WORLD TRADE
ORGANIZATIONG/L/244
15 May 1998
(98-1944)
Council for Trade in Goods
WTO TRADE FACILITATION SYMPOSIUM:   9-10 MARCH 1998
WTO rules relevant to Trade Facilitation
Statement by Mr. Heinz Opelz, Director, Market Access Division
INTRODUCTION
1. The legal framework of the WTO contains numerous Articles and provisions in Agreements
which have a direct relation to facilitating the movement of consignments across borders.  In the
GATT 1994, Articles V (Freedom of Transit), Article VII (Valuation for Customs Purposes), Article
VIII (Fees and Formalities connected with Importation and Exportation), Article IX (Marks of
Origin), and Article X  (Publication and Administration of Trade Regulations) contain obligations for
Members which are aimed at easing the conduct of international trade transactions.
2. In addition, several WTO Agreements have a direct bearing for trade facilitation.  These are
the Agreements on Customs Valuation, Import Licen sing Procedures, Preshipment Inspection, Rules
of Origin, Technical Barriers to Trade, as well as  the Agreement on the Application of Sanitary and
Phytosanitary Measures.
3. The General Agreement on Trade in Services  (GATS) with its annexed schedules provides for
liberalization in a number of service industries which are vital for the facilitation of trade, e.g.
transport, financing, telecommunications. The Agreement on Trade-Related Aspects of Intellectual
Property Rights  (TRIPS) contains a section on border measures which allows Members to take
specific measures to prevent the inflow of counterfeit and pirated goods.
ARTICLE V - FREEDOM OF TRANSIT
4. Article V deals with "traffic in transit".  It states that "there shall be freedom of transit
through the territory of each Member for traffic in transit to or from the territory of other Members...".
Further, it states that "...except in cases of fa ilure to comply with applicable customs laws and
regulations, such traffic coming from or going to the territory of other Members shall not be subject to
any unnecessary delays or restrictions and shall be exempt from customs duties  and from all transit
duties or other charges imposed in respect of transit, except charges for transportation or ...administrative expenses ...".  It establishes Most -Favoured-Nation (MFN) treatment for such transit
with respect to all charges, regulations and formalities.
ARTICLE VIII - FEES AND FORMALITIES CONNECTED WITH IMPORTATION AND
EXPORTATION
5. Article VIII of GATT 1994 stipulates that all fees and charges (other than import and export
duties and taxes covered by Article III) imposed on or in connection with importation or exportationG/L/244
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(a) must be "limited in amount to the approximate cost of services rendered";
(b) must not "represent an indirect protection to domestic products";
(c) must not "represent ... a taxation of imports ... for fiscal purposes".
Members recognize that the number and diversity of such fees, and the incidence and complexity of
import and export formalities should be reduced.  Further, documentation requirements should be
lessened and simplified.
6. "Service" in the sense of Article VIII is not to  be taken in the economic sense of "service", but
as "government activities closely enough connected to the processes of customs entry".
Agreement on Import Licensing Procedures
7. The Agreement on Import Licensing Procedures deals more specifically with some of the
procedural aspects of Article VIII.  It recognizes that import licensing procedures can have acceptable
uses, but also that their inappropriate use may impede the flow of international trade.  It establishes
disciplines on the users of import licensing systems to ensure that the procedures applied for grantingboth "automatic" (where a license is granted in all cases, used normally to establish trade statistics)
and "non-automatic" import licences (which usually serve to administer quantitative or other
restrictions on imports) do not in themselves restrict or distort trade.  WTO Members commit
themselves to simplifying and bringing transparency to their import licensing procedures and to
administering them in a neutral and non-discriminatory manner.  The Agreement sets up time-limitsfor the publication of information concerning licensing procedures, for processing of licence
applications, and for notification to the Committee on Import Licensing.
8. The Agreement requires prior publication of rules and all information concerning procedures
for the submission of applications for licences, including the eligibility of persons, firms or
institutions to make such applications, the administrative bodies to be approached, and the list ofproducts subject to the licensing requirement, in such a manner as to enable governments and traders
to become acquainted with them.  The Agreement further requires application forms for import
licences and renewal forms to be as simple as possible. Foreign exchange is to be made available for
licensed imports on the same basis as for goods not requiring import licences (Article 1.9).
ARTICLE IX - MARKS OF ORIGIN9. The Article establishes MFN treatment with respect to marking requirements.  It emphasizes
that the difficulties and inconveniences to the commerce and industry of exporting countries of
adopting and enforcing laws relating to marks of origin should be reduced to a minimum.  Whenever
practicable, required marks should be permitted to be affixed at the time of importation.  In addition,
Members should cooperate to prevent the use of trade names in such manner as to misrepresent thetrue origin of a product, to the detriment of protected distinctive regional or geographical names of
products.
ARTICLE X - PUBLICATION AND ADMINISTRATION OF TRADE REGULATIONS
10. The purpose of this Article is in the first place to achieve transparency.  It requires each
Member to promptly publish all laws, regulations, judicial decisions and administrative rulings
affecting imports and exports.  In addition, "agreements affecting international trade policy which arein force" between two Members shall also be published.  Measures imposing a new or moreburdensome requirement, restriction, or prohibition on imports, or on the transfer of payments, shall
be published before enforcement.  Each Member shal l further maintain or institute "judicial, arbitral
or administrative tribunals or procedures for the purpose, inter alia , of the prompt review and
correction of administrative action relating to customs matters".G/L/244
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11. Article X:3 provides for uniform, impartial, and reasonable administration of laws, decisions
and rulings affecting import and export.
ARTICLE VII - VALUATION FOR CUSTOMS PURPOSES
Agreement on Customs Valuation
12. Article VII lays down the main principles governing the valuation of imports for assessment
of duties or other charges (not including internal taxes).  It establishes that this assessment should bebased on the "actual value of the imported merchandise, or of like merchandise, and should not be
based on the value of merchandise of national origin or on arbitrary or fictitious values".  The Articledefines "actual value".
13. Interpretation and application of this Article has been more clearly specified in the Tokyo
Round and Uruguay Round Agreements on Impl ementation of Article VII of GATT 1994"
(Agreement on Customs Valuation) which establishes the rules for valuing imports for the assessment
of ad valorem customs duties.  As most countries today assess duties on the basis of an ad valoremsystem, the method in which customs authorities value imported goods is of paramount importance.
Harmonization of the methodology used by countries for valuing imports creates predictability and
transparency for exporters and importers transacting in the international marketplace.  The Agreement
stipulates that the price for customs purposes shall be  the transaction value, that is the "price actually
paid or payable for the goods when sold for export to the country of importation adjusted inaccordance with the provisions of [the Agreement]".   The Agreement provides for the establishment
of an adequate legal and judicial framework which would ensure the right of appeal for importers.  In
addition, the Agreement stipulates that customs authorities must release goods to importers with the
posting of a guarantee or surety, in cases where further investigation is required.
14. Currently, the WTO is in the process of devising a technical assistance programme to enable
those developing countries which have invoked a 5-year delay period for the application of the
Agreement, to implement the Agreement when their transition period expires.
Agreement on Preshipment Inspection
15. The Agreement on Preshipment Inspection was negotiated with the aim of reducing any non-
tariff barriers that could result from the use of private agents to conduct quantity, quality and price
inspection of imports.  The Agreement does not encourage countries to use PSI, but recognizes that
some countries might employ such private entities on a transitional basis.  As the WTO applies among
governments, the Agreement can only be implemented through Members imposing its provisions on
these entities through their contracts with them.  In establishing a set of provisions for the carrying out
of these inspection activities, the Agreement harmonizes the rules for the carrying out of preshipmentinspection activities world-wide.  A Working Party has been established to review the functioning of
the Agreement.  The Working Party has produced a report which contains recommendations which
should lead to an improvement of the practices surrounding PSI activities.
Agreement on Rules of Origin
16. The Agreement on Rules of Origin aims ma inly at harmonization of non-preferential  rules of
origin, and seeks to ensure that such  rules do not themselves create unnecessary obstacles to trade.
The Agreement sets out a 3-year harmonization work programme for non-preferential rules of origin
to be undertaken in conjunction with the WCO.  Th e underlying principle is that the originating status
of a good should be either the country where the good has been wholly obtained or, when more than
one country is concerned in its production, the country where the last substantial transformation hasG/L/244
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been carried out.  Harmonization work started officially in July 1995, which means that the work has
a deadline for completion by July 1998.
17. Until the completion of the harmonization work programme, Members shall ensure that their
rules of origin do not discriminate between Members;  the rules of origin shall be clearly defined andtransparent;  they must be administered in a consistent, uniform, impartial and reasonable manner and
be based on a positive standard. Members have to publish their rules of origin promptly; any
administrative action in relation to the determinat ion of origin shall be promptly reviewable by
judicial, arbitral or administrative tribunals or procedures independent of the authority issuing the
determination;  such findings can modify or reverse the determination.  Upon request, assessments oforigin shall be issued as soon as possible but no later than 150 days after such a request is received.
18. The Agreement on Rules of Origin contains also a Declaration on preferential rules of origin
which does not foresee harmonization of such rules, but establishes disciplines very similar to the
ones for non-preferential rules of origin.
Agreement on Technical Barriers to Trade
19. The TBT Agreement recognizes that product standards, technical regulations and conformity
assessment procedures are essential for the functioning of modern economies. The WTO does not
develop product standards, nor does it require its Members to have such standards.  Rather, the TBT
Agreement allows Members to develop their own technical regulations, standards and conformity
assessment procedures for certain legitimate purposes, such as the protection of human, animal, plantlife or health, of the environment, or for the prevention of deceptive practices, and seeks to ensure that
no unnecessary obstacles to trade are constituted.  Technical regulations shall not be more trade
restrictive than necessary to fulfil a legitimate objective.  Product regulations shall, where appropriate,
be specified  in terms of performance rather than design or descriptive characteristics.
20. The Agreement lays down the principle of non-discrimination between Members  and
encourages them to use existing international standards in the development of their national
regulations.  Members are to give positive consideration to accepting, as equivalent, technical
regulations of other Members, even if these regulations differ from their own, provided they aresatisfied that these regulations adequately fulfil the objectives of their own regulations.  Finally, the
Agreement encourages Members to enter into mutu al recognition agreements for the acceptance of
conformity assessment procedures.
Agreement on the Application of Sanitary and Phytosanitary Measures
21. The SPS Agreement contains several provisions which relate to facilitating the flow of goods
across borders.  A fundamental obligation in this respect is that Members shall ensure that their
sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members,
where identical or similar conditions prevail, in cluding ensuring national treatment.  Moreover,
sanitary and phytosanitary measures shall not be applied in a manner which would constitute adisguised restriction on international trade (Art. 2.3).  In addition, there are a number of more specific
provisions related to trade facilitation, particularly regarding harmonization of SPS measures,
equivalence, recognition of disease-free areas, transparency, and control, inspection and approval
procedures.
22. The Agreement encourages the use of international standards, guidelines and
recommendations, thus enhancing transparency and security.  The Agreement provides that Members
shall accept SPS measures of other Members as equivalent, even if these measures differ from their
own or from those used by other Members.  The onus to demonstrate equivalence rests with the
exporting Member.  Moreover, the Agreement encourages Members to enter into consultations withthe aim of achieving bilateral and multilateral equivalence agreements (Art. 4).  Members are requiredG/L/244
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to notify any new or chan-ged sanitary and phytosanitary requirements which affect trade. They also
have to set up Enquiry Points to respond to requests for any additional information on new or existing
measures, including on how they apply their food safety and animal and plant health regulations.
Annex C to the Agreement establishes detailed provisions aiming at rendering the control, inspection
and approval procedures non-discriminatory and as efficient as possible taking into account legitimate
commercial interests.
General Agreement on Trade in Services (GATS)
23. Under the general obligations  of the GATS, the Most-Favoured-Nation rule (Article II)
applies to all service sectors, regardless of whether a Member has undertaken specific commitments;
this means that if a Member has no market access and national treatment commitments it must still not
discriminate between suppliers of other Members. The obligation of transparency (Article III) requires
Members to publish all measures of general application affecting trade in services and to notify theWTO of any changes in laws and regulations affect ing trade in services in sectors where specific
commitments have been undertaken. The rules on domestic regulation (Article VI) require Members:
(i) to administer all measures of general application in an reasonable, objective and impartial manner;
(ii) to maintain or institute appropriate procedures and remedies for the review of administrative
decisions affecting trade in services; (iii) to provid e for adequate procedures to verify the competence
of professionals of other Members in sectors where specific commitments have been undertaken.
24. Under the specific commitments, the GATS covers all types of transport services , with the
exception of air traffic rights.  In the Uruguay Round 46 Members made commitments in maritime
transport services, 51 in air transport , 32 in rail transport  and 48 in road transport .  The maritime
transport sector includes sub-sectors such as international freight and passenger transport, maritime
cargo handling, storage and warehousing services, customs clearance services, container station and
depot services, maritime agency services and maritime freight forwarding services.  It has been agreed
that negotiations on maritime services will resume in the year 2000.
25. Fifty-four WTO Members have commitments in  Electronic data interchange  (EDI), a value
added telecommunication service.
26. Obviously, modern telecommunications  systems do provide new opportunities and means to
facilitate trade in goods and services.  Internet services are a sub-sector on which some Members haveundertaken specific commitments in the Uruguay Round or in the recent telecommunications
negotiations.  Internet services include at least three value-added telecommunications servicescovered by the GATS:  electronic mail, on-line information and data base retrieval and electronic data
interchange (EDI).  Currently 61 WTO Members have commitments in electronic mail, 63 in on-line
information and data base retrieval and 54 in EDI.
27. As concerns Financial Services , at the end of the negotiations on 12 December 1997 a total of
70 countries made commitments.
28. As concerns Distribution Services,  a total of 47 Members, including all industrialised
economies, have undertaken commitments in the Uruguay Round (45 in wholesale trade services, 44in retailing services, 34 in franchising and 32 in commission agentsÿ services).
Agreement on Trade-Related Aspects of Intellectual Property Rights
29. The TRIPS Agreement establishes minimum standards for intellectual property rights
protection and enforcement.  In WTO terms, these are internal policy instruments that do not, in
general, give rise to action at the border.  There is, however, one significant exception, in the section
of the Agreement on Special Requirements Related to Border Measures.   It concerns a specificG/L/244
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procedure, commonly known as "special border measures" by which right holders can obtain the
assistance of customs authorities in suspending the release of goods, suspected of being counterfeit or
pirated, into free circulation.  This acts as a sort of "safety net" to deal with cases where there has been
no effective enforcement in the country of production.
30. The special border measures have two basic objectives:  one is to ensure that effective means
of enforcement are available to right holders;  the second, which is more directly relevant to trade
facilitation, is to ensure that enforcement procedures are applied in such a manner as to avoid the
creation of barriers to legitimate trade and to provide for safeguards against their abuse.  The
provisions on special border measures stipulate certain requirements designed to this effect.  These are
intended to dissuade right holders from making groundless applications and to protect the position of
the importer, owner and consignee of the goods, whilst still permitting effective action at the border
against counterfeit trademark and pirated copyright goods.
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