horizontal and binding rule in the WTO (the private sector also expects such a rule)【Demerits】・Concerns among developing countries against trade procedures becoming subject to dispute settlement due to binding rule.・Possibilities of duplication of work among other specialized international organizations such as WCO.

【Merits】・Possible to achieve solution for problems faced by private sector by raising issues of concern in bilateral consultations or FTA negotiations.【Demerits】・Difficult to achieve global solution since the number of subject countries is large.

【Merits】・For example, in the area of customs, by pursuing the early enactment of the Revised Kyoto Convention and achieving simplification and harmonization of customs procedures, part of trade procedures may be facilitated.【Demerits】・If no consistency is preserved among sectors, overall trade facilitation may not be achieved.

To supplement the demerits, special and differential treatment (S&D) and technical cooperation is necessary for developing countries. Further, the rule needs to be general to avoid duplication of work among other organizations.

Need to supplement the demerits by multilateral and sectoral approaches.

To supplement the demerits, WTO rule which stipulates horizontal general principles on trade facilitation is needed to secure consistency among sectors.

【Merits】・Possible to achieve realistic solution on shared problems in the region by private sector.【Demerits】・Need to rely on members’ voluntary measures as APEC and ASEM are non-binding in nature.

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Multilateral (WTO) Regional (APEC etc.) Bilateral (FTA, etc.) Sectoral (Customs, Port, Quarantine, etc)

4. Multi-layered Approach for Trade Facilitation

Means for Solution Ways for Solution Sectoral Solution

Multilateral

(WTO)

Draw-up general, comprehensive and

binding rule on trade facilitation (works

aimed at launching negotiation on trade

facilitation rule in the WTO New Round).

Regional

(APEC, ASEM, etc.)

Voluntary implementation of action plans

and monitoring of implementation (APEC:

Trade Facilitation Action Plan (2002);

ASEM: Trade Facilitation Action Plan

(2002))

Bilateral

(FTA, etc.)

Consultations and solution of bilateral

concerns (Japan-Singapore Economic

Partnership Agreement, January 2002)

Improvement of rules by

sector by sector, providing

assistance for capacity

building by utilizing the

expertise of each specialized

international organizations (in

the area of customs,

endorsement and ratification

of the Revised Kyoto

Convention in WCO (2001),

provision of appropriate

technical cooperation to

developing countries).

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5. Trade Facilitation in WTO (Multilateral)

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AgricultureSubstantial improvements in market access, reductionsin domestic support, reductions of export subsidies, taking intoaccount non-trade concerns (food security, environmental preservation, etc)

5-1. Timeframe for WTO New Round

WTO Rules

Market Access for Non-agricultural

ProductsReduction or elimination of tariffs and non-tariff barriers

Service Progressive liberalization of trade in services

Clarification and improvement of disciplines under Anti-Dumping Agreement,Agreement on Subsidies and Countervailing Measures and regional trade agreements

Trade and Environment

Relation between WTO rules and multilateralenvironment agreements (MEAs)

TRIPs Establishment of a multilateral system ofNotification and registration of geographical indications for wines and spirits.

Clarification and improvement of Dispute Settlement Understanding

Revised Offer Deadline (2005.5)

Dispute Settlement Understanding

2003 2004 20052002September 2003

The 5th Ministerial Conference (Cancun)

September 2003The 5th Ministerial

Conference (Cancun)July 2004

General Council

Neg

otia

tions

Agreement on the Negotiation framework

Implementation IssuesSpecial and Differential treatment (S&D), etc.

Other Works

Developing

Countries Issues

Agreement on the Negotiation framework

Preparation

No work towards negotiations during the

Doha round

Trade InvestmentTrade Competition

Government-procurement

Trade and InvestmentTrade and Competition

Trade FacilitationGovernment Procurement

Trade FacilitationAgreement on

Launching negotiationClarification and improvement of trade –related procedures, including customs procedures

Dec

embe

r 200

5 Th

e 6t

hM

inis

teria

l Con

fere

nce

(Hon

g K

ong)

5-2．Trade Facilitation in the WTO

Doha Ministerial Declaration (Para. 27)27. Recognizing the case for further expediting the movement, release and clearance

of goods, including goods in transit, and the need for enhanced technical assistance and capacity building in this area, we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of negotiations. In the period until the Fifth Session, the Council for Trade in Goods shall review and as appropriate, clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 and identify the trade facilitation needs and priorities of Members, in particular developing and least-developed countries. We commit ourselves to ensuring adequate technical assistance and support for capacity building in this area.

Negotiations: Agriculture, Non-Agricultural Market Access, Service, WTO Rules, Environment, TRIPs (GI: Geographical Indication), Dispute Settlement Understanding (DSU)

New Issues (Singapore Issues): Investment, Competition, Transparency in Government Procurement, Trade Facilitation

Doha MinisterialDeclaration

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5-3．Three Articles of GATT Relevant to Trade Facilitation

Three Articles of the GATT

GATT Article VFreedom of transit (“Transit”-Especially those procedures in transiting

countries relating to traffic of cargo from land-locked countries to

seaports.)

GATT Article VIIISimplification of fees and formalities connected with importation and

exportation.

GATT Article XPublication of trade regulations; uniform, impartial, reasonable

implementation of regulations; and institution of appeal system.

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5-4. Scope of WTO Rule on Trade Facilitation (image)

Port Procedures Quarantine Procedures

Standards and Conformance Procedures

Customs Procedures

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5-5. WTO members’ Position for Trade Facilitation

(Note) This classification is based on information before negotiation started without prejudice to members’ positions toward negotiation hereafter.

【Moderate for negotiation】

Pakistan, Turkey, Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, Sri Lanka, Bulgar, Croatia, El Salvador, Iceland, Israel, Nicaragua, Peru, Uruguay, etc.

【Moderate Group】

Claims by Colorado Group

•Simple Modality

•Binding rules

•Sufficient consideration for the implementation capacity of developing countries (longer implementation period etc.)

•Provision of necessary technical

assistance

Claims by Core Group

•Response to the concerns of developing countries before negotiations begin

•Non-binding rules

•Provision of technical assistance and financial aid (including aid for infrastructure)

•Investigation and clarification of implementation cost

【Positive for TF negotiation】

Australia, Canada, Chile, Columbia, Costa Rica, EC, Hong Kong, Hungary, Japan, Korea, Morocco, New Zealand, Norway, Paraguay, Singapore, Switzerland, The US

【Colorado Group】

【Negative for negotiation】

Brazil, Argentine, Egypt, India, Indonesia, The Philippines, Thailand, Malaysia, China, Jamaica, Kenya, Cuba, South Africa, Nigeria (Representing of African countries), Tanzania (Representing LDC countries), etc.

【Core Group】

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5-6. Possible elements in WTO Rules on Trade Facilitation

Possible elements in WTO rules

Securing Transparency (Article X)•Publication of trade regulations and notifications to the WTO•Acceptance of public comments on the modification of trade regulations•Establishment of inquiry points for trade procedures•Establishment of complaints offices

Simplification and harmonization of trade-related procedures (Articles V and VIII)

•Simplification of trade-related procedures and document requirements•Implementation of trade-related procedures based on rules devised by other international organizations•Trade facilitation through cooperation among relevant border agencies•Introduction of “one-stop-service”/”single window” approach•Simplification of procedures related to transit cargoes•Introduction of a compliance mechanism

Special and Differential Treatment for Developing Countries

Lack of transparency and predictability in trade regulations

•Unclear and frequent modifications of regulations•Uncertain and overvalued fees and charges •Change in regulations of customs duty taxation without grace period•Unpublished operational rules

Lack of uniformity in operations•Different procedures among offices/ officers•Arbitrary administration of tariff classifications,customs valuations or rules of origin

Cumbersome trade-related procedures•Complicated customs duty refund procedures and delays in refunds•Procedural delays in customs clearance•Duplicated requirements for pledging bonds

Excessive document requirements•Requirement of various certificates•Requirement of excessive certifications or registrations

Necessity of strengthening security measures

Needs for W

TO R

ules on Trade Facilitation

Examples of problems in trade procedures

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5-7. Modalities for Negotiations on Trade Facilitation as decided by General Council (Annex D)

Annex D

Modalities for Negotiations on Trade Facilitation1. Negotiations shall aim to clarify and improve relevant aspects oNegotiations shall aim to clarify and improve relevant aspects of Articles V, VIII and X of the f Articles V, VIII and X of the GATT 1994 with a view to further expediting the movement, releasGATT 1994 with a view to further expediting the movement, release and clearance of goods, including e and clearance of goods, including goods in transit.goods in transit.11 Negotiations shall also aim at enhancing technical assistance and support for capacity building in this area. The negotiations shall further aim at provisions for effective cooperation between customs or any other appropriate authorities on trade facilitation and customs compliance issues.

2. The results of the negotiations shall take fully into account the principle of special and differential treatment for developing and least-developed countries. Members recognize that this principle should extend beyond the granting of traditional transition periods for implementing commitments. In particular, the the extent and the timing of entering into commitments shall be relaextent and the timing of entering into commitments shall be related to the implementation capacities of ted to the implementation capacities of developing and leastdeveloping and least--developed Members.developed Members. It is further agreed that those Members would not be obliged to undertake investments in infrastructure projects beyond their means.

3. Least-developed country Members will only be required to undertake commitments to the extent consistent with their individual development, financial and trade needs or their administrative and institutional capabilities.

4. As an integral part of the negotiations, Members shall seek to identify their trade facilitation Members shall seek to identify their trade facilitation needs and priorities, particularly those of developing and leastneeds and priorities, particularly those of developing and least--developed countries,developed countries, and shall also address the concerns of developing and least-developed countries related to cost implications of proposed measures.

1 It is understood that this is without prejudice to the possible format of the final result of the negotiations and would allow consideration of various forms of outcomes. 12

5-7. Modalities for Negotiations on Trade Facilitation as decided by General Council (Annex D) (2)

5. It is recognized that the provision of technical assistance and support for capacity bthe provision of technical assistance and support for capacity building is vital uilding is vital for developing and leastfor developing and least--developed countries to enable them to fully participate in and bdeveloped countries to enable them to fully participate in and benefit from the enefit from the negotiationsnegotiations. Members, in particular developed countries, therefore commit themselves to adequately ensure such support and assistance during the negotiations.2

6. Support and assistance should also be provided to help developinSupport and assistance should also be provided to help developing and leastg and least--developed developed countries implement the commitments resulting from the negotiaticountries implement the commitments resulting from the negotiations, in accordance with their nature and ons, in accordance with their nature and scope.scope. In this context, it is recognized that negotiations could lead to certain commitments whose implementation would require support for infrastructure development on the part of some Members. In these limited cases, developed-country Members will make every effort to ensure support and assistance directly related to the nature and scope of the commitments in order to allow implementation. It is understood, however, that in cases where required support and assistance for such infrastructure is not forthcoming, and where a developing or least-developed Member continues to lack the necessary capacity, implementation will not be required. While every effort will be made to ensure the necessary support and assistance, it is understood that the commitments by developed countries to provide such support are not open-ended.

2 In connection with this paragraph, Members note that paragraph 38 of the Doha Ministerial Declaration addresses relevant technical assistance and capacity building concerns of Members.

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5-7. Modalities for Negotiations on Trade Facilitation as decided by General (Annex D)(3)

7. Members agree to review the effectiveness of the support and assistance provided and its ability to support the implementation of the results of the negotiations.

8. In order to make technical assistance and capacity building more effective and operational and to ensure better coherence, Members shall invite relevant international organizations, incluMembers shall invite relevant international organizations, including the IMF, ding the IMF, OECD, UNCTAD, WCO and the World Bank to undertake a collaborativOECD, UNCTAD, WCO and the World Bank to undertake a collaborative effort in this regard.e effort in this regard.

9. Due account shall be taken of the relevant work of the WCO and oDue account shall be taken of the relevant work of the WCO and other relevant international ther relevant international organizations in this area.organizations in this area.

10. Paragraphs 45-51 of the Doha Ministerial Declaration shall apply to these negotiations. At its first meeting after the July session of the General Council, the Trade Negotiations Committee shall establish a Negotiating Group on Trade Facilitation and appoint its Chair. The first meeting of the Negotiating Group shall agree on a work plan and schedule of meetings.

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55--88．．Schedule of Negotiations on Trade FacilitationSchedule of Negotiations on Trade Facilitation

•Familiarization of merits on Trade Facilitation

•Approach from private sector in developing countries to governments in developing countries

【Co-operation between private sectors of Japan and of developing countries】

August 1. 2004 Agreement to commence negotiations

–Establishment of the Negotiation Group (NG)–Appointment of Chairperson (at TNC)

December 2005 The 6th Ministerial Conference (in Hong Kong)

–Formulation of Work Plan and Schedule of Meetings

(at the first NG on Trade Facilitation)

November 2004 APEC/WTO seminar on Trade Facilitation

February 2005 APEC/WTO Trade Facilitation Round Table

【Capacity Building by Japan Government for developing countries】

Negotiations on Trade Facilitation

•Co-operation for the Formulation of Rules on Trade

Facilitation

【Co-operation between Japan Government and private sector in Japan】

October 2004

November 2004

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6．Trade Facilitation in WCO (Sectoral)

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6-1．Trade Facilitation in WCO

“International Convention on the Simplification and Harmonizationof Customs Procedures (Kyoto Convention)”

1973 Adoption of Kyoto Convention (Entry into force 1974)

Number of contracting parties: 62 and EC (as of November 2003)Japan acceded to the Convention in 1976

June 1999 Adoption of Revised Kyoto Convention

The revised Kyoto Convention must have at least 40 Contracting Parties before it can enter into force

Number of Contracting Parties:14 (as of November 2003)

(Japan acceded to it June 2001)

－Promotion of trade facilitation through simplification and harmonization of customs procedures in each country.

－Need to adapt to changing environment surrounding Customs (information technology (IT), increase in volume of trade)

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6-2．Revised Kyoto Convention

ModernizationTo introduce modernized method such as risk management, information technology, management based on audit.

• targeting objects for inspection based on appropriate risk management• electronic submission of required documents (ex. Nippon Automated Customs Clearance System in Japan)• Utilization of Post clearance audit

TransparencyTo improve the transparency by clarifying necessary requirements in Customs procedure in national law.

AccelerationTo grant accelerated procedures to Authorized Traders.

HarmonizationTo make it compulsory to implement international standards of Customs procedure.

〔Landmark〕 〔International standards（Best practice）〕

・Separation of Import and Duty payment declarations （ex. Simplified Declaration Procedure in Japan）・ lump submission of declaration within a certain period together at the same time （ ex. Simplified Declaration Procedure in Japan）

・swift announcement to public when related regulations are modified （ex. Announcements in official gazettes in Japan）・Advance Classification Ruling System

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6-3. Establishing High Level Strategic Group

9/11 20019/11 2001

WCO

2002 WCO Council Sessions“Resolution of the

Customs Co-operation Council on Security

and Facilitation of the International Trade

Supply Chain”

Rules on International Trade

• Revised Kyoto Convention• HS Convention• Customs Valuation• Rules of Origin

etc…

ＷＴＯDeveloping

trade facilitation rules

Kananaskis Summit“Cooperative G8

Action on Transport Security “

Security• Compliance and Enforcement

Task Force*50 Member Administrations

In cooperation with*IMO，*INTERPOL*ICC

etc…

2003 WCOCouncil Sessions

• Customs Guidelines on Advance Cargo Information• Arrangements between Members and Private Industry• International Convention on Mutual Administrative Assistance in Customs Matters • List of Essential Data Elements for Identification of High Risk Consignments• Customs Capacity Building Strategy

“INTERNATIONAL CONVENTION ON THE SIMPLIFICATION AND HARMONIZATION OF CUSTOMS PROCEDURES”*Entered into force in 1976(Japan ratified in 1976)*Revised Convention adopted in 1999（not enacted yet）

“Convention on the Harmonized Commodity Description and Coding System”

Harmonized System” or simply “HS”, is a multipurpose international product nomenclature developed by the WCO It comprises about 5,000 commodity groups, each identified by a six digit code.*Entered into force in 1988 (Japan ratified in 1987)*Amendment to the Convention entered into force in 2002

2004 WCOCouncil Sessions

Adopted new Resolution

High Level Strategic GroupPrepares a WCO framework for the security and facilitation of global trade within 12 months

*Consists of Limited number of Director Generals from Member administrations*Consulting with related international organizations and business sector.

6-4．Framework of Standards to Secure and Facilitate Global Trade

1. Background and ObjectivesIn accordance with the Resolution of the Customs Co-operation Council on Global Security and Facilitation Measures Concerning the International Trade Supply Chain adopted at the Council Sessions in June 2004, the High-Level Strategic Group was established to develop the WCO Framework of Standards to Secure and Facilitate Global Trade within 12 months, taking over the duties of the task force.

June 2004: First meetingNovember 2004: Second meetingFramework was endorsed by Policy Commission (December 2004 in Jordan)

2. Framework of Standards to Secure and Facilitate Global Trade1. Foreword

Four core elements*, importance of capacity building, phased implementation in accordance with each administration’s capacity, and the necessary legislative authority, etc.

Four core elements:① To harmonize the advanced electronic manifest information requirements② To employ a consistent risk management approach③ To perform an outbound inspection of high-risk containers using non-intrusive detection equipment④ To define benefits that Customs will provide to businesses

2. BenefitsAdoption of the Framework of Standards will bring benefits for nations/governments, Customs administrations, and the business community.

3. WCO Standards to Secure and Facilitate Global Trade① Customs-to-Customs (11 items)② Customs-to-Business (6 items)

3. ScheduleTo continue working by completing annexes which includes technical specifications and developing arrangements for phased and practical implementation of the Framework for Council Sessions in June 2005. (next meeting to be held late April 2005)

Members of HLSG: Chair for the Council (South Africa) and 2 members from each region, including the vice chair.(China, Japan, Brazil, U.S., Jordan, Algeria, Guinea, Senegal, Kenya, South Africa, Russia, and EU presidency holder)

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