I. Introduction

1. So far largely unencumbered by the polarisation that characterises much of the Doha process, negotiations on Trade Facilitation (TF) are moving steadily but quietly forward. While no comprehensive draft legal text exists formally, the elements for such a document are becoming increasingly clear with possible legal drafting on specifics being pasted in and narrowed down progressively. On 10 March 2008, the WTO secretariat released a further revision of its compilation of elements for an agreement: “WTO Negotiations on Trade Facilitation – Compilation of Members’ Textual Proposals” [note 1] (hereafter Secretariat Compilation). With this document, for the first time, it is possible for members to assess the potential benefits from a TF Agreement in the WTO. The Secretariat Compilation the is the 14th revision of the original “W/43” document issued by the WTO Secretariat in June 2005, compiling the proposals made by WTO members by thematic groups depending on the measures in the proposals. By the time of the Hong Kong Ministerial Conference, the Report of the Negotiating Group on Trade Facilitation to the Trade Negotiations Committee (TNC) (contained in Annex E of the Hong Kong Ministerial Declaration) recommended intensifying the negotiations on the basis of the proposals made by members reflected in revision 4 of “W/43”.

The following note seeks to condense and simplify the 56 pages of legal drafting. All the texts are drawn from proposals submitted – and often revised following consultations with the broader membership – by individual WTO members and groups [note 2].

2. Much of the new material concerns proposed measures related to the three GATT articles underlying this negotiation, namely: Article X (publication and administration of trade regulations), Article VIII (fees and formalities) and Article V (freedom of transit). Other important elements include extensive new provisions on the clearance and release of shipments and the use of risk management techniques in shipment inspections. From Page 37 of the Secretariat Compilation, the horizontal elements that define the broad mechanics of an agreement – particularly, special and differential treatment (S&D), technical assistance (TA) and capacity building (CB) and implementation matters – are contained in several proposals that were tabled some time ago and among which the Chairman/Secretariat have not tried to make choices.

3. This does not mean that discussion has not moved forward on these central issues; open-ended consultations, led by Argentina, are regularly providing an input to the Chairman of the negotiating group (Ambassador Eduardo Sperisen, Guatemala). However, precision on the overall legal framework for the agreement will undoubtedly be finalised late in the process. What can be said for certain, however, is that the manner in which a WTO agreement on trade facilitation would operate would be unique and would tie enforceable commitments to successfully-delivered TA and CB support in a manner never seen before in the institution.

4. It is important that WTO members understand the current state of thinking, including where it is not fully reflected in the document. Thus, this note starts with the final section of the Secretariat Compilation – the operational and legal framework – and then moves on to the specific, practical measures that would be covered by a TF agreement.

II. How would a TF Agreement Work?

5. The paper contains two comprehensive proposals covering S&D, TA, CB, capacity assessment and other implementation issues. One [note 3] is from a large group of developing, developed and transition-economy members that includes the EU and China (the US has put its name to none of the proposals, though it has relatively minor issues on the general approach). The second [note 4] was tabled by the “Core Group” of (over 20) developing members and is to be read with a further proposal [note 5] from the Core Group together with the ACP, African and LDC groups.

6. The key point to keep in mind is that this agreement would be like no other in the WTO. Not only is it not one-size-fits-all, but it allows for a menu of commitments from which each individual member can choose depending on its situation, capacity and policy objectives. It provides a staged approach to identifying and implementing commitments. Further, it will probably allow for commitments to be enforceable progressively.

7. Each proposal contains a series of transitional provisions. These have been subjected to further discussion and much detail remains undecided. Broadly, however, it is possible to set out the essential components of a TF framework as follows:

A. Signature of the TF Agreement / Doha Single Undertaking

As part of the Single Undertaking, transition provisions will become applicable after signature by WTO members of the complete Doha package. In the event of Doha failing, there will likely be members pressing for the TF agreement to be implemented, perhaps provisionally, nonetheless.

B. Capacity self-assessment

Capacity/needs assessment is already taking place for some members which have sought it. However, after signature, all developing, least-developed and at least some transition economies will undertake assessments. These are intended to identify existing local capacity and gaps therein and, from that, the TA/CB requirements necessary to take on those WTO TF commitments the member considers appropriate. The time necessary to meet those commitments would also be part of the assessments, which will require TA backing from both international organisations and bilateral donors.

C. Notification

i. On the basis of the assessments, members would notify the WTO of their intentions with respect to taking on TF obligations. Three types of notification might be envisaged:

• Commitments that can be taken on immediately or the practical aspects of which are already in place and operating.
• Commitments that can be implemented over a specified period.
• Commitments that need both additional time and TA/CB support.

ii. The notifications might be the subject of some multilateral “dialogue”. Recent discussions suggest that the notifications would likely become scheduled commitments for the members concerned, bearing in mind that they would often be dependent on the delivery of TA/CB support.

iii. Some larger developing countries have pushed for a fourth type of notification, namely commitments made on a “best endeavours”-only basis. It seems unlikely that such “commitments” would be accepted, and the idea might be self-defeating if donors were put off from backing them with TA/CB support.

D. Entry into force of the TF Agreement

Certain obligations would be applicable for all members from the date on which the agreement/Doha Single Undertaking enters into force. Developed countries would only take on all obligations. Obligations that are covered by self-assessment notifications would be applicable as scheduled. Other aspects of the TF disciplines may enter into force progressively.

E. Formulation and notification of capacity-building plans

Clearly, the reformulation of needs-assessment notifications into full-scale capacity-building plans, with donor acceptance to provide the necessary funding, is fundamental to the process. Such plans would be the basis for dialogue between individual members, donors and international agencies. There is currently no intention to put in place a centralised process for identifying needs and allocating support; this is for the individual players themselves to agree. Once settled, however, plans, donors and timeframes would be notified to an oversight body [note 6] and would be available to the membership.

F. Verification of capacity acquisition

Some review mechanism will be put in place to consider whether or not the agreed support has been delivered and the necessary capacity acquired by the time the relevant implementation period has ended. However, this element of the package is still controversial. For instance, what happens if a member can find no donor to back its plans? Would that member be absolved of implementing commitments? A second difference among members is what to do if support is provided but does not lead to the necessary acquisition of capacity. Further, who decides on the extent of capacity acquired and on whether the appropriate support was provided? There may be need for some form of peer review procedure or additional oversight.

G. Dispute settlement

There appears to be no opposition to making obligations under the TF agreement – including those subject to S&D and extended implementation periods – enforceable under the DSU. There might, however, need to be small procedural adjustments; for instance, extended consultation periods and an additional emphasis on mediation.

III. Publication and Administration of Trade Regulations

8. Section III, Textual Proposals Compiled, A to E of the paper (starting page 7), deals with proposals that fit broadly within the scope of Article X of the GATT. A rough comparison of the original article and the new proposals suggests that much of what is on the table now was on the table in 1947. Nevertheless, the objective is to make the original provisions more operationally effective while adding modern communications techniques, notably the Internet.

9. Sub-section A deals with publication. Both Turkey and the US have produced texts relating to publication on national websites (Section III.A.2). The Turkish proposal [note 7] spells out S&D terms; the proposal by the US [note 8] does not. However, it is assumed that, as with other TF obligations, Internet provisions would become mandatory only when individual members secure the capacity to implement them. In the case of potentially large and complex websites, least-developed countries and some other members will be conscious of the need not merely to set them up but to maintain them adequately.

10. The question of enquiry points is dealt with through three texts (Section III.A.3). Of course, most members already have enquiry points devoted to TBT and SPS requirements, if not broader trade regulations. Nobody has fully assessed how much would need to be done to bring all members into line with the proposed TF provisions. Many members already run sophisticated enquiry point facilities; others are in the process of putting them in place. For small economies, the requirements could be a strain. Thus, a number of island members propose [note 9] that for such economies that are also part of customs unions or regional economic arrangements, a regional enquiry point should suffice.

11. Provisions on prior publication and consultation relating to new laws and regulations are covered in Section III.B. These are fuzzy requirements; for instance there is reference to a “reasonable period of time” between publication and entry into force and to “appropriate opportunities” for comment by interested parties. However, it probably should be recognised that most members have quite different administrative and legal regimes which might make uniform conditions difficult to agree.

12. Section III.C covers some important new ground relating to “advance rulings”. Such rulings are made by authorities with respect to the manner in which the member concerned intends to treat specific goods as imports. This normally means tariff classification, but there is a view that TF provisions might apply also to customs valuation criteria, duty drawback etc. and the application of quotas. A text [note 10] tabled by Australia, Canada, Turkey and the US sets out requirements for the issuance of advance rulings, their duration, review and other matters.

13. The right of appeal (GATT Article X.3) is elaborated in Section III.D, largely through a text [note 11] from Japan and Mongolia. This sets out the right of persons subject to decisions by border agencies to both administrative and judicial appeal. India’s text referring to appeals within customs unions is directed at the European Union (EU). New Delhi wants the EU’s common institutions to rule on inspection decisions made by authorities in individual member states. The expectation is that India and the EU will pursue this – and other related issues reflected in further Indian texts on customs unions – on a bilateral basis. Thus, the measure is unlikely to figure in the final TF text.

14. Section III.E contains further texts [note 12] tabled by India covering import alerts, detention of goods and test procedures. These proposals appear to overlap with the SPS and TBT agreements and may be more susceptible to consideration in the relevant bodies. Again, they also focus on practices in customs unions (EU) which are likely to be handled at the bilateral level.

IV. Fees and Formalities

15. Sections III. F-H broadly correspond to provisions under GATT Article VIII but introduce more-efficient, modern concepts. The text [note 13] tabled by the EU, Korea and Switzerland (Section III.F) spells out the terms of GATT Article VIII.1(a) and requires not only that fees and charges do not exceed the approximate cost of the service provided but that they are not calculated on an ad valorem basis and that they do not include fees for required consular services. (A later text (Section III.H) tabled by the US and Uganda would prohibit consular transactions altogether. The proposal also calls for adequate publication and periodic reviews of fees and charges.

16. Sections III.G(a)-(b) cover, in general terms, the simplification of formalities and documentation while Section III.G(c) provides for the use, by members, of international standards – including those of the World Customs Organization, the UN Centre for Trade Facilitation and Electronic Business, the International Maritime Organization and the International Civil Aviation Organization – in laying down import/export and transit formalities.

17. Limits on requirements for supporting documentation are set out in Section III.G(d) through a text [note 14] from Hong Kong, China, Korea and Switzerland. This also suggests that where declarations and supporting documents are lodged electronically, and supported by electronic signatures, there should be no additional requests for originals.

18. The idea of a “single window” administration of import/export transactions is probably one of the most important aspects of a WTO TF agreement for traders. Many countries have put in place such facilities or are in the process of doing so. Clearly, a provision in a WTO agreement would bring with it the scope for extensive TA/CB support for developing members wishing to go further. Essentially a single window allows importers and exporters to lodge standard documentation and data as a one-time submission at a single administrative office in order to fulfil all regulatory requirements on goods trade at the border. Where possible, the single window should operate electronically and use international standards. The text [note 15] is contained in Section III.G(e).

19. Among the more difficult texts for some developing countries are those dealing with pre-shipment inspection (Section III.G(f)) and customs brokers (Section III.G(g)). A proposal [note 16] from the EU and Chinese Taipei would eliminate PSI requirements immediately for developed members and over specified periods for developing countries and LDCs. The text on customs brokers would not eliminate their activities – some firms have their own in-house brokers – but would remove any mandatory requirement on traders to make use of them. The text provided by the EU, Mongolia, Chinese Taipei and Switzerland would require developing countries and LDCs to phase out customs broker requirements in a specified period. It would also provide that rules on the future licensing of brokers be transparent, non-discriminatory and proportionate.

20. One common complaint of traders is that relevant authorities within countries often do not cooperate and coordinate with each other; even less is it the case among authorities from neighbouring countries. Thus, a text [note 17] from Canada and Norway (Section III.I) calls for such cooperation and coordination, including the alignment of working days and hours at specific border crossings.

V. Release and Clearance of Goods

21. The modern need for rapid customs clearance and release of goods at the border was barely touched on in the GATT. Now it is one of the biggest demands of investors and traders, especially those engaged in “just-in-time” manufacturing procurement and international express services. Essentially, the competitive edge of many exporters is dependent on moving merchandise quickly to and from markets. Many developing countries have done much to relieve bottlenecks, but others have land border, port and airport clearance times that do little to support the export efforts of their own companies. Thus, the provisions on expedited and simplified release and clearance of goods, set out in Section III.J, are some of the most important in the paper.

22. Pre-arrival processing is a principal demand of several members. A text [note 18] from Hong Kong, China, Japan, Korea, Mongolia and Switzerland would require members to put in place procedures for the acceptance and consideration of import documentation prior to the arrival of a shipment. If the documentation proves satisfactory, then the goods would be cleared immediately on arrival. Similar provisions are contained in the following text [note 19] from the US which also calls for submission of a single document covering all goods in a shipment and the exoneration from customs duties and taxes of expedited shipments valued under a specified amount (an issue for international express carriers).

23. The US proposal opens the way for “expedited shipment providers” (as defined) to themselves finance the provision of the necessary infrastructure for expedited shipment and to assess appropriate fees for the special customs service provided. Both proposals covering pre-arrival processing leave members free to screen or examine shipments where necessary and use risk management techniques in identifying those shipments to be inspected.

24. The US concept of “expedited shipment providers” is reflected in the notion of “authorised traders” in the text [note 20] of the EU, Chinese Taipei and Switzerland which follows (Section III.J(c)). Here the proponents also suggest reliability criteria for identifying authorised traders. The criteria should not be designed to discriminate in an arbitrary or unjustified manner and all companies – including small and medium-sized enterprises - would have the right to apply for such status. Once identified, authorised traders would have the right to more rapid release and clearance, less physical inspections and facilitated documentation requirements.

25. The US, in its proposal above, and two other related texts recognise the need for border authorities to focus on high-risk goods. The proposal [note 21] from Chinese Taipei, Korea and Switzerland provides for the use of risk management techniques to identify which shipments should be inspected while taking account of the record of “compliant traders” and making available expedited procedures to them as appropriate. The text [note 22] from China allows for risk management techniques and expedited treatment for compliant traders and low-risk goods. It does not, however, set out a basis on which criteria for identifying such traders should be established.

26. Another approach to the use of risk management and compliant/authorised traders is contained in a text [note 23] from China, Indonesia and Korea (Section III.J(d)). This envisages the use of “post-clearance audits”. Such audits – both regular and targeted – would review all trade-related information maintained by enterprises subject to risk management. The outcome of such audits would be fed back to customs officers who would presumably adjust clearance treatment accordingly.

27. Section III.J(e) provides scope for the separation of the release of goods at ports and frontiers from clearance procedures. A text [note 24] from Canada and Switzerland would open the way for goods to be released even if clearance has not been completed on arrival. However, such release would require some form of guarantee from the importer, perhaps a deposit.

28. In Section III.J(f), a text [note 25] tabled by Korea and Japan would require members to publish average release times and provide individual traders with the reasons for significant delays on specific shipments.

VI. Goods in Transit

29. Non-discriminatory, duty-free, freedom of transit via the most convenient routes is fundamental to the GATT (Article V) and of intense interest both to landlocked countries and many firms engaging in international trade. Section III.L.1-5 contains detailed texts from a proposal [note 26] by a group of landlocked countries.

30. The first text defines the scope of “traffic in transit”, reflecting modern trading and transport practices – multimodal, container traffic and the air transit of goods (but not air services). There is controversy over the application of TF transit provisions to pipelines (oil and gas, etc.). This is included in the current text and is especially important in the context of pipeline development between central Asia, Russia and Europe. The EU supports the applicability of these provisions to pipelines (also for electricity transmission lines, which would be covered by the term “fixed infrastructure” in the current text) but some members – Malaysia and India, for instance – consider that Article V was never intended to apply to such infrastructure. Clearly, the right to follow the most convenient route through a transit territory could not apply to fixed infrastructure.

31. Section III.L.2 provides national treatment and MFN treatment for goods in transit; it also provides that the importing member treat goods arriving from a transit country no less favourably than would have been the case for direct delivery from the country of origin.

32. The publication of all fees and charges related to transit, as well as their periodic review, is covered by Section III.L.3 (a) and (b). In any event, the fees and charges should be “reasonable” and “commensurate with the administrative expenses entailed”. This latter requirement is also reflected in a text [note 27] provided by Turkey, Georgia and Paraguay.

33. To a large extent the disciplines on transit formalities and documentation requirements (Section III.L.4) reflect the broader (Article X- related) proposals, including those on publication, periodic review and simplification. Additionally, they call for special border crossing facilities and formalities adjusted for transit; more limited inspections of goods based on particular risk management techniques and non-application of quality controls and technical standards. Only where there is a risk of contamination might members insist on more systematic inspections. The administrative burden should be reduced on transit goods and allow for pre-arrival processing, a single window system and an authorised trader arrangement.

34. The promotion and monitoring of bilateral and regional transit agreements and arrangements, consistent with all other TF commitments, is encouraged in Sections III.L.4(d) [note 28] and (e). More generally, improved cooperation among domestic authorities, with neighbouring members and between the public authorities and the private sector is called for in Section III.L.5.

35. The imposition of cash guarantees to secure revenue in case of inland diversion of goods in transit would be banned by the text in Section III.L.4(f). However, where a bonded transit system operates the member concerned may require “reasonable” guarantees that must be released promptly and in full after the transit terminates. Guarantees should be abandoned when a member is satisfied that transit obligations will be fulfilled – presumably based on the previous performance of a trader or transport firm.

VII. Cooperation on Trade Facilitation and Customs Compliance

36. Two alternative textual proposals [note 29] setting out conditions for cooperation among authorities in importing and exporting members where there is doubt about the truth or accuracy of customs declarations are contained in Section III.M (pp 33-36). In large part, the proposals build a cooperative adjunct on to the WTO Customs Valuation agreement. In each case the texts set out the need for adequate verification efforts by the importing member; the information to be provided the exporting Member; and the limits on the obligation of the exporting member to respond. While the Canadian text relates explicitly and solely to declarations of customs value that of India et al. concerns HS classification, description, quantity, country of origin and valuation. Nevertheless, Canada seeks more extensive cooperative activity while strengthening the protection of confidential information supplied to the requesting member.

Acronyms

Note 1: See TN/TF/W/43/Rev.14, WTO Negotiations on Trade Facilitation - Compilation of members' Textual Proposals, 12 March 2008. (return to text)

Note 2: See Summary Table in Part II of the paper. (return to text)

Note 3: See TN/TF/W/137, Communication from Armenia, Chile, China, Dominican Republic, Ecuador, the European Communities, Georgia, Guatemala, Honduras, Japan, Kyrgyz Republic, Mexico, Moldova, Nicaragua, Pakistan, Paraguay, Sri Lanka, Switzerland and Uruguay, 21 July 2006 and addenda. (return to text)

Note 4: See TN/TF/W/142, Communication from the Core Group of Developing Countries on Trade Facilitation, 31 July 2006. (return to text)

Note 5: See TN/TF/W/147, Communication from of the Core Group of Developing Countries, the African, Caribbean and Pacific Group of States, the African Group, and the Least-Developed Countries Group, 18 July 2007. (return to text)

Note 6: The W/137 proposal envisages notification to a Committee on Trade Facilitation. However, the Core Group approach allows for a Trade Facilitation and Capacity-Building Support Unit (TFTACBSU) within the WTO Secretariat. (return to text)

Note 7: TN/TF/W/132/Rev.1, Communication from Turkey – Proposal on National Websites and Enquiry Points - Revision, 7 May 2007. (return to text)

Note 8: TN/TF/W/145, Communication from the US – Draft Text on Internet Publication, 21 May 2007. (return to text)

Note 9: See TN/TF/W/129/Rev.2, Communication from Barbados, Cuba, Fiji, Papua New Guinea and the Solomon Islands, 10 March 2008. (return to text)

Note 10: See TN/TF/W/153, Communication from Australia, Canada, Turkey and the United States, 10 March 2008. (return to text)

Note 11: See TN/TF/W/116, Communication from Japan and Mongolia, 7 June 2006. (return to text)

Note 12: See TN/TF/W/122, Communication from India, 4 July 2006. (return to text)

Note 13: See TN/TF/W/107, Communication from the European Communities, Korea, and Switzerland, 6 June 2006. (return to text)

Note 14: See TN/TF/W/112, Communication from Hong Kong China, Korea, and Switzerland, 6 June 2006. (return to text)

Note 15: See TN/TF/W/138/Rev.2, Communication from Korea, Singapore and Thailand, 10 March 2008. (return to text)

Note 16: See TN/TF/W/108, Communication from the European Communities, and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, 6 June 2006. (return to text)

Note 17: See TN/TF/W/128/Rev.1, Communication from Canada and Norway, 10 March 2008. (return to text)

Note 18: See TN/TF/W/117, Communication from Japan, Korea, Mongolia, and Switzerland, 7 June 2006. (return to text)

Note 19: See TN/TF/W/144/Rev.2, Communication from the United States, 20 February 2008. (return to text)

Note 20: See TN/TF/W/109, Communication from the European Communities, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and Switzerland, 6 June 2006. (return to text)

Note 21: See TN/TF/W/140, Communication from Korea, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and Switzerland, 21 July 2006. (return to text)

Note 22: See TN/TF/W/148, Communication from the People's Republic of China, 18 July 2007. (return to text)

Note 23: See TN/TF/W/134, Communication from the People's Republic of China, and Korea, 14 July 2006 and Add.1. (return to text)

Note 24: See TN/TF/W/136/Rev.1, Communication from Canada and Switzerland, 7 November 2007. (return to text)

Note 25: See TN/TF/W/139/Rev.1, Communication from Korea, 12 March 2007 and Add.1. (return to text)

Note 26: See TN/TF/W/133/Rev.1, Communication from the Former Yugoslav Republic of Macedonia, the Republic of Moldova, Rwanda, Switzerland, and Swaziland, 7 February 2008 and Corr.1 and Add.1. (return to text)

Note 27: See TN/TF/W/146/Rev.1, Communication from Turkey and Georgia, 10 March 2008. (return to text)

Note 28: This same text also appears as a footnote on page 27 in the context of MFN treatment for transit goods. (return to text)

Note 29: See TN/TF/W/123/Rev.2, Communication from India, South Africa and Sri Lanka, 10 March 2008. See TN/TF/W/154, Communication from Canada, 10 March 2008. (return to text)