. /.WORLD TRADE
ORGANIZATIONG/IT/9
7 April 2000
(00-1427)
Committee of Participants on the Expansion of Trade in
Information Technology Products
CANADIAN NATIONAL EXPERIENCE PAPER
Import Licensing for Information Technology Products
Introduction
Canada's experience in exporting information technology goods throughout the world reveals
that import licensing requirements for information technology products can constitute a serious
market access barrier.  While they may not be readily apparent to many exporters, these barriers can
impose undue costs and undermine the intent of the ITA, which is to foster and enhance global tradein information technology products.
As is the case with many other non-tariff measures, there are WTO provisions governing the
use of import licensing: specifically, the WTO Agreement on Import Licensing Procedures.  This
Agreement provides the parameters within which Members have the right to operate import licensingregimes.  However, we would recall that the Agreement recognizes “that the flow of international
trade could be impeded by the inappropriate use of import licensing procedures” and that import
licensing “should be implemented in a transparent and predictable manner”.  In addition, it specifies
that “non-automatic licensing procedures should be no more administratively burdensome than
absolutely necessary to administer the relevant measure”.  It would appear that some of the major
provisions in the Agreement which may be of particular relevance are those which cover issues such
as scope, publication and transparency, time periods, number of approval bodies, complexity andadministrative practices.
Commentary
The number of information technology products covered by import licensing regimes
throughout the world appears to be large.  The principal ITA 1 products, automatic data processing
machines (8471) and telecommunications e quipment (8517 and 8525), face import licensing
requirements in the largest number of countries.  Many other information technology goods are also
confronted with automatic or non-automatic import licensing requirements, such as IT-related electric
conductors under HS headings 8544 and various instruments under HS heading 9027.
Canadian exporters have indicated that, when they or their customers apply for import
licences, they regularly face disagreements regard ing the appropriate classification of information
technology goods under the Harmonized Commodity Description and Coding System.  As the
importing nation does not always make it clear in advance which code to use, the exporter andimporter have no way of ensuring the correct one is used.  This leads to the invalidation of the original
import licence and can lead to extensive delays in clearing the good in question through customs.
Additional processing delays are engendered by the number of administrative bodies which
often must approve import licences.  For example, it  is not uncommon for it to be necessary to obtain
the approval of the Customs, Transport and Communi cations departments, as well as others.  The
number of approval authorities also reduces the level of transparency and accountability making itG/IT/9
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difficult for exporters to determine when their import licence will be approved and what actions they
must take to expedite approval.  As well, comp lex administrative requirements, if linked to the
approval of many agencies, provide opportunities for irregularities.
As well, our research has revealed further concerns regarding the absence of transparency.
Canadian industry reports that administrative procedures are, at times, unclear and subjectively
applied.  Moreover, they have indicated that the requirements with which a particular shipment must
comply can change between the time contracts are signed and the customer receives its shipment.
Unfortunately, some countries have failed to consistently respond to the Import Licensing
Committee’s questionnaire, or report at all. In addition to questions regarding H.S. coding, the
definitions of the goods covered by a particular licensing regime are, on occasion, vague—  leading to
uncertainty regarding the coverage of import licensi ng regimes.  In some instances no distinction is
made between automatic and non-automatic licensing provisions and the source of further information
is not always provided.
As a result of the foregoing, and other causes, Canadian manufacturers of information
technology equipment have expressed serious concern regarding the total length of time required toprocess import licences which ranges from several days to several months and, in some instances, up
to one year.  They indicate that these delays are costly.  Broadly, inventory costs are a significant
portion of total costs.  More specifically, the warehousing costs at the port of entry are considerable
and include indirect costs related to damage and pilferage.  These costs total several percent of the
total cost of the good per month.  For example, a two month delay can be the equivalent of anadditional import duty totalling four to six percent of  the value of the product.  Further costs can result
from the penalties imposed by customers for failure to meet project completion dates which typically
equal 10% of the price paid for the exported good.
Beyond the cost of delays are those associated with the administration by exporters or
importers of import licensing requirements.  Expert staff must be engaged to initiate, monitor, submit
and track each licensing application.
It should be noted that it is the responsibility of the importer (i.e. the customer) to meet import
licensing requirements.  Hence, the exporting firm may rely on its customer to absorb the cost of
compliance with import licensing obligations.  Consequently, while there are real barriers to trade,
they may be hidden from the exporting firm.
Canada believes that the removal of unnecessary impediments created by certain import
licensing requirements for information technology products would significantly enhance trade in this
sector, without jeopardizing the achievement of their WTO-consistent objectives.  To do so would, in
Canada’s opinion, improve all participants’ access to the leading edge technologies which havebecome central to economic growth.
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