RESTRICTEDWORLD TRADE
ORGANIZATIONG/VAL/M/26
21 May 2002
(02-2806)
Committee on Customs Valuation
MINUTES OF THE MEETING OF 27 MARCH 2002
Chairman: Mr. K. J. Weerasinghe (Sri Lanka)
The agenda proposed for the meeting, circulated in WTO/AIR/1747 and amended at the
meeting, was adopted as follows:
Table of Contents
I. PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION
(WT/MIN(01)/DEC/1):  IMPLEM ENTATION-RELA TED ISSU ES..................................1
II. TECHNICAL ASSIST ANCE ................................................................................................23
III. OTHER BUSINESS............................................................................................................. ...24
IV. ELECTION OF  OFFICE RS..................................................................................................24
_______________
I. PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION
(WT/MIN(01)/DEC/1):  IMPLEMENTATION-RELATED ISSUES
1.1 The Chairman stated that paragraph 12 of WT/MIN(01)/DEC/1 directed the Committee to
address the tirets contained in paragraph 7 of Job(01)/152/Rev.1, and paragraph 8.3 of document
WT/MIN(01)/17 directed the Committee to address the matters referred therein.  These two
assignments were listed as sub-items 1 and 2 of item A of the agenda for this meeting.  He noted that
the Committee held an informal discussion on the tirets in paragraph 7 and he proposed reproducingthe statements made at that meeting in the minutes of the present formal meeting.
1.2 The Committee so agreed.  Following are the statements made at the informal meeting of the
Committee of 27 March 2002.
1.3 The Chairman recalled that the Committee had two reports to prepare at the end of the year -
one to the TNC on the outstanding implementation issues in paragraph 7, and the other to the General
Council on the exchange of information among customs administrations (paragraph 8.3).  At the
26 February 2002 meeting of the Committee, the Committee heard a re-introduction of the paragraph
7 tirets from the delegate of India.  These statements were reproduced in the minutes of that meeting,G/VAL/M/25.  The Secretariat also circulated a note on the negotiating history of the Agreement on
Customs Valuation in G/VAL/W/95.  Further, the Secretariat had compiled the documents in which
the customs valuation implementation-related issues had been discussed in G/VAL/W/97.  In the
airgram, the Chairman noted that there was an invitation to delegations to submit questions to the
Secretariat for circulation before the meeting.  No questions had been submitted to date.  He extended
this invitation throughout the Committee's implementation-related work.G/VAL/M/26
Page 2
General Statements
1.4 The representative of the United States posed questions which arose from India's statement at
the 26 February 2002 meeting.  His delegation was seeking also a general understanding of where this
work was heading and his questions were subsequently circulated in G/VAL/W/98.  As indicated inthe Secretariat paper on the negotiating history, G/VAL/W/95, most, if not all of the tirets proposed
had been the subject of discussion since the Tokyo Round of Negotiations.  However, India suggested
that recent developments in the trading system were  driving its proposals.  The US was puzzled as to
the genesis of these proposals.  He added that his delegation was also puzzled with the implication
from India's statement that, in the age of globalization and advanced telecommunications and global
sourcing, implementation of the Agreement was difficult for any country which maintained high
tariffs and other non-tariff barriers.  His delegation was looking forward to receiving the responses toits questions.
1.5 The representative of Canada made a number of observations for consideration when
discussing any change to the Customs Valuation Agreement. His delegation also sought confirmation
from India that these proposals would involve chan ging the Customs Valuation Agreement.  The
Preamble of the Agreement stated that the main pu rposes of the Agreement were to provide a fair,
uniform and neutral system for valuing goods for customs purposes that precluded use of arbitrary and
fictitious customs values, and that the basis of valuation of goods for customs purposes should be to
the greatest extent possible the transaction value.  The Preamble also highlighted that the customs
value be based on simple and equitable criteria consistent with commercial practices, and thatvaluation procedures should be of a general application without distinction between the sources of
supply. As the negotiating history reinforced, the objectives of the Agreement were to develop a
valuation system based on a positive approach reflecting both commercial reality and the need for
effective administration by customs services.  The Agreement was a delicate balance between
ensuring a positive approach based on transparency, predictability, non-discrimination and the right ofappeal for traders, and, at the same time, ensuring that customs had the means and ability to its job.
1.6 Canada fully supported the Agreement based on this approach. As the negotiating history
indicated, the move to a positive approach was a deliberate departure from previous valuation
approaches used by a large number of Members including Canada. Therefore, Canada would not
support any proposals that would regress these objectives.  In examining each proposal, his delegation
would look at how the proposal effected the use of transaction value as the basis for customsvaluation, how it would effect the delicate balance, how it would effect fairness, uniformity or
neutrality.  His delegation would also want assu rance that any proposal would not open the door to
arbitrary values.  For example, his delegation woul d not view proposals that raised a value for duty as
neutral.  The negotiating history showed that not only should valuation be based on the transaction
value of the actual import in question, but that there was an explicit and deliberate decision todisallow or prevent the use of prices in the exporting countries' market or in the importing countries'
market.  His Government's experience with the Agreement reinforced its support for this decision.  It
would not look favourably on any proposal that would, one way or another, revert to old practices.
1.7 He added that in India's presentation on 26 February, it noted that the Customs Valuation
Agreement was over 20 years old and that there had been important changes since then in the patterns
of trade. India cited, in particular, the growth of intra-firm trade, the increased trade in intermediate
products and components used in production, and the use information technology.  His delegation was
assuming that India flagged these particular considerations because it saw these as increasing the
problems associated with applying the Agreement such as deliberate under-invoicing.  India alsoindicated that its implementation issues focused on "the set of problems emanating from
multilateralism in the context of customs valuation".  His delegation asked what India meant by
"multilateralism in the context of customs valuation" and how this related to the proposals.G/VAL/M/26
Page 3
1.8 As the negotiating history showed, India's proposals were also 20 years old.  They had been
discussed since the start of the Customs Valuation Agreement, including during the Uruguay Round.
At each point, they had been deemed unappropria te.  His delegation did not understand why now they
would be appropriate;   why other solutions being used by many other Members were not more
appropriate;  or why the proposals now would not affect the basic fundamentals of the Agreement.The existing Agreement was quite robust in dealing with problems - for example, it already
recognized the importance of intra-firm and related-party trade.
1.9 India noted in its 26 February presentation that its proposals were required “to deter fraud,
facilitate genuine trade, and protect revenue".  He noted that fraud was a deliberate misrepresentation
of the facts and not specific to customs valuation.  It existed before the Agreement and before
international trade.   The right tools for dealing with fraud were a transparent administration, fairverification and an effective enforcement program – characteristics that reflected dealing with fraud in
any situation.  In the case of the Agreement, this meant taking a modern approach to implementation
and focusing on post-entry administration and enforcement.  He agreed that facilitating trade and
protecting revenue were important benchmarks in evaluating any proposal.  But he underlined the
importance of protecting revenue and not enhancing revenue by boosting the value for duty.  India’spresentation provided some clarifications but also raised other questions and left others hanging.  In
dealing with each tiret, in addition to applying the above considerations and criteria, his delegation
would be seeking to clarify what the real probl em was and to improve understanding of how these
proposals would work.  His delegation would also be  seeking to find out why these proposals would
be able to solve the problems, particularly since other Members had been able to address similarproblems by using other, more effective solutions that did not involve changing the Agreement.
1.10 The representative of New Zealand stated that her delegation had not yet seen anything that
led it to believe that India's proposals would address the general concerns it had raised with respect to
customs fraud and her delegation continued to have reservations about the proposals.  Taken on their
individual merit, and as a package of possible am endments (if that was what India was proposing),
they seemed to take Members away from some of the key principles in the Agreement and in
particular the achievement that this Agreement represented in terms of its movement away from theBrussels Definition of Valuation.  She added that New Zealand was a small country.  This meant, by
definition, that it had a small customs service and that the vast majority of exporters and importers
were small and medium-sized enterprises.  The general result of the Indian proposals would be to
increase the discretion of customs authorities to choose between a number of values.  This pick and
choose approach sounded more like value selection than true valuation.  For small countries, therule-based system protected against arbitrary approaches particularly when applied by larger trading
partners.  Whether this was in the context of a dispute settlement case or in the context of the daily
business of a New Zealand importer or exporter, the principle was the same.  Her delegation was
mindful of the legitimate objectives that customs authorities were interested in delivering including
the avoidance of fraud and revenue protection.  However, her delegation remained unclear as to what
problems the current proposals would address and how they could do so in a way that would not
undermine the basic principles of the Agreement, would not arbitrarily reduce the certainty and flowof the trade transaction, and would not impose undue or impractical burdens on customs authorities.
1.11 Her delegation noted from the negotiating history that some issues relevant to the current
proposals had been traversed and rejected in earlier negotiations as either not meeting developing
country concerns or not being workable.  Things had changed since this time.  A concrete agreementexisted which Members wanted to assist developing countries in implementing.  Her delegation
recognized that it could be a difficult Agreement to implement and wanted to address legitimate
concerns where possible.  But in order to do that beyond the current assistance being given, it was
necessary to better understand the specific problems that India's proposals were meant to address.  Her
delegation considered that some of these problems might lay outside the scope of the Agreement.G/VAL/M/26
Page 4
There may well be things outside the current contex t that the Committee could do to address any such
problems.  But again, her delegation did not thin k India's proposals were going down that path.
1.12 The representative of Australia was not convinced that implementation of the proposed tirets
would improve the operation of the Customs Valuati on Agreement.  His delegation's assessment was
that the tirets were unnecessary and would significantly alter the longstanding operation of the
Agreement which would have a negative impact on the practices of industry and commerce. The
Agreement had been in operation for 20 years and delivered an element of certainty for traders which
developed their business practices around the valuation treatment accorded under the current
Agreement.  To alter the operation of the Agreem ent may be to their detriment.  His delegation
acknowledged that the issues involved were clearly of importance to India and it was, therefore,
important for the Committee to work together on them. To facilitate a cooperative discussion, heposed some questions during the course of this meeting which were circulated in G/VAL/W/98.
1.13 The representative of the European Communities noted that the Agreement had already
reached a certain maturity and in the last couple of years had been implemented by the majority of
WTO Members.  Administrations everywhere had fully espoused this Agreement whose provisionswere as relevant and dynamic today as they were 20 years ago.  His delegation believed that the
Agreement provided a balanced approach between the rights of customs and the rights of economic
operators.  It provided a set of rules based on agreed principles;  produced a fair, uniform and neutral
system of valuation;  recognized the right of customs but also gave rights to importers;  provided rules
for transparency, for the provision of information on decisions and rights to appeal; made clear thatvaluation procedures were not to be used to combat dumping, and underlined that valuation was to be
based on simple and equitable criteria understood by importer, trader and customs alike. This meant
that the Agreement should not and could not be read in ways that opened up avenues which departed
from its basic principles:  simple, equitable criteria, uniform, fair and neutral systems, and no
distinction between sources of supply.  In his delegation's experience, this Agreement could be andcontinued to be implemented in a way that could meet the needs of customs and did not interfere with
trade nor give rise to serious fraud problems.
1.14 His delegation noted that the issues raised in the tirets existed for a long time and was
concerned that they were still regarded as problematic.  His delegation had not seen, over many years,
real evidence of problems arising with respect to this issues.  His delegation hoped to understand
whether there was a new dimension to the problems.  Recent advances in technology andglobalization would work to the benefit of customs which were increasingly smart and aware of the
way business and the world actually worked.  Customs were increasingly adapting and equipping
themselves with the technologies which would allow themselves to face up to the complexity of
applying any set of rules and valuation was no different from many of these rules.  The rules of the
Agreement were not simple but neither were they excessively complex and did not open doors totraders in a way that would allow them to cheat administrations. In fact, customs administrations were
increasingly equipping themselves with ways of ensuring that new technologies were helping them.
1.15 With respect to this specific tirets, his delegation hoped to explore beyond the texts but was
having difficulty with the direction of these proposals.  There was scope within administrations forfinding ways to deal with the kind of problems mentioned which did not necessarily lead to changing
the Agreement itself.  However, his delegation was committed to looking at the specific issues, with
an eye to seeing what new dimension to the problem really existed and how was it that some
administrations may be struggling while others seemed not to be having the same level of difficulty.
1.16 The representative of Brazil stated that his delegation attributed particular importance to the
implementation issues which were part of the single undertaking agreed in Doha.  His understanding
of the Committee's work was that it should address the tirets and not negotiate a statement made by
one delegation.  While that statement may have raised doubts and questions, and he looked forward toG/VAL/M/26
Page 5
receiving these questions, it was his expectation that these doubts would not stand in the way of the
Committee complying with the mandate given to it by Ministers.  He added that, generally, his
delegation did not consider that any of these proposals would constitute a major upheaval of the
Customs Valuation Agreement. Rather they seemed to propose some pointed enhancements to the
Agreement.  His delegation was ready to engage in a constructive discussion on the technical aspectsof these proposals with the view to complying with  the mandate.  Finally, his delegation did not reject
nor accept these proposals in total but would like to discuss each one of them on its own merits.
1.17 The representative of Japan hoped to gain, through the discussion, a better understanding of
the issues and problems the proponents of the tirets were facing in implementing the Agreement.  His
delegation believed that the exercise involved three stages:  to identify the problems, to explore all
possibilities for the problems identified, and to choose the best solution among the possibilities.Presently, his delegation did not support any of th e proposals.  The negotiating history showed that
most were registered 20 years ago but, through the negotiation process, were not incorporated in the
final Agreement which tried to strike a balance between the day-to-day administration of the customs
services and the traders' efforts to reduce their cost in clearing goods through customs.  The
Agreement established basic principles, namely transparency, predictability, and accountability sinceit prevented customs from deciding the customs value of the imported goods at their own will.
Customs had certain rights in conducting their the day-to-day operations such as the possibility to
pose questions to the importers.  However, the Agreement also secured benefits for traders which
should not be altered for unknown reasons.  His delegation was prepared to constructively engage in
the discussions.  It would pose specific questions on each of proposals at the appropriate time.
1.18 The representative of Switzerland supported the statements by the EC, Canada, New Zealand,
Australia and Japan. The proposals before the Committee were not new.  The negotiating history
showed that many questions had been raised and the proposals were not found to be appropriate.  Her
delegation was prepared to support India in addressing the significant problem of customs fraud,however, in its view there might be more appropriat e ways of dealing with the problem than through
the Customs Valuation Agreement.  Fraud existed well before the Customs Valuation Agreement
came into force. Her delegation supported the Agreement as it stood -  it was transparent and
predictable and it struck a delicate balance between the rights and obligations of customs on one hand
and importers on the other hand. The negotiating history showed that the positive approach to
valuation underlined in the Agreement was a deliberate departure from previous systems.  Why
should the delicate balance be altered if delegations still needed to be convinced that the proposalswould solve the problem of fraud?  Finally, the proposals raised a set of highly technical questions
which still needed to be examined in detail for factual understanding. In this respect, her delegation
was looking forward to further clarifications from  India and moving into the technical discussion.
1.19 The representative of Korea noted that his delegation was still not convinced of the merits of
the proposals.  His delegation considered that the Customs Valuation Agreement was the result of a
delicate balance as was mentioned by other speakers.  In this regard, he also asked whether India's
intention was to amend the Agreement.  He suggested that an efficient way to proceed would be for
each Member to submit its questions and/or answers in written form.
1.20 The representative of Norway stated that her delegation was also not convinced that the
proposals under consideration were the correct solutions to the concerns expressed by India.  Her
delegation did not wish to underestimate the implementation-related concerns of developing countries
with regard to the Agreement and considered that they should be addressed appropriately through
technical assistance and capacity building.  It was important to make sure that, in facilitating trade, theprinciples of transparency and predictability for importers were respected without compromising the
right of the relevant national authorities to investig ate the verified information.  This balance must not
be destroyed.G/VAL/M/26
Page 6
1.21 The representative of Malaysia reiterated the importance that her delegation attached to the
resolution of implementation issues as mandated by Ministers in Doha.  Like Brazil, her delegation
agreed that implementation problems in this Committee should be addressed in a very specific manner
and in a manner that addressed the issues raised in the 5 tirets. It was not sufficient to say that the
rules of the Agreement were sufficient or that Members did not see any need for changes to the
Agreement.  The Committee should address the issues in a focused and substantive manner.  For
example, regarding tiret 57, the Committee should examine why the addition of services should not be
included in the customs value.  Finally, she requested that questions be circulated in writing.
1.22 The representative of India noted that the negotiating history paper, circulated by the
Secretariat, brought to light the fact that the problems of concern had been raised by her and other
delegations and were not new.  Her delegation had been seeking to address them to reduce the burdenon customs administrations which was one of the objectives of the Customs Valuation Agreement.
She added that the fact that a problem had been around for a long time did not mean that it should not
be addressed.   She supported the statements made by Brazil and Malaysia and added that she would
appreciate receiving statements in writing.  This would assist her delegation in understanding better
the concerns expressed regarding whether it was India's intention to alter the existing balance in theAgreement and whether and in what manner her delegation's proposals would affect issues like
transparency and predictability for traders.  She would prefer to address those concerns in the context
of the specific tirets/proposals.  However, she assured Members that India, as a signatory to the WTO
Agreements, was not seeking to alter fundamental underlining principles through the proposals but, as
Brazil noted, was trying to enhance the value of WTO commitments.
1.23 One of the recurring questions was whether India's proposals were intended to amend the
Agreement.  She responded that the proposals were intended to help countries implement the
Agreement better. She did not wish to prejudge solutions but, as Japan noted, the best solution should
be one that addressed the problems raised. If that entailed amending the Agreement, it would have tobe by consensus in the Committee.   If the solutions took another form, again a consensus in the
Committee would be necessary.  Given this, she was not sure where the apprehensions laid.  On the
question of the long-standing nature of these proposals, she considered that, while they had been
identified by a number of developing countries years ago, recent events had not served to solve the
problems but had added to uncertainty for both traders as well as for customs administrations. Her
delegation would expand on this later.  On the issue of corruption within customs administrations, she
said that to perpetrate fraud collusion between two parties was necessary, either between importersand exporters or between a customs administration and a trading entity.  Her delegation was not
saying that any particular fraud was more important than others.  Her delegation was trying to
eliminate possibilities of fraud including the ingenuity of people who wished to commit fraudulent
actions, whether to defeat revenue or for any other reason.  As noted by Switzerland, fraud existed
even before the Customs Valuation Agreement came into force because of human nature.  While theCommittee should not be trying to alter the way humans engaged in trade, it could try to minimize or
address instances of fraud through these proposals.
1.24 On the question of where the word "actual value" appeared in the text, she stated that it was in
Article VII of GATT 1994.  Article VII, paragraph 2(a) stated "the value for customs purpose of
imported merchandise should be based on the actual value of the imported merchandise on which duty
is assessed…".  Paragraph 2 then defined "actual value".  The notion of actual value had been
elaborated in the General Introductory Comments of the Agreement and also in Article I.  India was
not introducing new terms or concepts.  They were in the Agreement itself.  References to "ordinary
course of trade" and "under fully competitive conditions" also arose from the provisions themselves,in Article VII of the GATT 1994.  On the statement by her delegation that a developed country
customs valuation division may deal with about 6 under-valuation cases in a month, her delegation
received this information from a specific developed country delegation with whom her customs
administration had been training.  She had put it forward as a means to emphasize that under-G/VAL/M/26
Page 7
valuation was real and proliferating.  With respect to her delegation's use of the term
"multilateralism", she clarified that in her opening statement at the last meeting she had said that some
issues arose from regionalism and from bilateralism and that others arose from multilateral WTO
commitments.  The specific proposals put forward arose from implementation of the multilateral
Customs Valuation Agreement.  On the  question of neutrality, she cited the specific case of tiret 57which sought to eliminate a distinction between goods and services on the basis of country of
procurement.  It sought to eliminate the distin ction when the procurement took place in the same
country but different treatment was provided based on whether the procurement was from the buyer of
the final goods under valuation or some other supplier in the same country.  Her delegation was not
seeking to alter the neutrality of the Agreement but to strengthen the "positive approach to valuation"
and not to undermine the primary basis for customs value, the transactions value.
- Tiret 57:  The addition of cost of services such as engineering, development, and
design work, which are supplied directly or indirectly by the buyer free of charge or at
reduced cost for the production of goods under import, shall be included in Article 8:1(b)(iv).
1.25 The representative of Canada asked that a more complete answer be provided on the question
of multilateralism.  He also added, in response to India's statement, that fraud could also be committed
without collusion.  The proposals appeared to address problems of a single person carrying out the
fraud.  He was encouraged by the fact that India's objective was to find the best solution.  His
delegation did not believe the solutions laid in changing the Agreement but with more effectiveimplementation of the  Agreement. His delega tion understood India, from its presentation of
26 February, to believe that the exclusion in Arti cle 8.1(b)(iv) of the Customs Valuation Agreement
provided scope for duty evasion as it allowed for manipulation of costs and also lacked in economic
rationale.  His delegation believed that there was an economic rationale for the provision.  During the
negotiation of the Agreement, it was explicitly decided to exclude engineering and related costs whenthey were provided from within the importing countr y.  The economic logic, as reflected in history,
was to encourage domestic engineering and related activities.  Perhaps there was a factual
disagreement with India.  His delegation interpreted this provision to mean that if the assists came
from somebody other than the buyer within the importing country, it was still excluded.  Clarification
was necessary to get the facts straight.
1.26 Duty evasion and fraud were enforcement problems, and not necessarily a valuation issue.
His delegation asked the following questions to be provided in writing:  Did India have a problem
when importers declared a low value while claiming they provided such services?  Were India's
importers claiming a low value because they suppl ied design and engineering? Did Indian customs
audit and verify the amount paid, and more importantly any additions to the price actually paid or
payable?  Did India verify the amount or value of the services being provided and being exported,versus the value of services received in kind?  It should be possible, through an audit review, to
determine if the importer was providing more design and engineering to the vendor than it was getting
back and thus reducing the amount they paid for goods.  Could India explain how the problem would
be resolved by requiring domestic design and engineering to be added?  It was not clear how this
proposal would reduce the burden on customs. Customs would still be required to audit the importerto determine the monetary worth of design work undertaken in the importing country to determine
how much and if there was any engineering service provided within the domestic country.  He also
asked whether the underlying purpose of this proposal was to enhance the value for duty and, hence,
raise the duty in effect payable on an imported good?   Finally, if it was India's intent to combat fraud,
would there not be other more direct means of accomplishing this, particularly through post-entryverification and normal application of fraud laws and enforcement techniques?
1.27 The representative of the United States noted that his delegation was aware of the wording of
GATT Article VII.  His delegation referred to the statement by India that the Customs Valuation
Agreement made reference to "actual value" and several other phrases that his delegation was unableG/VAL/M/26
Page 8
to locate in the Agreement.  His delegation assi gned importance to the implementation issues and
sought their resolution as well but shared the questions raised by Canada.  He also asked what exactly
was the problem?  India's statement indicated that the Agreement provided scope for duty evasion.
This was a rather general description since all trade transactions provided a scope for duty evasion.
The link with regard to evasion was not clear.  Also, how would India's proposal "protect the
revenue"?  It seemed to his delegation that the proposal would merely raise revenue.  This raised the
question whether the Committee should be concerne d with how revenue should be raised or how
revenue should be protected.  It was not clear how  revenue would be protected by the proposal.  He
also asked whether the proposal would actually create more opportunity for fraud because
implementation of this type of proposal would require an additional burden for allocating services
provided in India or in another importing country.  His delegation foresaw added complexity and
further opportunity for fraud to take place. Finally, he asked what the economic logic was of theproposal?  It seemed that it was to assess duties on the value of services performed in India.  His
delegation was puzzled by the logic of this and would appreciate a further explanation as to the
economic rational of the proposal as opposed to maintaining the status quo in the Agreement.
1.28 The representative of Brazil made reference to the statement of the European Communities in
which the principles of the Agreement were listed.  One of the important principles was no
discrimination between sources of supply.  It seemed that there was clear discrimination according to
the source of supply in Article 8.1(b)(iv).  The main concern of his customs authorities with regard to
this issue was the fact that there was discrimination between the supply of a service by the buyer
domestically or from abroad.  His delegation would like to have this discriminatory provisionaddressed in some way.
1.29 The representative of Singapore noted that India's rationale behind its proposal was to combat
duty evasion and fraud as well as discrimination between sources of supply.  Her delegation reiterated
its argument that the rationale behind Article 8.1(b)(iv) was to provide an incentive to importingcountries to develop engineering and development services.  Her delegation shared Canada's
statement on this point and advised caution in including these elements which would unnecessarily
inflate the imported value, the cost of which would be passed on to users and consumers.
1.30 The representative of the European Communities considered that the underlying effect of this
proposal would be that the work done in a countr y of import would be taxed.  India mentioned this
issue when it said that the exclusion, as it currently stood, also ensured that indigenous development,engineering, design and work was supported and encouraged by the existence of this exemption.
However, India wouldn't entirely agree with that because it believed that the exclusion provided in
Article 8.1(b)(iv) did not apply to other parties within the country of import.  There seemed to be a
different reading of Article 8.1(b)(iv) because one Member seemed to consider that the carrying out of
engineering, design or similar work in the country of importation by a buyer would under the existingrules, be an economic activity which would have to be taken into account in establishing the customs
value.  His delegation did not believe that this interpretation was a valid one.  The only reasonable
interpretation of Article 8.1(b)(iv) was that the carrying out of engineering design and development
work by anybody in the country of import was covered.  This would also effect the rest of the points
raised in support of the proposal.
1.31 With regard to the issue of sources of supply (a general principal applicable to all countries
trading) there was a clear general exemption in all situations for the country of import itself. The
Customs Valuation Agreement established the basis for application of customs tariffs;  one country
that would not be affected by the application of their own tariff was the country of importation itself.
The principal sources of supply applied to everybody, but when put into a context of the application
of the tariff by an importing country, no country would be expected to consider economic activity
undertaken in its own country as being part of that process.  Fraud could exist independently of the
valuation rules.  His delegation did not consider that Article 8.1(b)(iv) encouraged fraud.  If anG/VAL/M/26
Page 9
administration was able to identify that a trader was carrying out work in a country of importation, it
had immediate access to its operations which could be verified on sight.  The margin for fraud was
quite reduced in such situations.  He asked India how Article 8.1(b)(iv) actually assisted traders in
arranging situations which could be lead to fraud?
1.32 The representative of Colombia noted that in discussions last year, his delegation did not
support this proposal because it considered that it would create a lack of incentive for creativity for
engineering, design and other services at a national level.  However, his customs authorities had
discovered that the relevant provisions from the Agreement were not consistent with the provisions in
sub-paragraphs (i), (ii), and (iii) of Article 8.1(b) in terms of the place of origin.  His delegation did
not understand why the elements in the first three sub-paragraphs were part of the customs valuation,
whereas the services provided by the purchaser from the country of importation, which could have ahigh added value, were not included.  It was also clear that there was a problem of consistency.
Regarding the argument that this went against economic logic, he asked whether an analogy should be
made with the issue of subsidies to exports, for example.  There was clearly an impact on the cost of
the product and this was to the detriment of the exporting capacity of a country.  It was a question of
whether a good being imported clearly reflected its market price.  In addition, in terms of design,development and creation, the same elements were applied both to local producers as well as to those
that were abroad and were exporting these services.  The local producer in this case would be at the
disadvantage because the product would be using the services produced in the country, but the good
itself would be produced outside the country.  He concluded that it would be necessary to be
consistent in dealing with the cost of the good wh ich was reflected in the price for customs valuation.
1.33 The representative of Kenya supported the delegation of Brazil on this issue.  Her
administration also looked at category (iv) assists in relation to the issue of uniformity in the
Preamble.  The intention envisaged in the Agreement was to add the value of the assist to the
transaction value if it was not already included.  Her delegation failed to understand the intention ofthe Agreement in excluding the value of the engineering, design work, art work and plans and
sketches from the value of imported goods because the cost involved was a cost of production. Her
administration considered that the cost of this category of assists should form part of the transaction
value, whether produced inside or outside the country of importation. The sole criteria to be used was
that the assists had been supplied by the importer and their costs had not been included in the price.
1.34 The representative of Thailand stated that his delegation's earlier comments on this tiret were
still valid.  During the earlier discussions, his delegation had raised its concerns on double taxation of
importers which would translate into additional costs to be born by consumers.  The cost of the
service provided by the buyer that was subject to domestic taxation would be taxed again through an
import tariff if it was added to the customs value of the goods.  India had previously replied that if a
country wanted to exempt the charge of the services, it could elaborate a fiscal policy to do so, orexempt them from customs duty.  He could not accept this as an answer to his concern.  He also noted
that it was difficult to differentiate which services actually went to the import of products.
1.35 The representative of Japan wanted to know more about the nature of the problems India was
facing.  His delegation could understand that different treatment was accorded to goods and services
depending on the country of procurement, but in the WTO goods were treated differently among the
Agreements.  His delegation was not yet convinced of the mechanism to solve the problem of fraud
through this proposal.  Also, if the now currently excluded cost was added to the customs valuation,
the customs administration would have to verify the calculation of the development, engineering or
other services. The proposals might complicate customs' work and create additional implementationproblems.  His delegation saw a certain economic rationale for this provision.  Suppose that an
importer in Japan was doing the main work and was also importing work for the Japanese consumer.
This company invented some development, engineer ing work to be incorporated in their imported
products.  In this case, there was no problem because the products was produced in Japan.  If theyG/VAL/M/26
Page 10
wished to outsource these products to India, for example, they would have to do their own external
calculations.  In this case, it would be very difficult to distinguish their own work done by their
employees.  Calculating a certain part of the cost of the engineering, etc. work might be very difficult.
1.36 The representative of Korea also asked how the problem of double taxation could be resolved
if this proposal was accepted.  His delegation was not sure that India's interpretation of the
Agreement,  that the value of services supplied from the importing country by anyone else was to be
included, was appropriate.  This type of interpretation might be beyond the Agreement.  As far as he
knew, any cost of services such as engineering,  etc. produced in the importing country should be
excluded regardless of who supplied those serv ices under the Agreement.  He, therefore, sought
further clarification from India.
1.37 The representative of China stated that her delegation supported India's proposal since her
customs administration was faced with these kinds of problems everyday.  It was difficult to
determine customs value because often it was difficult to identify if the services were undertaken in
the importing country or in a third country, and whether the value of services supplied from the
importing country by the buyer was to be exclude d.  Indigenous production could be encouraged,
therefore,  the domestic legislation could provide an option.
1.38 The representative of India preliminarily responded to the concerns raised.  She asked that the
questions be provided in writing.  She considered that many of the questions that had been raised had
been answered by Brazil, Colombia, Kenya and some other speakers.  Regarding the question ofwhich were the suppliers in the country of importation that were excluded, her delegation gave
context and meaning to every word that was written in the text of Article 8.1(b).  There was the
possibility of creating uncertainty in trade if legal effect was given to the terms "supplied directly or
indirectly by the buyer free of charge".  Some customs administrations were perhaps only excluding
the costs of engineering services, etc when supplied by all suppliers in the country of importation, butthe provision could also allow for another interpreta tion.  This was a useful issue to address in the
context of resolving the problem.  On whether fraud was an enforcement problem rather than a
valuation issue, she understood enforcement and valuation to be linked.  It was because of the
problems associated with valuation that the issue needed to be addressed;  enforcement alone was not
serving the purpose.  Her delegation had given precise examples of where problems had been
detected.  Because of provisions in the Agreement, during valuation, fraud could not be addressed and
a lengthy legal procedure was required.  It was not an efficient way of addressing the issue.
1.39 With regard to the question of whether the underlying purpose was to enhance the duty, she
stated that the purpose was to ensure that the objectives of the Agreement were met.  This meant to
provide for the customs value, the price actually pa id or payable, and to prevent traders from using
loopholes to perpetrate fraud by declaring a cost to have been supplied by the buyer when it was not,or to inflate the component of the engineering cost supplied by the buyer.  There were various
permutations which were possible and her delegation's objective was to prevent some of these from
taking place.  With regard to the question of "actual value" and where it appeared in the Agreement,
she responded that GATT 1994 was adopted in its entirety and, to the extent that there was no conflict
between GATT Article VII and the Agreement, Articl e VII could not be disregarded.. On the question
of whether this proposal was designed to protect the revenue, this was also implicit in her earlier
response.  The objective was to ensure that the appropriate revenue was actually raised by customs.
Her delegation did not consider that this proposal would create more opportunity for fraud;  her
delegation was seeking to prevent one type of fraud which arose from the provision in Article
8.1(b)(iv).  If some Members considered that this would create an additional opportunity for fraud,they should indicate how this would be so.
1.40 On the issue of whether there was economic logic in maintaining this provision, other
delegations had already addressed the issue.  Her delegation was not sure how it was possible toG/VAL/M/26
Page 11
distinguish between different goods and services which were supplied in the country of origin and
how incentives could be provided for developmen t of engineering, development, art work, etc.
through an exclusion as set out in Article 8.1(b)(iv) while the incentives for the goods in sub-
paragraphs (i)-(iii) were not at issue. Their inclusion in the cost could serve to provide an incentive for
them to be sourced domestically but somehow for en gineering, art work etc. an incentive through its
exclusion in the customs value was necessary.  Her delegation did not see the logic in this argument.
Development of all services or manufacturing in relation to products was actually for the national
fiscal system to determine and was not to be provided through customs valuation incentives.  She had
already addressed the EC's issue of excluding othe r parties in the importing country rather than just
the buyer alone.  Regarding double-taxation, she indicated that this would be relevant also for the
elements set out in sub-paragraphs (i)-(iii) and her delegation continued to maintain that it was for
each country to not only take appropriate steps to prevent double taxation but also to developappropriate fiscal incentives for its domestic services industry.  Her delegation agreed with Japan that
perhaps there was different treatment provided between goods and services in the WTO, but services
related to freight and loading/unloading, etc. in Article 8.2 were allowed to be included in the customs
value.  She further directed Members to the report of the November 2000 meeting where many of
these questions were answered in more detail.
1.41 The representative of Canada noted that the responses given at the November 2000 meeting
were insufficient which was why many of the questions were being asked again.  He further asked
how this proposal would reduce the burden on customs in enforcing the Agreement, as India had
indicated.   His delegation considered that it would increase the burden on customs which would haveto do further audits and verifications within the importing country.  He was intrigued by India's view
of the phrase "where supplied directly or indirectly by the buyer".  His delegation considered that if
one provided a service produced by another within one's own country, this was provided indirectly.
That was why his delegation considered that the provision covered a service provided by anybody
from within the importing country.  India said that the purpose was not to enhance the revenue but toensure the appropriate revenue;  this Agreement existed for 20 years as had this provision and tariff
negotiations based on this Agreement.  Therefore, the appropriate revenue would be the revenue
determined by the application of the current rules which this proposal was trying to change. His
delegation was prepared to work towards solving the fraud problem associated with the Agreement
but considered that there more effective ways of doing so.
1.42 The representative of the United States supported Canada's previous statement and also
considered some of the responses not to be connected to the initial purposes outlined.  His delegation
shared the Canadian view on the potential lack of uniformity in the particular provision.  Regarding
concerns by current customs administrations about discriminatory treatment, and a zeal to collect
duties on the value of services conducted in the importing country, he assured the Committee that his
customs administration had similar concerns.  But his delegation tried to quell these tendencies whichwere not relevant to deterring fraud and assisting implementation.  He underscored his delegation's
perplexity on adding a cost which did not currently exist and the opportunities for artificially raising
and lowering what would be the dutiable value.
1.43 The representative of Brazil noted that much debate had centered on whether the objective of
this proposal was intended to artificially raise customs revenues.  It seemed to him that the Committee
should direct its focus to what the Article said.  The issue was not collection of duties on services
provided within the importing country in general, but only and specifically when the services were
rendered free of charge or at a reduced cost. This, in the view of his customs administration, had an
impact on the value of the good as such and must, in some way, be taken into account.
- Tiret 58:  The residual method of determining customs value under Article 7 shall be
inclusive of all residual eventualities, thus allowing valuation based on domestic market price
or export price in a third country with appropriate adjustments.G/VAL/M/26
Page 12
1.44 The representative of Canada was concerned that this proposal, if accepted, would reverse the
intention of the Customs Valuation Agreement not to base the value for duty on domestic prices in the
country of export or import.  It seemed to him that there was a problem of inadequate information,
and he asked, since India was applying the Agreem ent since 1998, what procedures and policies had
they developed to try to obtain the information?  Also, had India received any technical assistance inthis regard?  How would this proposal facilitate trade as it would seem to shift the burden of applying
the Agreement to the exporting country?  If this proposal was accepted, his delegation would have a
range of questions including how the domestic prices  were obtained, how they would be adjusted, was
there going to be reliance on commercial catalogues which were not final prices, and how could
adjustments be made for different market situations (in some countries prices would be higher
because of various advertising costs that were not included in another country, etc.)  His delegation
was puzzled by the phrase "inclusion of all residual eventualities".  This sounded like opening thedoor to arbitrary values and was not consistent with the objective of the Agreement to provide
transparency and predictability for traders.  Additional questions would be forthcoming.
1.45 The representative of Colombia stated that his delegation considered that the proposal would
broaden the few resources available to determine the customs value.  It would be used in applying the
methods of Article 7 of the Agreement when the information was available to the customs.  He
considered that when customs found themselves in difficulties, it may not be necessary to consult the
accountancy of the foreign businessmen. It sufficed to know the rate of the corresponding tax.  This
was important, having heard the comments referring to the highest prices in the internal market of the
exporting countries.  It would also be necessary to take into account usual general expenditures,publicity, promotion, etc.
1.46 The representative of Brazil stated that his delegation had mixed feelings on this proposal,
Utilisation of the price in the domestic market of the exporting country would, in some way, conflict
with the Preamble of the Agreement which said th at valuation procedures should not be used to
combat dumping.  An investigation into the domestic price in the exporting country was a procedure
more closely related to an investigation on dumping than to an investigation on valuation.  On the
other hand, use of the price in a third market could be explored further.  His delegation concurred with
India when it said that developments in the international trading environment had undergone
substantial changes over the past decades particularly with the significant growth of intra-firm trade.
Perhaps the use of a price in a third market might be an appropriate mechanism to use as a residual
procedure.  His delegation was, therefore, open to exploring the part of the proposal which wasreflected in Article 7.2(e) of the Agreement
1.47 The representative of Australia, in response to earlier comments by Brazil and Malaysia,
recalled his general statement which indicated the importance his delegation attached to a cooperative
discussion on the proposals.  The questions that his delegation raised should be seen as a reflection ofthis.  His delegation saw no reason to resort to this proposal since the interpretative note in Article 7
of the Agreement already provided enough flexibility to use previously determined values.  He asked
why references to domestic market price or export price in a third country were necessary?
1.48 The representative of the United States recalled that during the negotiations of the Tokyo
Round Agreement, many delegations were deeply  concerned with a particular US method of
valuation, the American Selling Price.  It was this method, in fact, that drove some contracting parties
towards creating a new valuation system in the form of the present Agreement.  His delegation shared
the questions raised by others, noting its concerns  as to how this proposal would fare with the
Preambular provision stating that valuation was no t to be used to combat dumping.  This raised
difficulties in suggesting that there were any parallels between this Agreement and the WTO Anti-
Dumping Agreement.  He asked how the proposal would deter fraud and facilitate genuine trade?
How would the proposal protect revenue, bearing in mind the distinction between protecting and
increasing revenue?  His delegation would also like to understand better how such prices would beG/VAL/M/26
Page 13
obtained, which prices would be used, and how they  would be adjusted.  He also asked how this
proposal would create a more coherent system as opposed to the opposite?
1.49 The representative of the European Communities noted that Article 7 of the Agreement was
not to be used until the other methods of the Agreement had been attempted.  It was not a valuation
method, but an appeal to use the existing methods in a flexible manner.  In reference to India's
statement that the residual methods under Article 7 were limited to situations where customs value
could not be found using other methods, his delegation was interested in understanding why the
previous methods were not able to be used.  What would be the special cases for which the methods
could not be used and Article 7 would be necessary?  Additionally, what were the even more special
situations that would arise for which it was not possible to use the hierarchical methods even in a
flexible way?  All this was even before consideration of the residual methods.  If the issue wasinformation related, the proposal presented higher hurdles in obtaining information.  Trade prices in
circumstances totally removed from the reality of the trader in question would represent valuation
solutions far beyond the present rules of the Agreement.  The proposal, if accepted, would open of
negative consequences because prices of different markets presented serious information, distortion
and adjustment problems.
1.50 The representative of Japan said that his delegation would like to have more information on
India's special cases and problems which led it to seek to propose these changes to the Agreement.
His delegation believed that the modifications in the proposal would change the basic principles of the
Agreement to ensure transparency, predictability and accountability.  To alter these principles wouldcause great concern to his Government.  He asked how India would decide the price of goods on the
domestic market of the exporting country?  In Japan, there were a lot prices, for example, for certain
types of computers.  It could not be determined which was the domestic price.  The same question
applied to the price in a third market – how would a specific price be determined?  Although Indian
customs sought these changes to the fundamental principles of the Agreement, Indian exporters maynot consider them a positive development.
1.51 The representative of India clarified that the purpose of this proposal was not to undo
elements of the Agreement.   Her delegation recognized that this proposal dealt with the residual
methods which would be used only after the other methods foreseen in the Agreement.  Article 7
stated that the customs value should be determined using "reasonable means that are consistent with
the principles and general provisions of this Agreement and of Article VII of the GATT 1994, and onthe basis of data available in the country of importation".  The term "reasonable means" provided
guidance because her delegation did not consider that  it was "reasonable" to exclude the two methods
found in Article 7.2(c) and (e).  She replied, therefor e, that it was not simply a problem of inadequate
data in the country of importation although this was often a problem in developing countries.  The
issue was systemic – why should these two methods of valuation, which subscribed to the principles
and general provisions of the Agreement, be excluded?  On the question of shifting the burden to the
exporting country, she did not understand how this would happen since the requirement was always
that the value would be determined on the basis of data available in the country of importation.
Regarding adjustments to these prices, she noted that adjustments were provided in other methods.
The proposal was meant to augment the basket of av ailable alternatives, it was not meant to set aside
the requirements for adjustments of prices which were already set out in the Interpretative Notes.
1.52 She noted that the proposal was not meant to add methods besides the domestic price in the
exporting country and the price in a country other than the country of importation.  She considered
that a particular situation where this proposal might be useful was when there were new goods forwhich a value had not been previously determined by the customs administration.  She appreciated the
US concern regarding the American Selling Price.  Her delegation's intention was not to recreate this
situation but rather an alternative within the mult ilateral system for determining value which would be
sufficiently transparent and reasonable through the relevant adjustment procedures.  She added thatG/VAL/M/26
Page 14
the objectives of Article 7 were quite clear – to provide for reasonable means of determining value.
She was not sure how facilitating trade and protec ting revenue would be jeopordized by including
these two methods.  She would seek information from her customs administration to respond to the
EC's question of what specific instances would create the situation where the existing hierarchical
system could not be used and these residual methods  would be necessary.  Her delegation did not see
how the potential distortions and adjustment proble ms that the EC mentioned would arise from this
proposal.  She agreed with Japan that the comfort level of both customs administrations and exporters
was necessary and this would have to be further explored.
1.53 The representative of Canada thanked India for clarifying that it did not intend customs to
seek information from the exporting country.  However, this reinforced the concern that new burdens
would be created in obtaining the information requir ed for these new valuation bases.  Not only would
prices have to be obtained from a foreign country but customs would have to figure out how the
adjustments would be made.  He also asked what percentage of value determinations made by the
Indian customs service actually fell under Article 7 of the Agreement?
1.54 The representative of India believed that the Committee did not need to address the issue of
where and how the information would be obtained because other WTO Agreements also sought
provision of such data.  The proposal aimed to see how the discretion available in Article 7 for
determining what constituted reasonable methods for determining customs value could be limited, and
to try to provide greater predictability to importers and exporters regarding the residual methods by
which the customs authorities would be valuing consignments.  Regarding Canada's additionalquestion, the issue was systemic and real for her Government regardless of what percentage of value
determinations were carried out under Article 7.  Would it matter if it was 7% or 11% of valuation
and who would determine an adequate level?  She cautioned against more arbitrariness.
1.55 The representative of Canada explained that he  wanted to get a sense of India's problem.  He
would provide the question is written form.  He added that he did not understand the reference to
other Agreements.  He understood India's proposal to  seek information within the importing countries.
He also shared the concern for predictability and certainty and he was not sure how increasing the
number of methods for calculating value for duty would provide greater certainty.
- Tiret 59:  The Agreement should be amended to provide for the highest value when
more than one transaction value of identical or similar goods is found.
1.56 The representative of the European Communities noted that this proposal was concerned with
the application of the second and third methods of the Agreement.  Accepting the highest value would
be large change in the Agreement that seemed difficult to justify.  It would give the wrong message in
that if there was doubt, customs would always look for the highest value.  This was not the underlying
objective of the Agreement which, in Article 7, prohibited systems based on accepting the highest of
two alternative values.  In addition, there was an equity argument.  Different traders achieved better or
worse results in their negotiations. If an importer in a country had been particularly efficient and
successful in establishing a favourable price, it would be extremely difficult and unfair to tell that
trader that another trader was not as efficient but that that higher price would be accepted.  Thescenario presented by India of pilot transactions being cleared through customs which were in turn
used as a basis to value subsequent trade was complicated to envisage.  It would be necessary to first,
set up a pilot case, than come back later with a larger consignment for which the importer would have
to succeed in getting customs to refuse the valu e, and only then could the importer hope to get
customs to substitute the pilot transaction for the imported goods.  He was not sure how often customswould be duped by this kind of set-up.  Before this problem would ever arise, the transaction value
would have to be shown to be no longer valid as the primary valuation method. Bearing in mind all
the uncertainty in this kind of hypothetical scenario which could fail at any point, he asked whether it
was worth looking at changing the Agreement?  The fact that customs had identified this kind ofG/VAL/M/26
Page 15
scenario meant that it was already well advanced.  Finally, he noted that India's introduction said that
this kind of situation could arise in cases where the valuation conditions were not met, or when it
referred to the Ministerial Decision on Truth and Accuracy.  Both situations would not automatically
imply the use of the identical or similar goods methods.  Customs should pay attention to this kind of
situation but his delegation was not convinced that it warranted modifying the Agreement.
1.57 The representative of Australia posed a question which echoed the EC comments.  Given that
the use of the highest value would introduce an ar bitrary element into the valuation process, should
not the most appropriate transaction value of identical or similar goods be used, not the highest?
1.58 The representative of the United States thought it worthwhile to explore further the nature of
the problem.  He asked why India said that Articles 2 and 3 rendered it difficult or even obligatory not
to engage in further scrutiny of a value that was cons idered a sham or artificially low.  His delegation
considered this the genesis of the problem and sought further understanding as to why these Articles
were used.  As the EC indicated, the problem was a complex fact pattern.  The starting point was that
the Agreement already contained ways to address what seemed to be the problem.  Further, how was
it that the highest level versus the lowest level woul d solve the problem.  The use of the lowest value
was a fairness issue.  The principle question his delegation asked was why would a party be precluded
from further examination of a value that was considered a sham.
1.59 The representative of Singapore echoed the EC comments.  The reason behind this proposal
was presumably to curb invoice manipulation and to check unscrupulous traders and cartels that used
Articles 2 and 3 to circumvent the Agreement.  Her delegation was puzzled by this because if there
were price fixing cartels or circumvention, and the customs authorities of the importing countries
were aware of the techniques being used by these unscrupulous traders, it could reject these prices as
unreliable.  There was no need to amend the Agreement to use the highest value which would also
artificially distort the transaction value.
1.60 The representative of Japan also supported the statement by the EC and the US and wanted to
know more about the problems India was facing.  India explained the problem of pilot transactions
involving artificially low prices which, India contented, did not even cover the cost of basic raw
materials used.  There was obviously something strange happening in the case which could be
complicated by more than one pilot consignment.  The solution proposed by India would affect
legitimate trade.
1.61 The representative of India said that she was looking forward to receiving the questions in
writing so that her delegation could fully address the concerns expressed.  Preliminarily, she
understood the apprehension of the EC not to send a wrong message.  Her delegation believed that it
was equally important to give the correct message that customs was ready to address fraud, that it wasvigilant and would address their wrongs.   On the EC's equity argument, she stated that if the trader
was successful in negotiating a good price then the customs authorities would have accepted the price
under Article 1.  Equally it was not successful traders that would need to rely on pilot projects because
these complex situations would be developed onl y by fraudulent traders who were not able to
negotiate good prices for their products.  Another point that was made was that perhaps customsauthorities would not be duped by these complex arrangements.  Even when a custom officer knew
that a pilot consignment had gone through, Articles 2.3 and 3.3 bound that officer to value the project
on an earlier consignment which was the one with the lowest value.  It was an issue of strengthening
customs administrations in their capacity to deal wi th fraud.  Another question raised by Australia was
whether an arbitrary value would be introduced.  She noted that during the negotiation of theAgreement, one delegation argued that choosing the lowest value might result in the introduction of
an exceptional value.  Surely the introduction of exceptional values was not the objective of the
Agreement.   While it could be argued that using the highest value introduced an exceptional value, it
was necessary to ensure a balance in the objectives sought.  The Customs Valuation Agreement wasG/VAL/M/26
Page 16
not about one single objective –  it was about not disadvantaging successful traders, not allowing
fraudulent traders as well as protecting revenue.  There were a number of objectives and it had to be
determined the best way to meet them all.
1.62 Regarding the US question of why Articles 2 and 3 would make it difficult to engage in
scrutiny,  she noted that the situation she describe d dealt with two transaction.  The first transaction
was the pilot transaction and the second, would reach Articles 2 or 3.  She assumed that it would reach
Articles 2 or 3 in a bona fide way.  Having reached Articles 2 and 3, the customs authorities would be
bound to reject the actual value of the transaction and accept the lowest value which was the
fraudulent pilot consignment in the example provided.  The relevant provision in Articles 2.3 and 3.3
said "the lowest value shall be used to determin e the customs value of the imported good".  Hence,
there was no scope for rejection of an earlier pilot consignment once a second consignment arrived.This bore witness to a history of complex arrangements having been set in place. Singapore raised the
issue of prices being rejected as unreliable. She was not sure which provision of the Agreement
allowed the customs authorities under Articles 2 and 3 to reject the price as unreliable.  She asked for
further clarification as to what the question meant.
1.63 The representative of Canada agreed that the Agreement had to send the message to
fraudulent traders that they would not get away w ith cheating.  The way to do this, however, was by
effective enforcement of fraud laws and not through the Customs Valuation Agreement.  His
delegation was not sure why India was not been able to send that message by being more vigorous in
enforcing fraud laws.  He was puzzled by India's statement that customs was bound by the earliervalue and that the Agreement forced acceptance of the pilot value.  There were a number of
provisions in Articles 2 and 3 that did not force customs to automatically accept the value of a
previous sale.  For example, a fraudulent importe r slipped a pilot project through customs which was
accepted under Article 1.  Later, this same importer came to customs with a much bigger sale.
Articles 2 and 3 provided that customs should use a sale of identical or similar goods at the samecommercial level and in substantially the same quantity as the goods being valued.  Obviously the
quantities were different.  Customs would not be automatically forced to accept the earlier price.
Secondly the Articles provided that importation had to take place "at or about the same time" as the
goods being valued.  Therefore, his delegation had difficulty understanding why customs, having
accepted that first value, was obliged to continue to  accept this price forever regardless of differences
in quality, times of import, and buyers.  It could only be assumed that India had no recourse under
domestic legislation to re-examine that price.
1.64 The representative of Korea found Canada's comments valid.  The example given was
complicated and his delegation wondered how many cases of this type were happening. He assumed
that the number would be very small.  If the highest value was introduced into the Agreement the
customs administration would continue to find the highest value.  The administrative procedures of
customs would become burdensome which would work against facilitating trade.
1.65 The representative of India said that she used the example of a pilot consignment as one way
that this type of fraud could be perpetrated.  It did not necessarily follow that a pilot consignment
would be followed by a bigger consignment.  The pilot consignment, which could be of small value,may be followed by similar sized consignments beca use the traders would be aware of the Interpretive
Notes to Articles 2 and 3.  Equally, her delegation pointed out that it had observed consignments
which had been imported at low prices by a cartel of traders.  This latter scenario would also make it
burdensome and difficult for the customs administrations to detect where and in what manner the
fraudulent arrangements were being set up.G/VAL/M/26
Page 17
- Tiret 60:  Buying commissions should be taken into account in the determination of
customs value of imported goods as it forms a legitimate component of the landed cost of
imported goods.
1.66 The representative of Canada asked a definitional question.  It considered that the rational for
excluding the buyers' commission was that it represented work that was undertaken by the purchaser
on the purchaser's account, and paying an intermediary to find goods brought no value to the goods.
However, it could be that there was not a clear definition of a buying agent, and he asked India if it
could provide the Committee with its definition of buy ing agent.  He sought more precision on exactly
what the issue was and what kinds of problems were to be solved;  his delegation was not sure where
the problem of fraud was.  If the buyer's commission was added in, the value for duty would increasewhich created a neutrality issue.
1.67 The representative of Australia asked, gi ven that genuine buying commissions were not
payments which accrued to or for the benefit of the vendor in the import sales transactions, what was
the rational for seeking their inclusion?
1.68 The representative of Brazil stated that, in the view of his customs authorities, it was
appropriate to exclude buying commissions.  This was due to the fact that these could not be
characterized as payments for the price effectively paid or payable regarding the importation of those
goods.  In the normal course of trade, buying commissions were activities or costs undertaken by thebuyer but were not indispensable for that operation.  Where the problem could arise was in trying to
precisely define a buying commission.  His Government had adopted internal legislation which
clarified that, even though the provisions of the Agreement were clear and did not raise questions of
principle, the treatment that applied to commissi ons for customs valuation depended on the exact
nature of the services provided by the intermediary . This legislation laid out guidelines regarding the
elements of proof necessary for the establishment of circumstances which may be considered as
buying commissions or commissions or costs incurred  by the buyer to an intermediary, and regarding
the nature of these payments.  According to these gu idelines or with the use of these guidelines the
customs administration had at its disposal all the means to conclude whether the services provided by
the intermediary were part of the price effectively paid in the importation.  Therefore, his delegation
concurred with the current wording of the Agreement.
1.69 The representative of the United States supported the Canadian question and the views
outlined by Brazil.  His delegation did not unders tand how India could conclude that a commission
was part of the procurement price of a good when such a commission was not paid to the seller and
was not a benefit to the seller.  He also asked why India considered that Technical Committee
instruments were not particularly helpful.  In this regard, he made reference to the note to Article 8 ofthe Agreement which set forth a definition of buying commission as well as a Technical Committee
explanatory note including several definitions of buying agents and commission, etc.  He also asked
how the suggestion that countries choose on their own whether to exclude buying commissions would
further greater uniformity and certainty in implementation.
1.70 The representative of the European Communities supported the views expressed by Brazil.
There was a relevant issue of definition, however, he noted that definitional issues had been dealt in
large part or even entirely by the WCO Technical Committee which had not received any claims of
short-comings in this area.  It might be worth reviewing this work which made it clear that these types
of arrangements had to be substantiated and that a custom administration was entitled to look fordocumentation. For example, it could look at a co ntract between a buying agent and his principle.
India provided a specific example of a fraudulent operation which could be a situation addressed
through some of the existing, generally recognized, and available strategies and instruments.G/VAL/M/26
Page 18
1.71 He added some views on what a buying agent actually did - a buying agent was the extended
arm of the importer who would locate in the country of export to locate supplies.   A buying agent
was, therefore, somebody who facilitated trade and carried out functions to match buyers and sellers.
It was a valuable function which was not regarded as reasonably classified under the price related
function.  Therefore, was it a positive development to think about changing the status of a buyingcommission which would imply changing the status  of a buying agent who only did what the buyer
would do.  Finally, the overall effect of looking at changes in the way buying agents and buying
commissions were treated may not be particularly productive for Members.  Perhaps it was necessary
look at existing guides and texts regarding the buying agent function which may provide considerable
help in solving the problems raised.
1.72 The representative of Malaysia noted the problems raised by India and the fact that
Article 8.1(a) excluded buying commissions.   Her dele gation considered that the exemption in Article
8.1(a)(i) did provide a loophole for under invoicing.   Therefore, there could be grounds for India's
concern.  Perhaps it would be interesting to have more information on what exactly was a buying
commission because her delegation wondered if the term still existed in trade terminology and
whether there was a universal understanding of it.
1.73 The representative of Japan said that his delegation believed that customs valuation should
not pose difficulties for the business operations of traders.  Each trader had a choice of establishing its
own office in exporting countries for purchasing, as might be the case for traders in India, or of
employing a local buying agent.  For either option, the customs valuation should be neutral and notpunish the choice of either option.  If India's proposal was accepted, employing a buying agent would
be negatively effected compared with establishing an office overseas.  This might create problems for
small and medium size enterprises in some countries.
1.74 The representative of the United States supported the statement by Japan and added that,
according to his national experts, approximately 90 per cent of cases where buying agents were used
pertained to textile exports of which 90 per cent came from Asia and South-Asia, in terms of trade
with the US.  He noted that his information also showed that these exporters were small and medium
size enterprises which further underscored his dele gation's puzzlement over this proposal from India.
1.75 The representative of India stated that her delegation's proposal referred to the definition of
buying commission provided in the note to Article 8.1(a)(i) which said,  "the term buying
commissions means fees paid by an importer to the importer's agent for the service of representing the
importer abroad in the purchase of the goods being valued". India was not going beyond this
definition because, in the course of valuation, Article 8.1(a)(i) required an exemption for buying
commissions defined purely in this fashion.  Wh ether these buying commissions were relevant in
terms of trade terminology was irrelevant.  The second set of questions dealt with the fact that thesewere not payments accruing to the seller.  Article 8.1(a) talked about inclusions and exclusions in
relation to the additions of all costs incurred by the buyer but which may not be included in the price
actually paid or payable to the goods.  The issue was that of payments made to the buyer and not to
the seller.  Therefore, she was not sure what was meant by stating that these were not payments to the
seller.  This entire Article dealt with and allowed payments made to the buyer, such as commissionsand brokerage, cost of containers or cost of packing, to be included, but in a discriminatory manner
excluded buying commissions even though all were incurred by the buyer.  Therefore, her delegation
could not understand why only one type of payment made to a buyer was to be excluded.
1.76 On the question of how uniformity or certainty would be ensured if countries were to choose
on their own whether to include buying commissions, her Government sought this multilaterally
endorsed flexibility in order to deal with fraud that might be perpetrated through the exclusion of
buying commissions from the customs value throug h this provision.  However, Members who did not
believe that such fraud was being perpetrated at  their borders would be free to exclude such aG/VAL/M/26
Page 19
requirement in their national legislation.  On the question of uniformity or certainty, the Agreement
provided for flexibility in the national legislation of  a Member to include or to not include the costs
dealing with freight, insurance and other such charges,.  Therefore, this was not a new concept that
her delegation was proposing.  Neutrality of the Agreement was maintained because the scope of its
proposal was simply to help a customs administration deal with fraud.  If there were negative impactson small and medium size enterprises, a government would be free to deal with it in its national
legislation.  Her delegation was not seeking to penalize traders, but only to ensure that there was an
avenue to deal with fraud. Her customs authorities said that this type of fraud was fairly wide-spread.
She was not certain if the fraud was in the textile sector, a large exporting industry in India, but she
was certain that her Government was not seeking to punish its own exporters through this proposal.
1.77 The representative of Canada did not consider that he had received a satisfactory answer to
the question of why normal fraud techniques that other Members were using could not be used to
address this kind of problem.  Customs administrations had access to the local buyers' books and
could sort out payments.  The reason buying commission was excluded was because economically it
was not a benefit to the seller and had no value to the good.  One of the reasons why there was a
question of economic logic was that including buying commissions would be discriminatory andwould lack uniformity.  Only large companies could afford to send agents across oceans to seek goods
which was Japan's point.  Small companies which could not afford to do this would have to pay duty
on this activity which would amount to a duty on a service, not a good.  This did not make sense to his
delegation. A solution to force each company doing its own buying to include the value for its
estimates of the value of its buying commission would probably open up new problems.  Therefore,he did not see how this proposal would facilitate tr ade.  It would create a greater burden on the small
and medium size enterprises.  The only obvious result of this proposal would be to raise the value for
duty.
1.78 He was interested in understanding India's definition of buying commissions because he
assumed it was based on the Agreement and its interpretative notes, but which would have to be
translated into domestic legislation – this was perhaps the source of the problem.  Brazil had indicated
it had set up detailed guidelines on how customs officials determined whether a certain fee was paid
for a buying commission or for something else.  Hi s Government had the same sort of laws which
provided specificity in making these sometimes daily decisions.  Much of the details were taken care
of by the WCO Technical Committee.  There might be some outstanding issues, however, his
delegation had difficulty with the idea of simply including the commissions because it would bediscriminatory.  It would not facilitate trade, particularly for small and medium size enterprises and it
would seem to raise the value for duty for one group of people and not another.
1.79 The representative of India stated that she did not think that her Government's problems with
this provision of the Agreement related to a probl em of domestic legislation.  The problem was both
systemic, in that her Government did not see the rational for excluding one type of commission while
all other types of commissions were allowed, and related to the fact that this provision was being used
to commit fraud.  Her delegation would like the flexibility to deal with that fraud.  Finally, with regard
to Canada's statement that the proposal would result in paying duty on a service rather than a good,
she noted that all the elements in Article 8.1(a)(i) dealt with services, as well as those in Article8.1(a)(iii) which dealt with labour services in association with packing costs.  Her delegation was not
trying to create a new set of services additions – the idea of which was already in the Agreement.
- Tiret 61: Persons associated with each other as sole agents, sole distributors, and
sole concessionaires, howsoever described, sh ould automatically be deemed "related".
1.80 The representative of Brazil noted that this issue had been dealt with in the Explanatory
Note 4.1 of the WCO Technical Committee.  His delegation concluded, from this Note, that a careful
and detailed analysis of the terms of the contract between the parties was the way to determine if theG/VAL/M/26
Page 20
provisions of Article 15.4 were applicable. Notwithstanding this general Note, his delegation reflected
that there were certain situations in which problems could arise for customs administration in trying to
determine the exact nature of the relationship.  For example, it was not impossible that the customs
administration might not have access to the terms of a contract.  In this sense, his delegation would
prefer that in discussing this issue, the Comm ittee take a slightly different track.  Rather than
presuming automatically that there was a relationship when there was a sole concessionaire, agent, or
distributor (hereafter, sole agents, etc.) discussion could focus on some way for Members to presume
such relationship when their were justified reasons such as lack of access to the terms of the contract
between the parties.  His delegation would be favour able to this type of examination of the issue.
1.81 The representative of the European Communities considered that the Agreement was precise
on the criteria to be examined to determine if parties were related.  Separately, there was a provision
which said that persons associated in business where one was a sole agent, etc. of the other were only
related if they fell into one of the relevant categories listed in the Agreement. Sole agents, etc. had
been an issue subject to negotiations in the Uruguay Round.  His delegation was struck by the drastic
treatment that the proposal envisaged for sole agents, etc. by deeming them automatically related.  He
provided an example of a subsidiary of a company versus someone who decided that it could supplythe domestic market in all or in part and they secured a distributorship agreement.  The distributor
would still have an arm's-length relationship with the seller of the good who was perhaps the company
with whom it had no other connection.  If the proposal was accepted, it would mean that this
economic operator would be regarded as related to its supplier, the seller.  On the other hand if the
seller/exporter of those goods had establish a subsidiary company in the same country, it would not besubjected to the same test nor would not be directly put into the same category.  The subsidiary
company would have to undergo the test laid out in Article 15, whereas , under the proposal, the sole
distributor would skip the tests and be automatically regarded as a related party.  This seemed rather
severe treatment of sole agents, etc. who would find themselves subject to more stringent rules than
even a subsidiary company of the exporter.
1.82 This begged the question of how this proposal could work?  Apart from the technical aspects,
these particular business arrangements which involved independent people entering into a particular
business operation would be considered related with all the connotations that involved.  Should such
tight rules be used in such situations?  His delega tion suggested examining some of the work that had
been done on related parties and cases where one operator controlled another.  These were situations
whereby the seller of the goods actually controlled the buyer.  There was a scale of situations andperhaps the one which was at the furthest end of the scale was where the buyer did nothing more than
secure the distribution contract.  Assuming automatic  relationship to that party with all the extra
checks and controls implied would seem to change the balance and not be a favourable development.
1.83 The representative of Australia stated that Article 15.4 already recognized that the only
involvement of sole agents, etc. with the import tr ansaction was in their capacity to provide a client
with a specific service.  His delegation was puzzled  about the rationale for this proposal and would
appreciate any clarification India could provide.
1.84 The representative of the United States as ked how India could suggest that no significant
studies had been made on this issue.  There was a large body of work done by the WCO Technical
Committee including Explanatory Note 4.1 and a case-study that was, in fact, submitted by India. He
asked for clarification on the proposal to create an automatic presumption of a relationship between
parties?  He supported Brazil, Australia and the EC in their concern that the proposal seemed a drastic
solution, inconsistent with the Agreement.  His delegation also considered that a solution could existwhereby a conclusion could be drawn that valuation could not be determined under Article 1 in terms
of the burden of proof in situations where the requisite information or contracts were not available.G/VAL/M/26
Page 21
1.85 The representative of India noted that the problem addressed in the proposal existed in the
GATT/WTO and had not disappeared.  The structure of Article 15.4 placed the burden of proving a
relationship on the trader, and not on the customs authorities because it stated that, for the purposes of
this Agreement, persons shall be deemed to be related provided certain conditions, in sub-paragraphs
to Article 15.4, were met.  Article 15.5 then dealt with the relationship for sole agents, etc. in thecontext of the conditions set out in Article 15.4 because the last part of the Article said these "shall be
deemed to be related," (implying an automatic presumption of relationship) provided the eight
conditions were met.  So the idea of presuming a relationship for sole agents, etc. was already in the
provisions of Articles 15.4 and 15.5.  Her delegation was not seeking to add a new concept of
automatic presumption.  The question was whether these eight conditions were sufficient to deal with
a relationship with sole agents, etc. and on whom should the burden of proof fall, the customs
authorities to prove a relationship or the importer and exporter to prove that a relationship did notexist.  Her delegation believed that the sole agents, etc., when they did not meet the conditions, should
have to prove that they were not related.  These agents had the full evidence of the contracts etc., and
in case the contracts were purely business contracts as the EEC implied, then it would be easy for the
customs authorities to recognise that fact.  She did not see why customs authorities would disregard
factual evidence or how such disregard would hold up in an appeal.
1.86 She understood Brazil to suggest that another condition could be added related to lack of
access to the terms of contract.  However, the issue may not be simply lack of access to the contract.
It may also include other factors such as collusion, in which case the contract submitted may not fully
reflect the relationship or the terms of engagement.  In order not to disadvantage the real businessarrangement that may exist, it would be in the inte rest of the sole agents, etc. to present documents
which proved that they were not related.  On the question of possible disadvantage to distributorship
arrangements of subsidiaries, as the EC pointed out,  she considered that they would be deemed to be
related regardless.  Therefore, she was not sure how they would be disadvantaged.
1.87 The representative of Canada asked, if there was collusion, why could not the normal fraud
techniques prove the case of fraud.  All the material necessary was available within the domestic
country.  He read the proposal to mean that India wanted to delete the last phase in Article 15.5 if the
conditions in Article 15.4 were satisfied.  He understood this because India said that the sole agents,
etc. should prove that they were not related, also in front of a court, even if they did not meet the
criteria of Article 15.4.  This raised the question of on what criteria would they prove their case?  If
the conditions in Article 15.4 were denied and other criteria were available, on what basis could arelationship be proved for the purposes of the Customs Valuation Agreement?  According to the
proposal, by definition, a relationship existed and it was not clear how it could be demonstrated that
there was not a relationship given that it was assumed on the basis of criteria other than those set out
in Article 15.4.  He could not see how to get out of this circular reasoning.
1.88 The representative of India said that it would be a circular argument if her delegation's
proposal was to delete the last part of Article 15.5.  She was not suggesting that the application of the
eight conditions for determining a relationship be removed.  If one of these eight conditions were met,
sole agents etc. should be deemed related.  She was trying to add the possibility of a relationship
existing outside of these eight conditions.  Then the provisions, because they were looped provisions,would not allow for the possibility of other criteria.  Article 15.5 went back into the loop by adding
another 'if' clause – "if they fall within the criteria of paragraph 4".  The loop arose because sole
agents, etc. could only be deemed to be related if they met the eight conditions in Article 15.4.  This
begged the question of why Article 15.5 existed at all;  if it was deleted, and persons deemed to be
related on the basis of the eight conditions, sole agents etc. who met any of those eight conditionswere already deemed related.   Article 15.5 was not necessary to emphasise the point.  She considered
the problem needed clarification because otherwise there was no other type of relationship recognised.G/VAL/M/26
Page 22
1.89 With regard to the suggestion that a solution could be found through declaring that the value
could not be determined if the requisite information was not available, she noted that her delegation
would like to retain, as much as possible, the purity of the agreement and not simply reject the value.
Trying to build into the Agreement the possibility that there were other types of relationships outside
the eight conditions listed for sole agents, etc. would not leave the customs administrations at themercy of the sole agents, etc. for the information necessary to prove a relationship.  These agents
would often not submit such documents which could conclusively prove the relationship.  She wanted
to hear others' views regarding her suggestion that Article 15.5 was irrelevant.
1.90 The representative of Canada said that Article 15.5 was in the Agreement to make it explicit
that Article 15.4 applied to sole agents, etc.  The negotiating history also showed that, during the
negotiations, some delegations wanted to drop the phrase "if they fall within the criteria ofparagraph 4".  He was reassured to hear that India agreed to maintain that phrase.   He had difficulty
with India's request to include additional "criteria"  for deeming sole agents etc. as related parties
because he was not sure what the other criteria would be, and because the Agreement clearly provided
the definition of "related".  He did not understand why this definition would not apply to sole agents,
etc.  Clearly if a sole agent, etc. met any of the conditions in the Agreement, it would be related and ifit didn't, it was not related.  India indicated that sometimes it had difficult obtaining information from
the sole agents, etc. on their particular business arrangement.   The Agreement gave clear ability and
tools to deal with situations where there was not sufficient information.  Allowing for other
unspecified criteria to deem a relationship would not improve transparency nor predictability.
1.91 The representative of India clarified that her delegation was not proposing to delete
Article 15.5 nor to add other criteria to those in Article 15.4.  The proposal meant to deal with
possibilities of a relationship with sole agents, etc. based on conditions that fell outside of the eight
conditions in Article 15.4.  The proposal was not seeking to change these eight conditions but to
recognize that there were other possible forms of relationship.  Terms of contracts these days werevery interesting and, in this regard, her delegation was seeking to replace the burden of proof on the
customs administration that a relationship did exist with the converse – that sole agents, etc. or the
trading entities would have to prove that a relationship did not exist.  Her understanding of the
Agreement was that importers, exporters and associated agents and brokerages, etc. would present
documents which the customs administrations would take into account in their valuation work.  Her
delegation was not seeking to change the nature, scope, nor the principles of the provisions.  Equally,
her delegation considered that Article 15.4 and the "if" clause in Article 15.5 limited recognition of arelationship by a customs authority because no other provision allowed for a relationship regarding a
sole agent, etc. outside of these eight conditions.
1.92 The representative of Canada understood that India was not seeking to change Article 15.4
but to change Article 15.5.  This was based on the assumption that India did not want to add other
criteria to Article 15.4 because it was not seeking to change the definition of related party for any
party except for sole agents etc.  India stated that possibilities of relationships between sole agents
existed that fell outside the eight criteria and wanted recognition of these other forms of relationships.
Also, India wanted the sole agents to have to prove that the relationship did not exist.  He asked what
were these other forms of relationships and conditions that would apply only to sole agents, etc.?  If asole agent would have to prove that it was not related, it would have to have criteria or conditions in
order to know what it had to fulfil or to prove or  disprove.  It would be necessary to know what the
conditions were for transparency and predictability purposes.
1.93 The representative of Japan said that his delegation considered that related persons had certain
definitions enshrined in the Agreement and sole agents, etc. had another definition.  Therefore, there
were two sets of definitions.  The Indian proposal  would assume that sole agents, etc were related
persons.  His delegation considered that related persons and sole agents, etc. were very differentG/VAL/M/26
Page 23
concepts and wanted to understand the rationale for correlating them.  He asked India to provide
further reasoning for assuming such an interpretation.
1.94 The representative of Brazil found the debate productive and constructive.  He shared the
view that Article 15.4 did not need any changes or additions of conditions. The problem was that sole
agents, etc. did not have any incentive to produce documentary evidence with regard to Article 15.4.
They were safeguarded because if the customs administration could not prove a relationship, they
were in a comfortable position.  The burden should be shifted to the sole agents, etc. to prove that they
were not related by providing documentary evidence of the relationship for customs administrations to
determine if the Article 15.4 conditions were being met.  This would not entail an automatic
presumption of relationship for sole agents, etc. but rather provide a some way in which customs
administration could presume a relationship in the absence of documentary evidence to the contrary.
1.95 The Chairman considered that the Committee had a useful initial exchange of views on the
tirets.  A number of questions and technical clarifications were raised.  Many delegations were
seeking clarification and understanding of the issu es and problems faced by Members.  There would
be more questions and clarifications sought at following meetings during which focus could be onspecific issues and problems and solutions could be considered.  Many delegations noted their
appreciation of the background paper by the Secretariat and their need to have questions in writing.
This would facilitate study and reflection for the next meeting.
1.96 The representative of Australia suggested that the question and answer process on the tirets
would be facilitated by deadlines for the submission of written questions and responses.  Deadlines
should be set to provide sufficient time to review written responses before the next meeting.
1.97 The Committee took note of all statements made.  It agreed  that questions on the tirets should
be submitted in writing by 15 April and responses should be provided in writing by 30 April 2002.  It
also agreed to revert to item A.2 at its next meeting.
II. TECHNICAL ASSISTANCE
2.1 The Chairman recalled that at the last meeting, it was agreed that the Secretariat would
prepare a draft agenda for the seminar on technical assistance that was foreseen for autumn 2002.
This draft had been circulated in document G/VAL/W/96.  He informed delegations that the World
Customs Organization was also planning a symposium on technical assistance/capacity building inautumn 2002.  He considered it important to avoid duplication and to coordinate work as much as
possible.  He asked Members to give some consideration to these latter two issues.
2.2 The representative of Canada stated that his Government had been providing technical
assistance to developing countries over the past six years.  Most recently, it had worked with APEC
countries and in the Caribbean.  He had just returned from a fact-finding/needs assessment mission in
Central America where his Government would be providing assistance to Guatemala, El Salvador,
Nicaragua and Honduras.  His Government welcom ed the organization of the seminar on technical
assistance and looked forward to participating in it.  His Government's experience showed that the
sharing of best practices and working together rendered the Customs Valuation Agreement moreeffective, neutral and fair.
2.3 The representative of India noted that her delegation had just received the draft agenda and
would need more time to study it.  She asked that the dates for the seminar be moved closer to the
November meeting of the Committee.  She was not sure what the intention was behind the topics forthe sessions – was it the intention to document a state-of-play of the technical assistance that had been
provided?  She was concerned that it would render the seminar too static.  Her delegation hoped to see
a more dynamic and future-looking assessment of needs and priorities.G/VAL/M/26
Page 24
2.4 The Chairman indicated that the draft agenda had been prepared on the basis of the comments
from the 26 February meeting where some delegation s thought it would be useful to share national
experiences of how Members had benefitted from technical assistance, and what were the present
needs and expectations.  It was also considered that donor Members and intergovernmental
organizations could share their experiences in providing assistance.  He asked Members for furtherconcrete suggestions on revising the agenda.
2.5 The representative of the European Communities indicated his delegation's satisfaction with
the draft agenda.  His delegation understood that the seminar would mark historic developments in the
provision of technical assistance as well as be forward-looking.  This could be incorporated through
the participants' presentations which could look at the dynamic of technical assistance and its value
and contribution as well as identify certain areas where assistance was still necessary.  The end of theyear would mark milestones for a number of countries which would have worked through their
implementation work programmes and would begin implementation.  Technical assistance needs
would not disappear but would become more specific .  The seminar would help both recipients and
donors to fine-tune their demands and offers for the future.
2.6 The representative of Canada saw merit in India's comments.  It had assumed that the seminar
would be similar to the trade facilitation seminar which allowed a useful sharing of information.
Speakers should consider talking about their past ex perience as well as their future plans.  His
delegation planned its technical assistance missions a year in advance, so this would help in future
planning.  Further, the seminar would provide an  opportunity for Members to share ideas on how to
improve technical assistance, identify where assistance should be aimed, and to identify elements that
had perhaps been overlooked.  He suggested a sess ion on "next steps".  His delegation would circulate
a paper on how and where his Government provided assistance.
2.7 The representative of Australia reinforced the need to avoid duplication between the seminars
planned by the WCO and WTO.  One option could be to combine the two events.  If this was not
possible, the Secretariat should work closely with the WCO to ensure that the respective agendas were
complementary rather than identical or similar.
2.8 The Committee took note of the statements made.  It agreed  that the Secretariat should
coordinate with the WCO to avoid duplication and to prepare a revised draft programme for the next
meeting.  It further agreed that the incoming Chairman would consult on this matter to assist in the
preparation of the revised agenda.
III. OTHER BUSINESS
3.1 The Chairman recalled that the next meeting of the Committee would be on 6-7 May 2002.
The Committee would take up regular business on 6 May and the implementation issues, in an
informal meeting followed by a formal meeting, on 7 May.
IV. ELECTION OF OFFICERS
4.1 The Chairman stated that the rules of pr ocedure for the Committee on Customs Valuation
provide for the election of a Chairperson at the end of the first formal meeting of the year.  The
Chairman of the Council for Trade in Goods had carried out consultations on a slate of names for
appointment as Chairpersons of standing bodies in accordance with the established guidelines for the
appointment of officers.  On the basis of the understanding reached, he proposed that the Committee
elect Mr. Raimundas Karoblis, Permanent Representative of Lithuania to the WTO, as Chairperson,
by acclamation.G/VAL/M/26
Page 25
4.2 The Committee elected Mr. Raimundas Karoblis (Lithuania) as Chairperson for the
year 2002.
4.3 The meeting was adjourned.
__________