Approaches for Trade Facilitation Initiatives in in WTO and WCO

Approaches Approaches for for Trade Trade Facilitation Facilitation Initiatives Initiatives in in WTO WTO and and WCO WCO February, 2005 Customs and ...
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Approaches Approaches for for Trade Trade Facilitation Facilitation Initiatives Initiatives in in WTO WTO and and WCO WCO

February, 2005 Customs and Tariff Bureau Ministry of Finance, Japan

TABLE 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. Requests, complaints on trade procedures from the private sector Type of Problem

Fees and charges, etc.

Complicated import and export procedures

Excessive documentation requirements for import and export

Examples Problems related to the system

tips (Customs) zIncrease of terminal handling charges by instructions from each port authorities (Port Procedures)

zExpensive

terminal handling charges (Port Procedures)

zBribery,

zComplicated

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

zLong

zRequirement

zExcessive

of certificate of heated treatment for wooden pallets and wooden packaged cargoes (Quarantine) zExcessive requirements of safety certificates and registration certificates (Standards) zRequirement for price registration documents by exporters, making downward price adjustment difficult (Customs)

customs clearance time (Customs) zComplicated import and export procedures (Customs) zComplicated duty refund procedures, delays in refunds (Customs) zInappropriate cargo examination at the time of clearance (Customs, Quarantine) documentation requirements for clearance, treatment of documents complicated (Customs) zNon-acceptance of documents due to minor errors (Overall)

zSudden

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

Lack of transparency and predictability zNon-transparent

Lack of fairness

Problems related to implementation

customs regulations

(Customs) zDifferent system among regions (Overall)

(Based on hearings from the private sector)

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2. Approaches for Solution Complaints from the private sector

Approaches for solution

How should governments respond to and solve the problems?

Multilateral (WTO)

Regional (APEC, etc.)

Bilateral (FTA, etc.)

Sectoral (Customs, Port, Quarantine, etc)

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

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

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

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

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3. Merit and Demerit of each approach Multilateral (WTO) 【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.

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.

Regional (APEC etc.)

Bilateral (FTA, etc.)

Sectoral (Customs, Port, Quarantine, etc)

【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 nonbinding in nature.

【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.

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.

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

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4. Multi-layered Approach for Trade Facilitation

Means for Solution

Ways for Solution

Sectoral Solution

Draw-up general, comprehensive and Multilateral

binding rule on trade facilitation (works

(WTO)

aimed at launching negotiation on trade facilitation rule in the WTO New Round).

Improvement of rules by sector by sector, providing assistance for capacity building by utilizing the

Voluntary implementation of action plans Regional

and monitoring of implementation (APEC: Trade Facilitation Action Plan (2002);

(APEC, ASEM, etc.)

ASEM: Trade Facilitation Action Plan (2002))

expertise of each specialized international organizations (in the area of customs, endorsement and ratification of the Revised Kyoto Convention in WCO (2001),

Bilateral (FTA, etc.)

Consultations and solution of bilateral

provision of appropriate

concerns (Japan-Singapore Economic

technical cooperation to

Partnership Agreement, January 2002)

developing countries).

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5. Trade Facilitation in WTO (Multilateral)

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5-1. Timeframe for WTO New Round 2002

Agriculture

Market Access for Non-agricultural Products

Negotiations

Service

2004

Substantial improvements in market access, reductions in domestic support, reductions of export subsidies, taking into account non-trade concerns (food security, environmental preservation, etc)

July 2004 General Council

Agreement on the Negotiation framework

Reduction or elimination of tariffs and non-tariff barriers

Revised Offer Deadline (2005.5)

Progressive liberalization of trade in services

Trade and Environment

Relation between WTO rules and multilateral environment agreements (MEAs) Establishment of a multilateral system of Notification and registration of geographical indications for wines and spirits.

Clarification and improvement of Dispute Settlement Understanding

Trade and Investment Trade and Competition Trade Facilitation Government Procurement

Developing Countries Issues

2005

Agreement on the Negotiation framework

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

Dispute Settlement Understanding

Other Works

September 2003 The 5th Ministerial Conference (Cancun)

WTO Rules

TRIPs

Prep arati on

2003

Trade Facilitation

Agreement on Launching negotiation

Trade Investment Trade Competition Governmentprocurement

No work towards negotiations during the Doha round

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

Clarification and improvement of trade –related procedures, including customs procedures

December 2005 The 6th Ministerial Conference (Hong Kong)

September 2003 The 5th Ministerial Conference (Cancun)

5-2.Trade Facilitation in the WTO Negotiations: Agriculture, Non-Agricultural Market Access, Service, WTO Rules, Environment, TRIPs (GI: Geographical Indication), Dispute Settlement Understanding (DSU)

Doha Ministerial Declaration

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

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. 7

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

Three Articles of the GATT GATT Article V Freedom of transit (“Transit”-Especially those procedures in transiting countries relating to traffic of cargo from land-locked countries to seaports.) GATT Article VIII Simplification of fees and formalities connected with importation and exportation. GATT Article X Publication 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 【Colorado Group】

【Moderate Group】

【Core Group】

【Positive for TF negotiation】

【Moderate for negotiation】

【Negative for negotiation】

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

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

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.

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

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

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

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 WTO Rules on Trade Facilitation

Examples of problems in trade procedures

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 traderelated 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

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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 Facilitation 1. Negotiations shall aim to clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit.1 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 extent and the timing of entering into commitments shall be related to the implementation capacities of developing and least-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 needs and priorities, particularly those of developing and least-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.

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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 building is vital for developing and least-developed countries to enable them to fully participate in and benefit from the negotiations. negotiations 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 developing and least-developed countries implement the commitments resulting from the negotiations, in accordance with their nature and 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.

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. 2

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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, including the IMF, OECD, UNCTAD, WCO and the World Bank to undertake a collaborative effort in this regard.

9. Due account shall be taken of the relevant work of the WCO and other relevant international 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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5-8.Schedule of Negotiations on Trade Facilitation August 1. 2004 Agreement to commence negotiations October 2004

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

November 2004 –Formulation of Work Plan and Schedule of Meetings (at the first NG on Trade Facilitation)

Negotiations on Trade Facilitation 【Co-operation between Japan Government and private sector in Japan】

•Co-operation for the Formulation of Rules on Trade Facilitation

【Capacity Building by Japan Government for developing countries】

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

•Familiarization of merits on Trade Facilitation

November 2004 APEC/WTO seminar on Trade Facilitation February 2005 APEC/WTO Trade Facilitation Round Table

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

December 2005 The 6th Ministerial Conference (in Hong Kong) 15

6.Trade Facilitation in WCO (Sectoral)

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6-1.Trade Facilitation in WCO

“International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention)” −Promotion of trade facilitation through simplification and harmonization of customs procedures in each country. z

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

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

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)

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6-2.Revised Kyoto Convention 〔Landmark〕 Modernization To introduce modernized method such as risk management, information technology, management based on audit.

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

Acceleration To grant accelerated procedures to Authorized Traders.

〔International standards(Best practice)〕 • 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

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

・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)

Harmonization To make it compulsory to implement international standards of Customs procedure.

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6-3. Establishing High Level Strategic Group WTO

9/11 2001

Developing trade facilitation rules

WCO

Kananaskis Summit “Cooperative G8 Action on Transport Security “

Security • Compliance and Enforcement

Rules on International Trade • Revised Kyoto Convention • HS Convention • Customs Valuation

etc…

Council Sessions

Task Force *50 Member Administrations In cooperation with *IMO, *INTERPOL *ICC etc…

*Entered into force in 1976 (Japan ratified in 1976) *Revised Convention adopted in 1999(not enacted yet)

• Rules of Origin

2002 WCO “Resolution of the Customs Co-operation Council on Security and Facilitation of the International Trade Supply Chain”

“INTERNATIONAL CONVENTION ON THE SIMPLIFICATION AND HARMONIZATION OF CUSTOMS PROCEDURES”

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

2003 WCO Council 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

“Convention on the Harmonized Commodity Description and Coding System”

2004 WCO Council Sessions Adopted new Resolution

High Level Strategic Group Prepares 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 Objectives ¾

In 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. ¾ ¾ ¾

2.

June 2004: First meeting November 2004: Second meeting Framework was endorsed by Policy Commission (December 2004 in Jordan)

Framework of Standards to Secure and Facilitate Global Trade 1.

Foreword ¾

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 requirements ② To employ a consistent risk management approach ③ To perform an outbound inspection of high-risk containers using non-intrusive detection equipment ④ To define benefits that Customs will provide to businesses

2.

Benefits ¾

3.

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

WCO Standards to Secure and Facilitate Global Trade ① Customs-to-Customs (11 items) ② Customs-to-Business (6 items)

3.

Schedule ¾

To 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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