RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/236
24 October 2000
(00-4409)
Council for Trade in Goods Original:  English
TRADE FACILITATION
Trade facilitation and customs procedures
- Contribution by Japan
The following communication, dated 23 October 2000, has been received from the Permanent
Mission of Japan.
_______________
1. Introduction
1. Trade facilitation is beneficial to all trade-related parties, including governments and the
private sector, and contributes to the development of the world economy.  This understanding has
been widely shared among the Members through the exploratory and analytical work to assess thescope for WTO rules during the Council for Trade in Goods (CTG) sessions, mandated by the
Singapore Ministerial Declaration. In order to confirm this understanding and to enable the work of
the CTG to become more fruitful, it would indeed be useful to take as examples issues arising from
actual problems in the real trading world.  Although these problems do have various aspects, this
paper will mainly focus on customs procedures as a starting point.
2. In this way, the purpose of this paper is to introduce some of the issues concerning customs
procedures, as well as the use of information technology in trade-related practices, as identified during
a series of recent discussions held with the business community in Japan.  Needless to say, this paper
does not cover an exhaustive list of issues, and therefore, it does not prevent any others not contained
in this paper from being included in the deliberations of the CTG.
2. Issues identified
Predictability of the procedures
3. Regarding discussions on a long clearance time, a lack of predictability has been pointed out
as a major difficulty.  One of the important measures with which to tackle this problem is to increasetransparency.  Already, in many countries, the authorities dedicate their efforts on making a clear
official announcement and publication of the laws, regulations and procedures.  The private sector
welcomes such a positive approach towards increasing transparency.  Furthermore, these efforts may
have a positive effect towards preventing the arbitrary operations by an individual official.  On the
other hand, it is also said that there are some countries that do not extend sufficient efforts in theannouncements and publications of the various laws, regulations and procedures.
4. Insufficient detailed administrative rules for each operation have been pointed out as another
reason for a lack of predictability in the trade proces s.  In the absence of such detailed administrative
rules, the actual implementation of legislations and regulations may be left to the arbitraryG/C/W/236
Page 2
interpretation of an individual official.  There have been cases where the interpretation of a same
regulation differs drastically when a change in personnel occurs.  International traders face such
difficulties when a sudden change of interpretation arises, especially in the area of customs valuation
or classification, which relates directly to the amount of tariff duties and thus has a strong influence
on the profitability of the transaction.  It is also said that simplified and harmonized rules compatiblewith international standards are more attractive for the private sector, especially investors.
5. Establishing a system for an advanced ruling on classification is welcomed by the private
sector.  However, it would be difficult to use such a system if it takes some long time, for example
over several months, to make an advanced ruling.
6. It is pointed out that if an individual official is allowed to make an arbitrary interpretation,
this may invite the prevalence of unofficial procedures on collection of opaque fees.  It is also said
that some enterprises may also enjoy advantages due to unjustifiable reasons.
7. Public announcements to the private sector of changes in regulations tend to be delayed, to
the extent that even front-line customs officials and regional offices are sometimes not informed ofsuch changes.  The private sector welcomes the orientation meetings organized upon request to inform
of important changes and the establishment of inquiry contact points.
8. Regarding transparency, several international agreements exist, including WTO agreements.
In the WTO, relevant clauses can be found in Article 10 of the GATT and other related WTOAgreements.  As for other International Organizations, the World Customs Organization (WCO)
provides international standards in this area th rough the Kyoto Convention (International Convention
on the Simplification and Harmonization of Customs Procedures).  In the General Annex thereto,
Chapter 3 covers the customs clearance formalities, such as checking the declaration; Chapter 4
covers duty formality, such as the kind of elements that should be provided through legislations andregulations; while Chapter 9 is for transparency.
Documentation
9. The issue of documentation has also been raised as an important issue.  The same supporting
documents and explanations are often required of traders on every occasion which handles same
goods.  To solve this problem, information, such as record of the document check, could be sharedamong sections within the customs authority.  The introduction of a blanket checking system would
be also useful.
10. In some cases, due to the lack of communication between the department making a physical
examination and the department actually checking a document in customs, the same supportingdocuments and explanations are demanded.  There is a case where a tax payment has to be made prior
to the physical examination, the result of which en tails a modification to the tax paid, thereby causing
unnecessary administrative procedures to register such tax correction.  In another case, according to
the business community, customs clearance procedure is divided into many phases, thereby forcing
the trader to proceed through the different customs sections before being able to complete procedures.
11. Regarding documentation, there are cases where submission of a signed original is strictly
required in every case, or where a document not directly related to the clearance, such as a letter of
attorney for a customs broker, has to be submitted on every occasion.  Such formalities are
burdensome for traders and thus the introduction of blanket formalities are requested.  Furthermore,correction to these documents requires additional labor and cost.G/C/W/236
Page 3
12. In Article 8 of the GATT, the need to decrease and simplify documentation is recognized.
Moreover, in the WCO Kyoto Convention, Chapter 3 of the General Annex stipulates that customs
shall require only necessary documents.
Physical examination
13. The burden encountered for physical examination is also an issue often raised by the private
sector.  One solution for this problem is to adopt risk management techniques.  It is necessary to focus
on a targeted cargo with a clear purpose for examination, whether it be the assessment of the tariff
amount or the anti-smuggling activities, and by using appropriate examination measures, such as the
examination of all, part, or only a few packages.  This should reduce the burden on traders and, at the
same time, would enable customs to allocate its resources more efficiently.  It is also worthconsidering the introduction of a system that would allow the early release of cargoes for which
physical examination is not necessary or the payment of taxes has been secured.  Further information
can be found in Chapter 6 of the General Annex of the WCO Kyoto Convention, which deals with the
provisions concerning risk management in the context of customs control.
EDI
14. Automated clearance systems have been introduced in a number of countries to facilitate
customs clearance procedures.  As some Members have mentioned in past meetings, automation
brings about significant facilitation, and the private sector appreciates these initiatives.  However, thebenefit of automation is sometimes compromised when the same documentation and formality as
before automation continue to be necessary.  It has been pointed out that an IT-friendly environment
should be fostered, in line with international standards.
15. The UN/EDIFACT is a standard for the EDI, and attempts are now being made to harmonize
the data-elements for customs clearance.  Indeed, in the WCO Kyoto Convention, Chapter 7 of the
General Annex is related to the use of information technology.
16. One of other problems which can arise is that certain trade procedures require traders to fill in
the same information on different documents.  This as well as other problems could be considered as
non-tariff barriers for trade.   In order to improve such a situation, it is necessary to not only increase
automation for customs procedures but also for other trade-related procedures in the government, inaccordance with the development of automation in the private trade sector.  Seamless and paperless
trade procedures can thus be achieved through establishing interfaces between these EDI systems at
both national and international level.
17. In Japan, the automated system for customs clearance has already been introduced.  Recently
another system called JETRAS, enabling licensing procedures for the permits and approvals of import
- export controlled items through the Internet, ha s been introduced.  A linkage between these two
systems is now undergoing a feasibility study in order to facilitate procedures through enhanced
communication within the government.  On the other hand, trade-related private sectors, such as
traders, banks, transport companies and insurance companies, are proceeding with the project called
TEDI that introduces an electronic format of trade-related documents, such as the bill of lading and
invoices, and enables the exchange of such documents through the Internet.
Customs valuation
18. There have been a number of problems pointed out about the customs valuation system.
Further discussion is necessary as to how the WTO should work on this problem, considering that a
number of Members have changed their customs valuation system from this year in order to comply
with the Customs Valuation Agreement.  Technica l assistance is also an essential element forG/C/W/236
Page 4
implementing the Agreement, and thus, the current work of the Committee on Customs Valuation is
important.
Customs formalities, other than customs cleara nce procedures, such as procedures for the
exemption or reduction of import taxes and repayment
19. In addition to cargo clearance procedures, other trade-related procedures are conducted by
customs.  Facilitating these procedures also contributes to the overall trade facilitation.  For example,
a number of Members have a system for the exemption or reduction of import tax, as well as its
repayment, under certain conditions.  These systems of course require some administrative procedures
to ensure the conformity of the applications by checking, for examples, the rights of the applicant
himself or that the goods are used properly.  Some times, however, the examination is far too strict and
the burden of documentation is increased.  There have been cases where the repayment procedures are
too complex taking up to one year, thereby reducing the effect of repayment in this case.
3. Points to be taken into account for the future discussions in the WTO
20. In the future discussions in the WTO, technical assistance should be discussed in parallel due
to the importance of capacity building.  Moreover, technical assistance activities, aiming at trade
facilitation, are being carried out by other international organizations, such as the WCO and the
UNCTAD, as well as regional fora, such as the APEC.  Bilateral technical assistance activities by
individual countries, including Japan are also being carried out and such activities should be
encouraged further.
21. Customs clearance procedures have the functions of controlling cargoes that are imported into
the territory from a social and economic point of view, and of securing revenue by collecting tariffs
and other duties.  Due attention should be paid to allow governments to pursue these legitimate policy
objectives.
22. Any existing work carried out by other WTO fora or international organizations should be
taken into account to avoid unnecessary duplication from a viewpoint of work efficiency.
4. Conclusion
23. Taking into account the above points, the WTO should move its discussions forward on the
issues indicated to promote world trade.  Inputs from the Members are vital and the positivecontributions are to be encouraged.
__________