WORLD TRADE
ORGANIZATIONG/C/W/424
1 October 2002
(02-5263)
Council for Trade in Goods Original:  English
TRADE FACILITATION: ARTICLE V OF GATT 1994 ON
 FREEDOM OF TRANSIT
Communication from Canada
The following communication, dated 1 October 2002, has been received from the Permanent
Mission of Canada.
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Introduction
This paper, Canada’s third contribution to the 2002 work programme on Trade Facilitation,
provides a number of Canadian ideas on how GATT Article V on Freedom of Transit could beclarified and improved.  We believe that improvements to and clarification  of this Article could
increase  its effectiveness in addressing  freedom of transit issues and in addition could assist in
furthering  the capacity of land-locked countries to trade and to integrate fully into the international
trading system.
Canada’s earlier papers on GATT Article X on the Publication and Administration of Trade
Regulations (May 2002) and on GATT Article VIII on Fees and Formalities connected withImportation and Exportation (July 2002) flagged some possible areas for technical assistance in
support of our proposals.  In the specific case of Article V, we would want to look to a wider
discussion that might better place proposals for technical assistance and capacity building into an
appropriate context that could link with more specific proposals resulting from earlier discussions on
Articles VIII and X.  We believe this is best pursued through Member discussion on how best toidentify, coordinate and deliver technical assistance in the context of implementing future
commitments in trade facilitation.  In this regard, Canada continues to support fully the integrated
approach of developing WTO commitments and ensuring technical assistance and capacity building
where required to assist in implementing such commitments.
Considerations
The original 1921 Convention and Statute on Freedom of Transit (Barcelona Convention)
called on contracting parties to comply with a number of specific obligations to promote freedom of
transit.  The more specific of these obligations
1 were subsequently taken up in the Havana Charter-
related discussions in the mid-1940s and eventually embodied in paragraphs 1 – 4 of Article V of the
GATT in 1947.  The main body of Article V (paragraphs 1 – 4) appears to be based on concepts
originally promulgated over eighty years ago.  For this reason, we believe there is a need to examine
                                                     
1  See Barcelona Convention, Articles 1 – 3 in particular, which were subsequently taken up and largely
addressed in the Havana Charter discussions.  The Havana Charter  (see articles 1 – 4) essentially embodies
these same precepts as originally laid out in 1921.G/C/W/424
Page 2
the applicability of this Article to the current environment and to the modern customs procedures and
practices that have ensued since its inception.  There is also a need to review it in respect of other
arrangements which are now the focus of various international agreements governing procedures for
the treatment of goods in transit.
 Possibilities for Clarifying and Improving GATT Article V
Canada would suggest the following elements of clarification and improvements to GATT
Article V.  In many cases, these ideas draw from the original Convention and Statute on Freedom of
Transit (Barcelona Convention), the Havana Charter for an International Trade Organization (Havana
Charter), as well as several other international agreements containing provisions relating to
international Customs transit procedures.
These suggestions build upon various trade facilitation principles including transparency,
efficiency and simplification; and consultation and cooperation.
A. Issues related to Customs procedures
The provisions of Article V might be enhanced by clarifying certain issues related to customs
procedures.  For example:
1. Develop new provisions to limit any undue documentation requirements on arrival, or on any
intermediate or subsequent stops in the Customs territory while in transit and on departure of
goods in transit.
2. To better facilitate trade, limit Customs formalities on arrival, on subsequent stops within the
Customs territory and on departure to the minimum necessary to ensure compliance withCustoms law in the territory of the contracting party.  Such formalities should as simple as
possible taking into account necessary control measures.
3. Provide for the possible use of “surety bonds” in cases where the Customs might require
security to be furnished for goods in Customs tr ansit passing through its territory.  This might
also potentially address those instances where the Customs transit operation is terminated and
the goods in transit are subsequently entered for importation.
4. Provide for the use of risk management principles to permit special procedures for those
traders (and/or their authorized consignee) that have demonstrated a good record of
compliance with Customs requirements for goods in transit through the Customs territory.
This might include special arrangements under which Customs formalities are reduced byagreement between the Customs and the trader and/or the authorized consignor or consignee,
similar to the proposals made by Canada in its submission on Article VIII.
5. Provide for a provision to promote “the simplification of customs regulations concerning
traffic in transit”.  The Havana Charter originally included provisions to “promoteinternational agreement relating to the simplification of customs regulations concerning
traffic in transit, the equitable use of facilities required for such transit and other measures
designed to promote the objectives of this Article.”
2.  This exhortation is captured in part by
                                                     
2 See Havana Charter for an International Trade Organization;  Article 6.  Article 6 reads as follows:
"6. The Organization may undertake studies, make recommendations and promote international agreementrelating to the simplification of customs regulations concer ning traffic in transit, the equitable use of facilities
required for such transit and other measures designed to promote the objectives of this Article.  Members shall
cooperate with each other directly and through the Organization to this end."G/C/W/424
Page 3
the provisions of the current wording from Article VIII, paragraph 1c) “ The contracting
parties also recognize the need for minimizing the incidence and complexity of import and
export formalities and for decreasing and si mplifying import and export documentation
requirements ”.  This has similar application to the provisions of Article V.
6. Promote the use of international instruments relating to Customs transit including the
possibility of accession to various instruments relating to Customs transit3, where applicable.
B. Issues related to non-discriminatory  treatment (national treatment and MFN)
Paragraph 5 currently calls for most-favoured-nation treatment for traffic in transit, building
on the general provisions of most-favoured-nation treatment that is outlined in GATT Article I.  Thereis, however, no explicit accounting of the complementary principle of national treatment on internal
taxation and regulation as contained under GATT Arti cle III.  The extension of national treatment to
goods in transit would add more certainty to this Article overall.
The Secretariat, in G/C/W/408, has outlined an interpretative discussion with regard to the
application of paragraph 6.  The interpretative discussion indicates that “ it may be debatable whether
paragraph 6 applies only to cases where goods are shipped from X through Y and V to Z, or whether
it also covers goods coming from X through Y to V (without continuing to go to Z )”.  The present
review provides an opportunity to clarify this point.
C.  Fees and Charges and Securities
GATT Article V states that all fees and charges shall be “commensurate with administrative
expenses entailed by transit or with the cost of services rendered” and “shall be reasonable”.  It would
be useful to provide a clearer definition of this to clarify that fees and charges should only be chargedon a amount representative of the approximate cost of services rendered.
Canada’s submission on GATT Article VIII on fees and charges connected with importation
and exportation made a number of proposals to clarify such fees.  These proposals might provide a
basis to elaborate parallel provisions on fees and charges in connection with transit.
Summary
We agree that the provisions of Article V are, in some instances, lacking in specificity and
that clarifications and improvements are warranted.  In this paper, we have put forward some
suggestions to that effect.  The purpose of these suggestions is to highlight areas where the provisions
of Article V might be improved, notably by taking account of international developments in the transitfield.  We believe that ease of transit is a matter of interest to all WTO Members since its impediment
results in considerable inconvenience and extra and unnecessary cost burdens that ultimately affect
everyone.
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3 Various existing international instruments include:  1) The Customs Convention on the International
Transport of Goods under cover of TIR Carnets (TIR Convention), Geneva, 14 November 1975;  2) TheConvention on Temporary Admission (done at Istanbul, 26 June 1990) (as per Annex A as it relates to ATACarnets);  3) The Customs Convention on the ATA Carnet for the Temporary Admission of Goods (ATA
Convention), Brussels, 6 December 1961.