RESTRICTEDWORLD TRADE
ORGANIZATIONG/VAL/W/97
26 March 2002
(02-1534)
Committee on Customs Valuation
COMPILATION OF DISCUSSIONS IN VARIOUS WTO BODIES
ON IMPLEMENTATION-RELATED ISSUES
CONCERNING CUSTOMS VALUATION
Background note by the Secretariat
At the request of delegations, the Secretariat has compiled the relevant portions of documents
in which the tirets in paragraph 7 of document Job(01)/152/Rev.1 and/or the subject-matter ofparagraph 8.3 of document WT/MIN(01)/17 have been discussed.  Below is a list of the documents
which are annexed and which are presented in chronological order.
I. PROPOSALS .................................................................................................................... ........2
A. WT/GC/W/227.................................................................................................................. ..........2
B. WT/GC/W/354, 
PARAGRAPHS 28-30..........................................................................................5
C. WT/GC/W/355, PARAGRAPHS 30-32..........................................................................................5
D. J OB(99)/3169, PARAGRAPHS 79-85.............................................................................................6
E. JOB(99)/3169/A DD.1..................................................................................................................7
II. MINUTES OF GENERAL  COUNCIL SE SSIONS...............................................................7
A. M EETING OF 22 J UNE AND 3 JULY 2000 (WT/GC/M/56 – PARAGRAPHS 149 TO 161 )..............7
B. M EETING OF 18 O CTOBER 2000 (WT/GC/M/59 – PARAGRAPHS 21-26)..................................11
C. M EETING OF 15 D ECEMBER 2000 (WT/GC/M/62 - PARAGRAPHS 7-9  AND 22-24).................12
D. M EETING OF 27 A PRIL 2001 (WT/GC/M/64 - PARAGRAPHS 32- 33, 51-62; 72-76;
AND 84-86)......................................................................................................................... .......14
E. M EETING OF 20 J ULY 2001 (WT/GC/M/67 – PARAGRAPHS 13, 16, 25-27, 34-35, 50-
51 AND 54-55)......................................................................................................................... ..21
F. M EETINGS OF 3 OCTOBER 20001 AND 1 NOVEMBER 2001 (WT/GC/M/70 –
PARAGRAPHS 5-6 AND 15-16) ...................................................................................................25
III. GENERAL COUNCIL  DECISION .....................................................................................26
A. D ECISION OF 15 D ECEMBER 2000 (WT/L/384) ........................................................................26
IV. DISCUSSIONS IN THE COMMIT TEE ON CUSTOMS VALUATIO NS.......................29
A. M INUTES OF THE MEETING OF 7, 13, 24, A ND 29 N OVEMBER 2000 (G/VAL/M/17 –
ITEM 2) ............................................................................................................................. .........29
B. R EPORT OF THE CHAIRMAN OF THE COMMITTEE ON CUSTOMS VALUATION TO THE
GENERAL COUNCIL (G/VAL/36) ..............................................................................................45
C. R EPORT OF THE CHAIRMAN OF THE COMMITTEE ON CUSTOMS VALUATION TO THE
CHAIRMAN OF THE GENERAL COUNCIL (WT/GC/49) ..............................................................50G/VAL/W/97
Page 2
Annex
I. PROPOSALS
A. WT/GC/W/227
PREPARATIONS FOR THE 1999 MINISTERIAL CONFERENCE
Proposals Regarding the Implementation of  the Agreement on Implementation of
Article VII of the GATT 1994 in terms of Paragraph 9(a)(i)
of the Geneva Ministerial Declaration
Communication from India
The following communication, dated 2 July 1999, has been received from the Permanent
Mission of India.
_______________
1. Issue:  Ministerial Decision regarding rejecti on of transactions value method in doubtful
cases
1. Article 1 of the Agreement on Implementation of  Article VII of the GATT 1994 is to be read
together with Article 8 which provides inter alia  for adjustments to the price actually paid or payable
in cases where certain specific elements which are considered to form a part of the value for customs
purposes are incurred by the buyer but are not included in the price actually paid or payable for theimported goods.  The Agreement, therefore, enjoins customs administrations to accept the transaction
value except in specified circumstances as laid down in Article 1. Article 17 of the Agreement
recognizes that in cases where there may be reason for doubt, customs administrations may satisfy
themselves as to the truth or accuracy of any statement, document or declaration presented for
customs valuation purposes.  Paragraph 6 of Anne x III to the Agreement secures full cooperation of
importers in the conduct of enquiries by a customs administration in this regard.
2. However, these provisions are inadequate to deal with situations such as collusion between
the importer and exporter for undervaluation of goods aimed at evading customs duty.  Verification
and enquiry by customs administrations set out in Article 17 would not enable the establishment of
fraud in such instances.  Furthermore, the importer can not be expected to fully cooperate with
customs administrations when he is a party to undervaluation and to suppression of information.
3. At the Marrakesh meeting of April 1994 a decision was taken by the Ministers to deal with
this issue (“Decision Regarding Cases Where Customs Administrations have Reasons to Doubt the
Truth or Accuracy of the Declared Value” taken by the WTO Committee on Customs Valuation at its
first meeting held on 12 May 1995 pursuant to the Marrakesh Decision).  This Decision sets out theprocedures to be observed in such cases and may be particularly useful in cases where a
manufacturer’s invoice has not been submitted and where the declared value is much less than the
traded prices given in contemporaneous reputed international publications or is less than the price at
which the goods are sold in the ordinary course of trade under fully competitive conditions.
ProposalG/VAL/W/97
Page 3
4. For practical applicability, this Decision may be incorporated in the WTO Agreement itself as
it will help in a significant way in tackling the problem of undervaluation which is reported to be
rampant in many developing countries, especially those where the rates of customs duty are relatively
high.
2. Issue:  Multilateral arrangement for ex change of information on customs value
5. The provisions of the Agreement do not address the situation where an exporter files the
correct export declaration to the customs authorities, but the importer unilaterally resorts to
mis-declaration of value to the customs authoriti es in the importing country to evade due customs
duty.  To tackle this problem, the practice of entering into bilateral agreements for exchange of
information regarding customs value as evolved.  But this is not a practical and enduring solution tothe problem.
Proposal
6. A multilateral solution that enables customs administrations of importing countries to seek
and obtain information on export values contained in the export declaration to the customs
administrations of exporting countries, in a time-bound manner, in doubtful cases, is proposed.
3. Issue:  Determination of customs value on th e basis of transactions value of identical or
similar goods
7. Where the customs value can not be determined under the provisions of Article 1, Articles 2
and 3 of the Agreement proceeding sequentially envisage consultation between the customs
administration and the importer with a view to arriving at a “identical goods” or “similar goods” basis
of transaction value.  The Agreement provides that if in applying these Articles more than onetransaction value of identical or similar goods is found, the lowest of such values shall be used to
determine the customs value of the imported goods.  This provision creates a bias in favour of
importers and could lead to manipulation.  In fact, in many instances the variation between the lowest
value and the highest value of identical or similar goods is very wide and there may be a
concentration of transactions in the higher end of the range.  In a situation where the transaction at the
far lower end results from a deliberately conducted import consignment, a pilot consignment at a
suppressed value, the resultant application of the provision that the lowest value shall be used todetermine the customs value of the imported goods may not fall within the general principles of
valuation set forth in these Articles.
Proposal
8. This situation needs appropriate correction to avoid manipulation of import prices and a better
approximation of “transaction value”.  It is pr oposed that the Agreement should be amended to
provide for the highest value when more than one transaction value of identical or similar goods is
found.
4. Issue:  Buying commissions
9. Under Article 8 of the Agreement, adjustments to the price actually paid or payable is
provided in cases where certain elements which are considered to form a part of the value for customs
purposes are incurred by the buyer but are not included in the price actually paid or payable for theimported goods.  Commissions and brokerage, exce pt buying commissions, therefore, have to be
taken into consideration in determining the cu stoms value.  “Buying commissions” are payments
made by an importer to his agent for the servi ce rendered by the agent towards representing the
importer overseas in the purchase of the goods under valuation. Buying agents may also, in some
instances, buy the goods from the manufacturer or trader in that country using own funds and re-G/VAL/W/97
Page 4
invoice the purchase to the importer.  The Agreements recognizes the second invoice price as the
transaction value in such instances.  However, manipulation through artificially reduced re-invoice
prices frequently occurs to mutual benefit. The exclusion of buying commissions from the
computation of value encourages such under-invoicing and the artificial splitting of value, especially
when purchases are first made by buying agents and are re-invoiced to the importer.
Proposal
10. Buying commissions should, therefore, 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.
5. Issue:  Cost of services, such as engineering, development and design
11. Under Article 8:1(b)(iv) of the Agreement, 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, is permitted only if the services are
undertaken other than in the country of importation.  This provision provides room for the splitting ofthe import value, by claiming that part of the services were rendered in the importing country itself.
Proposal
12. It is proposed that the cost of such services, which are integral to the value of the imported
goods, should be included in the valuation irrespective of whether they were undertaken in the
country of importation.
6. Issue:  Imports by sole agents, sole distributors and sole concessionaires
13. Valuation of imports by sole agents, sole distributors, and sole concessionaires of large
corporations, including transnational corporations, poses a problem as such entities are not considered
as “related persons” automatically under Article 15:5 of the Agreement.  If such entities sell the
product at specially reduced prices, there may be no means available with customs administrations to
check the veracity of such special prices.  Article 1:2(a) and (b) provide safeguards in the matter of
acceptance of transaction value for customs purposes between a buyer and a seller who are “related”.
Proposal
14. In order to shift the burden of proving that the prices quoted are not influenced by the
relationship to the agents, distributors or concessionaires, as the case may be, persons associated with
each other as sole agents, sole distributors, and sole concessionaires, howsoever described, shouldtherefore automatically be deemed “related”.
7. Issue:  Determination of customs value under the residual method in Article 7 of the
Agreement
15. The determination of customs value under the residual method is set out in Article 7 of the
Agreement.  Article 7.2 prohibits, inter alia,  determination of customs value on the basis of:  (i) the
price of goods in the domestic market of the country of exportation;  and (ii) the price of the goods for
export to a country other than the country of importation.  The exclusion clause (c) in paragraph 2,
however, creates a situation of dichotomous treatment.  Under the WTO Agreement onAnti-Dumping, a product is to be considered as being dumped (that is, introduced into the commerce
of another country at less than its normal value), if the export price of the product is less than the
comparable price for the like product sold in the domestic market or is less than the export price in a
third country where there is no sale in the domestic market.  Therefore, while the Agreement onG/VAL/W/97
Page 5
Anti-Dumping takes cognisance of the domestic price and export price in a third country, the Customs
Valuation Agreement explicitly excludes such a possibility.
Proposal
16. The residual method of determining customs value appropriately should be inclusive of all
residual eventualities, allowing valuation based on domestic market price or export price in a third
country with appropriate adjustments.
B. WT/GC/W/354, PARAGRAPHS 28-30
Agreement on Implementation of Article VII of the GATT 1994
28. A multilateral solution, that enables customs administrations of importing countries to seek
and obtain information on export values contained in the export declaration to the customs
administrations of exporting countries, in a time-bound manner, in doubtful cases, shall be included in
the Agreement.
29. 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), in the valuation of imported goods
irrespective of whether the services were undertaken in the country of importation.
30. In order to ensure that due cognisance is taken of the domestic price and export price in a
third country as is done in the Agreement on Anti-Dumping, 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.
C. WT/GC/W/355, PARAGRAPHS 30-32
Agreement on Implementation of Article VII of the GATT 1994
30. In order to avoid manipulation of import prices and enable a better approximation of
‘transaction value’, the Agreement should be amended to provide for the highest value when more
than one transaction value of identical or similar goods is found.
31. In order to address the problem of manipulation through artificially reduced re-invoice prices,
mainly under-invoicing and the artificial splitting of value, especially when purchases are first made
by buying agents and are re-invoiced to the importer, for the purposes of Article 8 of the Agreement,
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.
32. For the purposes of valuation of imports by sole agents, sole distributors, and sole
concessionaires of large corporations, including trans-national corporations, under Article 15.5 of the
Agreement, and in order to shift the burden of proving that the prices quoted are not influenced by the
relationship to the agents, distributors or concessionaires, as the case may be, persons associated witheach other as sole agents, sole distributors, and sole concessionaires, howsoever described, should
automatically be deemed ‘related’.G/VAL/W/97
Page 6
D. JOB(99)/3169, PARAGRAPHS 79-85
5.1 Agreement on Customs Valuation
5.1.1 Main features
79. The Agreement on Customs Valuation provides that value of imported products should be
determined by the Customs for the purpose of the levy of customs duties on ad valorem  basis, on the
basis of the “price paid and payable by the importer in the transaction being valued”.  As a result of
the Decision adopted in the Uruguay Round, it is open for customs to reject the transaction value
when it has reasons to doubt the truth or accuracy of the value declared by the importer.  However,
where customs reject the value declared by the customs by following the procedures laid down by the
Decision, they are required to determine the dutiable  value by following the five methods laid down in
the Agreement.  These methods have to be followed in the hierarchical order in which they are listed
in the Agreement and only where the method listed first cannot be used, the next method in the list
could be used.
5.1.2 Experience of the operation of the Agreement
80. Over 50 countries have not been able to acc ede to the Agreement on Customs Valuation.  One
of the reasons for the reluctance of customs administrations in these countries to change over to the
Agreement’s valuation system is that it is vastly different from the valuation system, based on
Brussels Definition of Value, which they follow at present.  They are apprehensive that unless theircustoms officials are trained to apply the new system, its adoption could lead to loss of revenue.
81. Loss of revenue could also occur from the provisions in the Agreement which require
customs administrations in these countries to deviate from their existing practices to add to the “price
paid or payable”, “buying commissions” and “special discounts obtained by importers who operate assole agents”.
82. The experience of countries which have acceded to the Agreement has also brought out
practical difficulties which arise in applying the rules of the Agreement.  For instance, even though
the Uruguay Round Decision now permits customs administrations to reject the value declared by the
importer, where they consider that it has been deliberately under or over-valued, in practice it is not
possible for them to make use of the authority given by the Decision, because of the non-availabilityof reliable and up-to-date “date on prices” required for price comparison purposes.  The rules of the
Agreement also pose problems in determining dutiable value of goods traded on the basis of “transfer
pricing” between parent companies and their subsidia ries and affiliates should be determined.  In a
number of developing countries, with the gradual removal of restrictions that were previously applied
to foreign direct investment, industry to industry trade among the member units of the transnationalcorporations is on the increase.
5.1.3 Possible future action
5.1.3.1 Strengthening of the provision of technical assistance
83. To facilitate accession to the Agreement by countries which have not been able so far to join
the Agreement, it would be necessary to strengthen and reorient the technical assistance provided by
WTO, WCO and other international organizations.  Such re-orientations would require greater
emphasis being placed on training of officials at operative level who are primarily responsible for thecollection of duties in applying methods prescribed by the Agreement, adopting the modern methods
in customs clearance, building of price database that could be used for price comparison purposes, and
assisting customs administrations in adopting new management techniques.G/VAL/W/97
Page 7
5.1.3.2 Extension of the transitional period
84. The transitional period provided for developing countries to accede to the Agreement would
expire on 1 January 2000.  Even though the provision of technical assistance may help, it is unlikely
that many of them would be able to accede within the limited time available between now and thetarget date.  It would be therefore desirable to extend the transitional period by five years, for all
countries, which request for such extension.
5.1.3.3 Clarifications and modifications in the rules of the Agreement
85. It would be further necessary to examine inter alia :
- whether any changes in the rules relating to treatment of “buying commissions” and
“special discounts obtained by sole agents” in determining dutiable value by customs
administrations are necessary;
- how the customs administrations could be assisted in developing “price data base”
which they need for price comparison purposes where they have reasonable grounds
to believe that the imported goods have been deliberately undervalued;  and
- whether the existing provisions of the Agreement are adequate enough to enable
customs administrations in developing countries to deal with trade that takes place onthe basis of transfer pricing.
E. JOB(99)/3169/A
DD.1
PREPARATIONS FOR THE 1999 MINISTERIAL CONFERENCE
Non-Paper on Implementation Issues
Communication from Zambia, Jamaica, Kenya, Pakistan,
Sri Lanka, Tanzania and Uganda
Addendum
Zimbabwe should be added to the list of countries submitting the Non-Paper.
II. MINUTES OF GENERAL COUNCIL SESSIONS
A. MEETING OF 22 J UNE AND 3 JULY 2000 (WT/GC/M/56 – PARAGRAPHS 149 TO 161 )
149. The representative of India said that the proposals by India on the Customs Valuation
Agreement drew upon the recognition in the Agreemen t that the provisions of Article VII needed to
be elaborated in order to provide greater uniformity and certainty in their implementation.  The
Agreement required that the customs value should be based on the transaction value, or the actual
value.  The Agreement also recognised that a fair, uniform and neutral system for the valuation ofgoods for customs purposes should preclude the use of arbitrary or fictitious customs values.  India
attached importance to both these dimensions of th e Agreement, which laid out that the actual value
would be the sale price in the ordinary course of trade and under full competitive conditions.  Uniform
customs valuation methods presented in a hierarchy under the Agreement had been advocated on the
grounds that importing countries should not use arbitrary values to restrict trade and that traderswould know in advance their duty liability with  certainty.  Implementation of the Agreement,
however, posed many problems particularly for the customs administrations of developing countries.G/VAL/W/97
Page 8
It was easier to rely on transaction values in adva nced countries where the duty rates were low, import
controls were minimal and not based on value, exchange controls were non-existent, corruption in the
public service was low, voluntary compliance was high and the judicial system was quick and
efficient.  But the situation in developing countries was different.  Moreover, the number of cases of
fraudulent transactions might not be as high in developed countries as in developing countries.  TheWorld Bank Policy Research Paper entitled "Implementation of Uruguay Round Commitments: The
Development Challenge", of October 1999, observed that:  "Where tariffs are high, and where
accounting expertise and access to electronic information limited, shifting to a risk-based valuation
system that depends on in depth examination of a sample (15 or 20 percent) of shipments, might
increase rather than reduce the number of shipments on which importers attempt to under-invoice.
Traders might view the change as giving them a better, not a worse chance to get away with under-
invoicing".
150. India's specific proposals in this area were aime d at addressing these important provisions and
the need to deter fraud, facilitate genuine trade and protect revenue.  The first proposal in
paragraph 21 suggested a multilateral arrangement for the exchange of information on customs value.
The provisions of the Agreement did not address the situation where an exporter filed the correctexport declaration to the customs authorities, but th e importer unilaterally resorted to mis-declaration
of value to the customs authorities in the importing country to evade due customs duty.  To tackle this
problem, the practice of entering into bilateral ag reements for exchange of information regarding
customs value had evolved.  But this was not a practical and enduring solution to the problem.  In this
regard the World Bank Paper stated that:  "At least for basic goods, a valuation system based onobserved world prices might offer a better opportunity to introduce transparency, objectivity and
accountability into the system.  At periodic reviews of these "reference prices" both import users and
import-competing interests might be given "standing" and could be offered the opportunity to submit
evidence in support of revisions.  It might also be possible to establish a collective system of reference
prices, over which no one government had control.  Schedules of reference prices might bedetermined by an intergovernmental group, their preparation and circulation might be contracted to an
independent agency".   The Agreement did not explicitly provide for adoption of reference values as a
method of valuation.  However, there might be no objections to using such values for price
comparison purposes to test the truth and accuracy of declared values and for rejection of the
transaction value method.   Successful implementation of the Agreement and proper valuation of
goods traded internationally required international cooperation.  One way could be through securing
administrative assistance from the customs administration of the exporting country when there wasdoubt regarding truth and accuracy of the value declared.  This was not a new idea, since the
International Convention on Mutual Administrative Assistance for the Prevention, Investigation and
Repression of Customs Offences (the Nairobi Convention) acknowledged in its preamble that
"offences against Customs law are prejudicial to the economic, social and fiscal interests of States and
to the legitimate interests of trade" and that "action against Customs offences can be rendered moreeffective by co-operation between Customs administrations".  This Convention had been ratified by
only 38 countries, of which only 28 had ratified Annex II relating to valuation frauds, and most of
developed countries had not done so.  Thus, while developing countries had a binding obligation to
apply the Agreement, there was no such binding obligation on developed-country Members to render
assistance to verify customs values even in doubtful cases.  India's proposal was accordingly todevelop a multilateral solution that enabled customs administrations of importing countries to seek
and obtain information on export values contained in the export declaration from the customs
administrations of exporting countries in doubtful cases, in a time-bound manner.  The second
proposal addressed the cost of services, such as engineering, development and design.  Under
Article 8.1(b)(iv) of the Agreement, the addition of the cost of such services, supplied directly orindirectly by the buyer free of charge or at reduced  cost for the production of goods under import, was
permitted only if the services were undertaken other than in the country of importation.  This
provision provided for the import value to be split, by claiming that part of the services had been
rendered in the importing country itself.  India's proposal was that the cost of such services, which
were integral to the value of the imported goods, should be included in the valuation irrespective ofG/VAL/W/97
Page 9
whether they had been undertaken in the country of importation.  The third proposal addressed the
determination of customs value under the residual method in Article 7 of the Agreement.  Paragraph 2
of this Article prohibited, inter alia, the determination of customs value on the basis of:  (i) the price
of goods in the domestic market of the country of exportation; and (ii) the price of the goods for
export to a country other than the country of importation.  The exclusion clause (c) in paragraph 2,however, created a situation of dichotomous trea tment.  Under the Anti-Dumping Agreement, a
product was to be considered as being dumped (introduced into the commerce of another country at
less than its normal value) if the export price of the product was less than the comparable price for the
like product sold in the domestic market or the export price in a third country where there was no sale
in the domestic market.  While the Anti-Dumping Agreement recognized the domestic price and
export price in a third country, the Customs Valuation Agreement explicitly excluded such a
possibility.  India proposed that the residual method of determining customs value appropriately underArticle 7 should be inclusive of all residual eventualities, thus allowing valuation based on domestic
market price or export price in a third country with appropriate adjustments.
151. The representatives of Cuba, Honduras
, Pakistan  and Sri Lanka  supported the statement by
India, since their countries had been co-sponsors of the proposals in paragraph 21(h).152. The representative of Hong Kong, China said  that, with regard to the first proposal on
customs valuation in paragraph 21, his delegation believed that there had been some developments
since the 19 October text which would provide a better basis to take the matter forward, in the
consultations or further discussion in the General Council.
153. The representative of the European Communities said that his delegation was not in a position
to provide a detailed position on the issues under discussion, and it believed that this was an area
where an exchange at expert level would be necessary.  His delegation's preliminary reaction to the
proposals was that most of them would entail negotiation, since they appeared to question thefundamentals of the Customs Valuation Agreement.  In the case of the proposal relating to the
exchange of information between authorities, it was difficult to envisage how to make such a system
operational in a way which would not result in a burden on the services concerned.  His delegation
wondered whether the proposal addressed more the symptoms rather than the underlying problem,
which was the effective application of the Agreement.  He wished to draw attention to proposals in
this area on which his delegation had been working.  The first addressed extensions for developing
countries in difficulties coupled together with an implementation programme for the countriesinvolved.  The second covered the broader issue of enhanced technical assistance to build capacity, on
which his delegation had submitted a specific proposal, in the belief that this was the key to both good
and timely implementation of the Customs Valuation Agreement.  This approach could serve as a
model for other agreements where some least-developed countries had especially acute resource
problems.  His delegation was keen to make progress on these two issues, which it believed wouldremove many of the implementation problems in the area of customs valuation.
154. The representative of Japan said that his delegation believed that the first three proposals in
paragraph 21(h) would involve altering the right and obligations under the current Agreement and
they would most appropriately be addressed in further negotiations.  The first proposal wouldprobably entail changing his country's domestic regulation and the third proposal would involve a
considerable burden on customs authorities and would imply technical complexities.  With regard to
the fourth proposal, his delegation believed that this issue was being adequately dealt with in a
separate process.
155. The representative of the United States said that her delegation appreciated the statement by
India on the justification for its proposals.  However, her delegation was concerned that some of the
issues raised involved re-negotiating the provisions of the Customs Valuation Agreement, and it
believed that the Agreement was sufficient as it stood.  With regard to the first proposal, the
Agreement adequately addressed the issue of verifying the truth or accuracy of statements andG/VAL/W/97
Page 10
declarations made by importers.  However, her delegation was willing to engage in further
consultation on some means of facilitating the objective sought in the proposal, short of opening up
the Agreement.  On the second proposal, her delegation was concerned that the proposal would
discourage the design and development of products by domestic workforces in the importing country.
Her delegation did not see how these related to the transaction value, but it would be ready to explorefurther clarifications.  Equally, the third propos al might change the fundamental character of the
Agreement, since it explicitly recognised these methods of valuation as being inappropriate to
approximate transaction value.  Her delegation also agreed with the statement by the European
Community in this respect.  Since these proposals had been made there had been demonstrative
progress on the issue of transition periods and more was being done in the area of technical assistance.
While technical assistance was not necessarily a solution to all implementation issues, Customs
Valuation was one area where it was applicable.
156. The representative of Morocco said that, as a developing country, Morocco fully associated
itself with the statement by India.157. The representative of India said that the Customs Valuation Agreement provided for the
declared transaction value to be the basis for customs valuation.  The first proposal addressed the
discrepancies which existed between the value declared by the exporter to the exporting customs
authority and the value declared by the importer to the customs authority of the importing country.  In
a number of countries, this led to fraud and a leakage of revenue.  Some delegations believed that this
proposal would change the balance of rights and obligations in the Agreement, but since the existingprovision was not effective, a way should be found to allow customs administrations in importing
countries to obtain the cooperation of those in exporting countries when they had strong reasons to
believe that there was a discrepancy.  One could not reject the aim of dealing with fraud through
seeking the help of exporting countries by saying that the existing balance of rights and obligations
was correct.  No major burden would result from this proposal, since the documents existed in mostcases.  The argument that it would require a change in domestic laws for some Members was not also
not valid, since many Members were struggling to change their laws to implement the WTO
Agreements.  It was extraordinary that many developed and even some developing countries could be
opposed to this simple proposal, and this was a matter for reflection.
158. The representative of the United States said that her reference to the balance of rights and
obligations in her earlier statement had been with regard to other proposals, not the first one.  She
wished to reiterate that the existing provisions were adequate to verify the accuracy of declarations
made by importers.  Her delegation acknowledged there was a problem in this area, and this could be
addressed without reopening the Agreement.  Her delegation was ready to work towards such a
solution in the consultations.
159. The representative of Japan, responding to the statement by India, said that the true objective
of the first proposal was not the supply of information on export values, but rather accurate
assessment of the value of the particular commodities.  The proposal addressed the means to
overcome the problem, but the real objective was elsewhere.  He agreed with others that custom
valuation was a highly technical area, and to make progress in this area it would be appropriate forexperts to be involved.  Japan had certain limits in its domestic regulations on supplying export value
information, which was why experts would be necessary.  Experts would also have to be involved in
addressing the issues in the second and third proposals, since some solutions might change the nature
of customs valuation.
160. The representative of Switzerland supported the statements by the United States on all the
proposals and the European Communities on the latter three.  On the first proposal, his delegation did
not oppose looking for solutions in this area, but it agreed with the Community that the question of
practical feasibility of supplying information was a factor.  It would be unfortunate if such a system
resulted in an avalanche of requests by the importing countries to the customs authorities of exporting
countries.  Furthermore, the proposal omitted to mention export value declaration, which would give aG/VAL/W/97
Page 11
different dimension to what was proposed and allow delegations to examine it from a different view
point.  Another problem in the exchange of information was the variety of domestic legislation across
Members, and this should be taken into account.
161. The representative of Canada supported the statement by Japan.  Her delegation believed that
of the issues under discussion in this area were complex and technical, and Members' domestic
systems had different rules and regulations.  Therefore these issues should be referred to the technical
experts.  With respect to the fourth proposal, work on this issue was taking place in the Customs
Valuation Committee, and her delegation believed that efforts should continue in that forum.
B. MEETING OF 18 O CTOBER 2000 (WT/GC/M/59 – PARAGRAPHS 21-26)
21. It was his understanding that in pursuing their work on export credits in accordance with
Article 10.2, Members would of course take into account the provisions of paragraph 4 of the
Marrakesh Decision on net food-importing countries, in which Ministers had agreed that any
agreement on export credits should ensure appropriate provision for differential treatment in favour of
least-developed and net food-importing developing countries.
d) Customs Valuation
22. Consultations thus far had focused on all four Tirets of the proposals in paragraph 21.23. Starting first with Tiret 1 regarding the idea of information exchange between customs
administrations on export values in doubtful cases, discussions had indicated that while there seemed
to be no disagreement on the importance of the objective behind the original proposal, which was to
find effective ways to deal with customs fraud through fraudulent declarations of value to customs
authorities in an importing country, there was some concern regarding the means.
24. Some delegations had suggested that there might be a number of practical and technical
questions that might have to be addressed, including the question of possible confidentiality
constraints in providing the information that was being sought.  This was clearly an issue on which
further consultations were needed, and also input from customs valuation experts.
1
25. As regards the proposals in Tirets 2 and 3, they appeared to raise a number of technical issuesthat might need to be dealt with at a technical level.  In this regard, and on the basis of discussions, he
proposed that the Committee on Customs Valuation be requested to consider the proposals, and thatthe Chairman of the Committee be requested to report on the outcome of that consideration to the
General Council before its Special Session in December.
26. Finally, as regards the proposal in Tiret 4, regarding the extension of the moratorium in
Article 20.1, Members had noted that the process of examination and approval, in the Customs
Valuation Committee, of individual requests from Members for extension of the five-year delayperiod in Article 20.1 was proceeding relatively well, and that, as part of that process, the Committee
had thus far been able to grant 13 out of the 19 current requests for extension.  The view had been
expressed that the Committee should be encouraged to pursue this work and that no additional action
might be needed from the General Council at this stage.
                                                     
1 See also paragraph 96 of the present Minutes
[(96) The Chairman said he noted that India could support the suggestion made during the
consultations that Tiret 1 of the Customs Valuation proposals might also be referred to the Committee on
Customs Valuation for consideration of the technical asp ects.  Since he believed that India had been the only
delegation to have expressed reservations on this suggestion, he proposed that his report be adjusted
accordingly, and that this item also be referred to the Committee and the Chairman of the Committee berequested to report on the outcome of that consideration to the General Council before its Special Session inDecember].G/VAL/W/97
Page 12
C. MEETING OF 15 D ECEMBER 2000 (WT/GC/M/62 - PARAGRAPHS 7-9  AND 22-24)
7. The Chairman recalled that the Director-General, in his report to the May General Council
meeting on his consultations on the transition period issue, had pointed out that the process of
examination and approval of requests for extensions of the transition period by developing countrieshad, in general, been proceeding well in the Committee on Customs Valuation, and he had suggested
that Members should encourage the Committee to continue with this work.  The Chairman said that
since then, he understood that more progress had been made in this area, but also that some requests
still remained pending.
8. At the October Special Session, in the light of the report on progress by the Director-General
and himself, the General Council had agreed to his proposal to refer to the relevant WTO bodies anumber of issues identified in that report as being appropriate for their action, with the mandates and
time-frames he had suggested.  These issues had been:
- the development of internationally agreed disciplines to govern the provision of
export credits, export credit guarantees or insurance programmes pursuant to Article10.2 of the Agreement on Agriculture, taking into account the provisions of
paragraph 4 of the Decision on Measures Concerning the Possible Negative Effects of
the Reform Programme on Least-Devel oped and Net Food-Importing Developing
Countries, which was referred to the Committee on Agriculture;
- the concerns of developing countries regarding the equivalence of Sanitary and
Phytosanitary Measures (SPS), referred to the SPS Committee;
- the problems faced by developing countries in both international standards and
conformity assessment, referred to the Committee on Technical Barriers to Trade
(TBT);
- the idea of information exchange between customs administrations on export values
in doubtful cases, the addition of the cost of services in Article 8:1(b)(iv) and aspects
of the residual method of determining customs value under Article 7 of the Customs
Valuation Agreement, which were all refe rred to the Customs Valuation Committee;
and,
- the issue of the relationship between the Trade-Related Aspects of Intellectual
Property Rights (TRIPS) Agreement and the Convention on Biological Diversity, and
the issue of the implementation of Article 66.2 of the Agreement on technologytransfer, which were referred to the TRIPS Council.
9. The Chairpersons of the bodies he had just listed had been invited to report on the outcome of
the consideration of these issues, and in all cases these reports had been issued as documents.  He
noted from the reports that the work of these bodies with regard to the issues referred to them would
continue in most cases, and he underlined that this continuing process would remain under the
overview of the General Council.  It was this body which retained at all times the overall
responsibility of the work on implementation, and the results of all work referred to subsidiary bodies
should come back to this body.
22. The representative of India said that the importance his delegation attached to finding
meaningful solutions to implementation-related issues and concerns was well known.  India drew
some satisfaction from the fact that at least a few decisions had been taken in the present meeting,
months after the decision to establish a special mechanism to deal with the subject of implementation.
While some of the major delegations had characterized the present Decision as modest and meagre,
for India it was below its lowest expectations.  His delegation was profoundly disappointed at the
results obtained thus far.  The Chairman's first draft decision of 29 November 2000 had incorporatedpossible decisions on 28 tirets of the 54 contained in paragraph 21.  The draft of 13 December hadG/VAL/W/97
Page 13
contained possible decisions on 9 tirets, and th at of 14 December had again contained 9, though one
tiret relating to services had been replaced by a tiret on subsidies – a referral to the Subsidies
Committee which did not ensure the qualitative equality of the two drafts.  It was thus clear that out of
54 tirets in paragraph 21, the present Decision covered nine tirets, and even among these, five were
merely referrals to subsidiary bodies and two were appeals to other international organisations.  Thatleft only two really meaningful decisions.  One of these was a rectification of an error – the case of
Honduras – and the other was a decision on tariff rate quota regimes in agriculture.  Regarding the
section of the Decision on rules of origin, his delegation was distressed to note that the United States
was characterizing the decision as unrealistic.  His delegation expected that all delegations would
make good faith efforts to implement this decision.  As for a qualitative assessment of the present
Decision, the fact that there had been no decisions in areas like textiles, anti-dumping and subsidies
spoke eloquently for the real impact these decisions would have in trade or economic terms fordeveloping countries.  It was regrettable that services, an area where results should have been
possible, did not figure in the Decision.  During the informal consultations delegations had agreed to a
simple decision regarding mode 4, movement of natural persons.  His delegation had accepted the text
on this issue suggested by the Chairman and had even accepted further dilution of it.  However,
regrettably, this issue had not found a place in the final Decision, and this was extremelydisappointing.  Therefore, it was obvious that the results achieved thus far represented, at best, the
first minimal step.
23. India had always maintained that the issues it had raised under implementation required a
certain amount of political sensitivity and could not be dealt with in a narrow and legal manner.  Itwas for this reason that his delegation had been reluctant to refer the issues to subsidiary bodies.  Yet,
in a spirit of compromise and sometimes in deference to the Chairman's views, it had agreed at the
last meeting to refer some of the issues to subsidiary bodies.  His delegation had read the reports
submitted by the Chairpersons of these bodies, and it recognized their valiant efforts to encourage
their respective bodies to come up with meaningful recommendations.  Nevertheless, India wasdisappointed at the lack of substantive results or progress, especially in the areas of TRIPS and
customs valuation.  For instance, in the TRIPS Council it had not even been possible to grant
observership to the Secretariat of the Convention on Biological Diversity (CBD), much less conduct a
serious examination of the relationship between the TRIPS Agreement and the CBD on the basis of a
Chairman's checklist or a factual note by the Secretariat.  Furthermore, his Government had sent an
expert all the way from India to Geneva to participate in the Customs Valuation Committee.
However, in spite of the clarifications provided by the Indian delegation, it had not been possible topersuade the Committee to accept even a simple proposal on exchange of information on export
values in doubtful cases, with a view to reducing the scope for fraud.  Thus, his delegation's
scepticism about referring matters to subsidiary bodies had been vindicated.  India reiterated that in
accordance with the 3 May Decision, the General Council should refer matters to the subsidiary
bodies only where absolutely necessary, and with a clear mandate and a specific time-frame.
24. He wished to mention one other important aspect of the present exercise and request all
delegations to reflect further on it.  Even in the case of a relatively minor issue, such as a best-
endeavour clause or a desirable course of action already provided for in the various agreements, any
move to make it meaningful was being resisted by some Members on the grounds that this required achange in domestic legislation.  It was a matter of serious concern that the best-endeavour clauses in
existing agreements did not figure in the domestic legislation of some of the major trading partners.
Even best-endeavour clauses should be clearly provided  for in legislation.  This would be in line with
both the letter and spirit of the WTO Agreements signed and ratified by Member Governments.  He
reminded all delegations that the present exercise on implementation-related issues and concerns hadbeen, and should continue to be, about confidence building.  This could be achieved only through a
combination of political will and good faith effort.  The present results demonstrated that these factors
were not available to the extent needed.  India strongly disagreed with delegations suggesting that the
fault might lay with the process.  The General Council had decided on 22 June 2000 that the present
meeting would decide on the organization of future work in the year 2001.  It was a matter of regretG/VAL/W/97
Page 14
that at the present Special Session attention had not been devoted to this issue and a decision made
about the organisation of work in the coming year .  India requested that the Chairman hold informal
consultations on this well in advance of the next General Council meeting scheduled for 8 February
2001.  His delegation hoped that in the new year delegations would find the necessary political will,
good faith and courage to address the remaining implementation issues and find meaningful solutionswell before the deadline of the fourth Ministerial Conference.  This alone would build confidence in
the WTO and enhance its image in countries such as his.  India would continue to persevere in its
efforts to persuade its major trading partners to be more forthcoming in this area.  This would be the
most important common endeavour for all in the year ahead.
D. M
EETING OF 27 A PRIL 2001 (WT/GC/M/64 - PARAGRAPHS 32- 33, 51-62; 72-76; AND 84-86).
(f) Agreement on Implementation of Article VII of GATT 1994 (Customs Valuation)
32. On 10 April he had held consultations on the issues raised under the Customs Valuation
Agreement.  The three issues listed in the compilation under paragraph 21 had all been referred to the
Customs Valuation Committee on 18 October 2000, and the Chairman's report on the Committee's
consideration of these issues had been circulated on 7 December 2000 in document G/VAL/36.  Thefull discussion in the Committee on these issues was reflected in the minutes of that meeting in
document G/VAL/M/17, in which the high level of complexity of these issues was clear.  In his
consultations, the discussion had also been highly complex, and he would need to return to these
issues on another occasion.
33. Three further issues were listed in this area under paragraph 22, and there had been a useful
first reading of the proposals they represented.  Here too, there were some complex issues on the table
and it would be necessary to revert to them in further consultations.  Indeed, the complexity of these
issues made him wonder whether technical input from the Committee would not help the General
Council's work on them.  For the second and third tirets, it would be useful if the proponents couldreflect on how the language of these tirets could be clarified.
51. The representative of the European Communities said the Chairman's report provided an
excellent basis on which to build.  His delegation was confident that the process under the Chairman's
management would bring successful results on implementation, and was encouraged by the work that
had taken place in the informal consultations and also in the subsidiary bodies.  There seemed to be a
genuine desire to move forward beyond rhetoric and tactical considerations and to get to the heart ofthe substance of the issues.  The Community took the issue of implementation very seriously and
believed it was important to show that the WTO could find practical solutions to genuine problems.  It
was making major efforts to help developing coun tries to fully implement commitments made in the
Uruguay Round and more broadly to integrate into the multilateral system.  Its position on
implementation was part of this policy – to progressively steer the WTO and the multilateral tradingsystem towards being more responsive to development needs and priorities.  It was necessary to
recognise that the more practical progress could be shown on implementation, the more an
environment conducive to further negotiations in WTO would be created.
52. The Chairman's report showed that a lot had already been done.  Amongst other things, a set
of decisions had been taken in December, extension of transitional periods had been agreed in some
Agreements such as Customs Valuation, and there had been several proposals on agriculture and
services on the guidelines for the next phase of the negotiations in those areas, which was an
encouraging development.  In addition, autonomous measures, such as the decision by the
Community to give duty- and quota-free access to products from least-developed countries, andcomparable actions by other Members, were also  a good signal.  At the forthcoming conference on
LDCs to be held in Brussels, the Community w ould put much emphasis on deliverables, and hoped
that autonomous measures would be multilateralized at a later stage.  Furthermore, specific work
programmes had been started in areas such as TBT and SPS to find ways to better help developingG/VAL/W/97
Page 15
countries participate in standards-setting, as well as work in areas such as TRIPS to ensure good
implementation.  A start had also been made on developing more coherent approaches to technical
assistance, including through strengthened coordination with other international agencies and donors,
and new contributions to the Integrated Framework Trust Fund.  In fact, the whole field of technical
assistance to build capacity, and thus to help full and faithful implementation, was being addressedsubstantively and seriously in many areas of the WTO's work.  In addition, more issues might also be
rapidly agreed, for example the proposed decision in the area of customs valuation aimed at more
coherent technical assistance, on which his delegation hoped that any remaining reserve could be
lifted quickly.  His delegation wished to underline all of this, since it had been said that very little
progress had been made.  While it was true that more could be done, it was also true that there had
already been progress, if one looked at all these decisions and actions as a whole and recognised that
implementation was about much more than the list of proposals in paragraphs 21 and 22 of the 1999draft Ministerial text.  Implementation concerne d also a way of looking at the integration of
developing countries into the multilateral trading system.  As a result of all the work that had been
carried out in this area, the development focus had become more pronounced.
53. The main question at the present meeting was how to move ahead in the coming weeks and
months.  It should be borne in mind that the different proposals were heterogeneous and that it might
not be possible to treat them all in the same way or according to a single timetable.  The recent
consultations between capital-based officials of some delegations had been useful in helping
delegations to understand this better.  Many delegations recognised that among the outstanding
implementation issues, there were some of a technical, procedural or administrative nature, which itshould be possible to resolve rapidly.  Other issues, however, were of a more clearly political nature,
carried real economic implications, or would involve amending or rebalancing existing agreements,
and therefore negotiation.  In many cases, proposals to modify agreements or their interpretation
could necessitate changes to Members' domestic laws and require ratification procedures.  Therefore,
delegations should start work on determining the most appropriate course of action for the differentimplementation issues, recognising that some of the more difficult questions might entail more
substantive negotiation.  In this respect, the Comm unity wished to offer some specific ideas, but in
doing so wished to stress that this was its own initial assessment, and that it was ready to continue
discussions on individual issues to see what could be achieved and within what time-frames.
54. Having done its own initial assessment, the Community was convinced there were some
proposals on which additional progress should be possible in the coming weeks or months.  The mostimportant of these would be a decision to extend certain notified trade-related investment measures
(TRIMs) as foreseen in the TRIMs Agreement itself and which had been outstanding for some time.
The Community believed a solution was not far away and urged adoption of a decision as quickly as
possible.  This would give a major boost to confidence and demonstrate the WTO's ability to respond
sensitively to development problems.  While it was not his intention to give precise lists of issues,there were other issues on which the General Council Chairman, through his consultation process,
could seek early progress.  Examples of this could include:  (i) asking the Anti-Dumping Committee
to clarify whether and how annual reviews under Article 18.6 of the Anti-Dumping Agreement could
be improved;  (ii) the transparency and notification proposals made in respect of rules of origin
changes;  (iii) the proposal for biennial reviews of the SPS Agreement, on which perhaps the SPSCommittee could reach a view and which could be cons idered further by the General Council;  (iv) in
the areas of both SPS and TBT, considerable work programmes were underway in areas such as
technical assistance, participation of developing countries in standards-setting bodies and equivalence,
and it might be possible in the near future to draw conclusions from that work that could be adopted
by the General Council, or further guidance given;  (v) in the area of customs valuation, a decisionshould be possible regarding more coherent technical assistance;  discussions in the Customs
Valuation Committee on specific implementation proposals had also yielded a better understanding of
the different measures to combat fraud, and it might be possible to draw some conclusions confirming
Members' views on the most effective means to tackle fraud;  (vi) in the area of TRIPS, there had also
been useful work in the TRIPS Council on the question of technology transfer under Article 66.2 ofG/VAL/W/97
Page 16
the TRIPS Agreement;  consultations on this were continuing, at the end of which the General
Council could see if anything needed to be acted upon or any more formal or operational conclusions
reached;  and, (vii) there had been a proposal recognising the particular nature of the balance-of-
payments provision and this could be reaffirmed.
55. Regarding the other implementation issues, some were likely to necessitate the attention of
Ministers at the Ministerial Conference, since they concerned clearly political matters.  Some might
be conclusively decided by Ministers, but others might need to be negotiated further after Doha,
especially if they necessitated amendment of Agreements or changes to Members' domestic laws.
Regarding issues that could be decided by Ministers at Doha, it was perhaps too early to list them
definitively.  However, by way of example, certain proposals relating to subsidies, anti-dumping, and
textiles and clothing would require serious attention.  The Community had an open mind on thesequestions and wished to make progress.  Regarding issues that might need negotiations, some
delegations had made it clear that even if this were to be the case, there should nonetheless be a clear
political commitment to do this.  The Community  understood that point of view, and therefore
proposed that the negotiating mandates that would be adopted at Doha should explicitly include a
number of generic negotiating mandates addressing outstanding implementation issues.  For example,there could be a mandate to revisit the special and differential treatment provisions of existing
Agreements with a view to making them more opera tional.  This could be part of an overall mandate
to review existing WTO rules.  Other proposals could have similar treatment.  The Community looked
forward to making concrete progress on implementati on in the coming weeks, of which an extension
on TRIMs would be a key element and crucial to the WTO's credibility.  All delegations should try to
put rhetoric behind them and not to fear a real and constructive debate as they started the preparatory
work for Doha, on how to make progress on some of the more difficult issues, and in particular what
kind of Ministerial decisions could be taken.  In doing so, it would be possible to build upon the
extremely useful conclusions of the General Council Chairman, and the Community would fully
support him in his further consultations.  It also supported the Chairman's suggestions regarding theorganization of further work, in particular that it was necessary to find practical ways to move the
process forward, and that the focus should be on results and on substantive issues rather than on
process.
56. The representative of Pakistan said that according to the 3 May Decision, Members
recognized that implementation issues had given rise to serious concerns among many developing
countries.  One type of concern was that the expected benefits from the Uruguay Round Agreementshad not been realized, in part due to the way in which these agreements had, or had not, been
implemented.  Another was that the objectives of those agreements could not be fulfilled without
certain clarifications, new understandings or supple mentary measures.  A third type of concern was
that certain agreements or aspects thereof, in operational terms, were contradictory to the interests of
developing countries, for example the patentability of life-saving drugs under the TRIPS Agreement.The 3 May Decision envisaged a three-stage process:  to assess the existing difficulties, to identify
ways to resolve them, and to take decisions on appropriate action.  This process was to be completed
by the Fourth Ministerial Conference.  The then-Chairman of the General Council had said at its
June 2000 meeting that the process on implementation was an action- and results-oriented process.
All three stages of the process had to be completed by the Fourth Ministerial Conference.  Thedecisions that had to be adopted were those on the ways and means to resolve the difficulties.  It
would not be sufficient to reach conclusions that only a few issues could be resolved before or at
Doha, and Pakistan could not accept consigning the majority of implementation concerns to some
post-Doha process, as this would amount to a dire ct abrogation of the 3 May Decision.  There was no
justification for linking concerns on implementation to new or further trade negotiations, as theseconcerns related to the Uruguay Round package which had its own internal balance and which was
supposed to produce mutual benefits for all participants.  The implementation process was designed to
achieve that anticipated and promised balance.  Developing countries could not and should not be
asked to pay twice for the mutual benefits anticipated under the Uruguay Round.  The special and
differential treatment promised to developing countries in so many of the Uruguay Round agreementsG/VAL/W/97
Page 17
could not be linked to new negotiations regarding WTO rules as the Community had just suggested,
since all that was being asked was that these provisions be made operational.
57. Regarding the report made by the Chairman, the results reflected therein were not so much
mixed as meagre, since very little progress had been made.  Pakistan might have an evaluationdifferent from that in the report as to "achievable results" – which depended on the political will of all
concerned – and "little hope of immediate progre ss" – which was dependent on positive responses to
developing countries' concerns.  Pakistan wanted to move away from such value judgments, and
expected progressive results as anticipated in the 3 May Decision.  For example, it would have
expected that on the eight proposals that had been dropped at the last minute from the decision
proposed by the then-Chairman of the General Council in December 2000 due to difficulties
encountered in the negotiations, at least an attempt would have been made to revive them and to seewhether decisions could not be reached on them at the present Special Session.  There were
possibilities for decision, and on a broader spectrum than what the Community had envisaged, e.g. on
SPS and TBT, TRIMs extensions, Article 7 of the Customs Valuation Agreement, and services.
Pakistan was concerned that decisions on such issues had not been suggested or taken at the present
meeting.  Second, even where decisions were not possible, ways and means to resolve these issueshad to be identified, and the present meeting could have been used to discuss these.  For example, in
agriculture, the principle of flexibility for developing countries could be recognized and later
translated into something operational at a later stage.  Priority in the implementation process should
not be determined solely by feasibility or achievability, but by the importance of the issues for the
countries concerned and for the system.  In this context his delegation was very disappointed therehad been no opportunity for a substantive and open discussion on the whole gamut of issues relating
to textiles and clothing.  For Pakistan, the results on textiles would be the touchstone for its
assessment of the success or failure of the whole exercise on implementation.  The Agreement on
Textiles and Clothing was supposed to have been im plemented in a progressive way, and Pakistan had
therefore asked for accelerated integration and for improvements in the prescribed progressiveliberalization ("growth-on-growth") of trade in te xtiles and clothing, as means of redressing the
imbalance resulting from the failure to implement thes e provisions.  It had also asked for an assurance
against anti-dumping measures once the quotas were removed.
58. Regarding the future work programme, it was clear that intensive efforts would be needed
both in formal and informal sessions if there were to be concrete results and the exercise completed in
accordance with the 3 May Decision.  Therefore, Pakistan suggested that three, and preferably four,special sessions be convened:  one in June, one towards the end of July, and one in late September or
early October.  These would provide important deadlines for the action- and results-oriented process
envisaged, and Pakistan hoped that decisions and action would be taken at each one of these sessions.
Apart from these three meetings, a further special session should be devoted solely to the issues of
textiles and clothing, as this was a sector of importance to a large number of developing countries andwould be an important part of the implementation exercise.  He underlined the need for clarity
regarding the likely nature of the conclusions on implementation-related issues before his delegation
could turn to new issues being put forward for disc ussion by a number of delegations.  It would be
very difficult for Pakistan to move beyond implementation issues and the built-in agenda until and
unless there was clarity, commitment and certainty that the implementation concerns of developingcountries would be addressed and decisions for their resolution adopted by, i.e. before, Doha.
59. The representative of Singapore said that as  the ASEAN Members' views on how to move the
process forward had already been stated, he would comment on specific aspects of the Chairman's
report which were of particular interest to Singapore.  On the Customs Valuation Agreement, thereport said that "in our consultations, the discussion was also highly complex, and we will need to
return to these issues on another occasion", sugges ting that the Chairman intended to have another
round of discussions at a future special session.  Discussions on the three issues raised under
paragraph 21 were clearly documented in G/VAL/36 and G/VAL/M/17, which reflected the intensive
discussions there had already been on these issues at  the technical level, and nothing more needed toG/VAL/W/97
Page 18
be said on them.  The final paragraph of the Committee Chairman's report summed up the situation
clearly:  "While the majority of Members acknowledged the genuine difficulties and problems
experienced by the proponents of tirets 1, 2, and 3, they failed to be convinced that the tirets
themselves were appropriate solutions.  Indeed, some of these Members had themselves experienced
the same problems but had dealt with them by using existing mechanisms and instruments whileremaining within the parameters of the Agreem ent."  As noted in that report, Members had
acknowledged that while there were genuine difficulties in addressing fraud, a different solution to
those suggested in paragraph 21 would be more appropriate in resolving these problems.  What was
needed now was engagement on possible alternative solutions to this problem. Suggestions made at
the 10 April consultations, as well as other alternatives, should be explored, rather than continuing to
discuss the proposals in paragraph 21, since it was clear the latter were not workable.
60. On the three tirets in paragraph 22, it would be useful, as noted in the General Council
Chairman's report, if the proponents could reflect on how the language of tirets 2 and 3 could be
reworded to accurately reflect the concerns that needed to be addressed.  Once these revisions were
available, all three tirets should be sent to the Customs Valuation Committee for technical
discussions.
61. Regarding the TRIPS Agreement, the report st ated that "on some issues, the likelihood of
finding ways to resolve them in the present process  is quite low" and that some of the issues were
under active consideration in the TRIPS Council.  In fact, nearly all the issues listed in paragraphs 21
and 22 had been actively discussed by the TRIPS Council as well as by other internationalorganizations such as WIPO.  Thus, it could not be  said there had been no serious engagement.  These
issues were highly technical and complex.  The dilemma was whether Members wanted to duplicate
the TRIPS Council discussions in the Special Session of the General Council.  Some had suggested a
political discussion on some of the important issues, but this would require agreeing on which issues
were important.  The TRIPS Council also had its own mandate and time-frame.  The General Councilmight want to urge the TRIPS Council to intensify its work on issues mentioned in paragraphs 21 and
22.  Progress there should be monitored, and the General Council Chairman might convene an
informal session of the General Council to provide political guidance on how to break the deadlock.
62. The representative of Japan said his delegation's basic position on the question of
implementation was that this was an important element of work leading to the Fourth Ministerial
Conference, and Japan would continue to devote ti me and energy to completing it by Doha, as agreed
in the 3 May Decision.  It would continue to address a ll the issues raised in th is context with a view to
identifying elements for appropriate decision at Doha.  It had allocated, and would continue to do so,
additional resources in this area in the form of ca pacity-building programmes and technical assistance
to facilitate implementation of various agreements by developing-country Members.  It had engaged
seriously in discussions on the extension of transition periods in the Customs Valuation Agreementand the TRIMs Agreement, where there had been important progress, and would continue those
efforts.  However, implementation was not the only important element that needed to be addressed in
preparations for Doha.  Given the limited time available, Members had to address implementation
issues in the most effective and pragmatic way.
72. The representative of the United States said that her delegation had engaged in the discussions
on implementation issues and had found many of the clarifications and suggestions informative and
useful.  There had been progress in deliberations on some issues such as customs valuation, TRIPS,
TBT, and capacity building, which overlapped into some of the implementation proposals.  In 2000 a
decision had been reached on a number of items of varying interest to delegations such as therectification sought by Honduras regarding Annex VII of the Subsidies Agreement and the rules of
origin deadline all were expeditiously working to meet in light of the enormous work to do there.  The
United States was pleased to note that consensus had been reached in the Rules of Origin Committee
on 23 outstanding issues, reflecting a new momentum in the negotiations and the adoption of a
working method.  The Chairman's report also recognized the steady progress in ensuring increasedG/VAL/W/97
Page 19
developing country participation in relevant standards-setting organizations related to TBT and SPS
work in the WTO.  In addition, there had been continued progress in the work of  the Customs
Valuation Committee and the Council for Trade in Goods on the treatment of  requests for extensions,
while at the same time ensuring that capacity building and technical assistance measures were part of
the solutions.
73. In the TRIMs area, her delegation had worked persistently to find ways to resolve these issues
and in 2000 had helped fashion approaches to address each request in the light of US trade concerns
and those of the countries requesting extensions.  It had now been a year since those extensions had
expired, and the US had exercised due restraint.  It remained committed to building on the proposed
solutions that had gained momentum in 2000 in order to address TRIMs, without prejudice to US
rights under the WTO Agreements.  The Chairman's report on other specific consultations in thevarious sectors was accurate and included ideas on how to proceed next, including how to deal with
issues not yet discussed.  The US had participated in these consultations, had listened carefully, had
asked questions and had learned more about the proposals.  Implementation concerns were a critical
issue for every Member, in particular developing countries, and the present exercise had to ensure the
full and faithful implementation of the agreements.  The 1998 Geneva Ministerial  Declarationhighlighted this as part of the General Council’s work programme.  The US would continue to engage
positively in this work with a view to identifying and achieving what was appropriate.  In many cases,
the proposals had been rigorously examined and debated in the responsible subsidiary bodies.  In
some cases, while not all, there had been a resolution of the issues raised.  The US had also suggested
in the consultations that the TBT Committee and the Secretariat invite the standards-setting
organizations to include, in their reporting, information about their own technical assistance available
for bringing developing country representatives to their meetings.  As the Chairman's report noted, the
work done in that Committee in the context of th e Triennial Review had resulted in a decision on
principles and procedures for the development of international standards, guides and
recommendations in relation to Articles 2 and 5 and Annex 3 of the TBT Agreement.  Membersshould be kept informed of progress on this.  On certain other proposals in this category the US would
examine options.
74. On agriculture her delegation had taken note of the Chairman's status report concerning net
food-importing developing countries, and looked forward to the progress report concerning the
additional proposal for this tiret from the Vice-Chairman of the Agriculture Committee at the General
Council’s May meeting.  The US also supported the Chairman's suggestion that there be periodic
reports on progress on work concerning implementation of Article 10.2.  On TRIPS, much was still tobe discussed, but the US had indicated in the TRIPS Council and the informal consultations its views
on how to approach the proposals.  In any case, in some instances the TRIPS Council would continue
ongoing work, such as its examination of the relationship between the TRIPS Agreement and the
Convention on Biological Diversity and the examination of proposals to compliment the existing
implementation of Article 66.2 of the Agreement.   Her delegation was also pleased to have been ableto play a key role in working with the African Group to achieve agreement on its proposal to hold a
special discussion in the TRIPS Council on the flexib ilities inherent in the TRIPS Agreement to deal
with health crises.  In the informal consultation on services, Members had explored new language,
which still needed to be examined, concerning Mode 4 commitments, and had discussed the proposal
concerning GATS Article IV.  However, Members should examine whether both these proposals hadnow been satisfied in the context of the agreement on Negotiating Guidelines and Procedures in the
CTS.  Regarding Mode 4, the US and a number of delegations had also made additional proposals in
the services negotiations.   Of course, the US intended to meet fully its existing commitments in
Mode 4.
75. Concerning other proposals such as the Customs Valuation tirets in the Secretariat
compilation, the technical discussions had helped the US to understand better the concerns underlying
the proposals.  It was necessary to take a step back and look at these proposals further in light of these
discussions.  On other issues where there had been only a first reading, the US looked forward to
closer examination and assessment.  The Chairman had reported on the latest developments onG/VAL/W/97
Page 20
implementation issues being examined in sub-bodies and not yet taken up in his consultations, in
particular, work in the Subsidies Committee, and there had been a report on recent progress in the
anti-dumping Ad Hoc Group on Implementation.  Anti-dumping experts had worked together
constructively to finalize and approve a third recommendation paper outlining indicative guidelines
for “best practices” in a particular area of anti-dumping law administration.  This paper, on an“Indicative List of Elements Relevant to a Decisi on on a Request for Extension of Time to Provide
Information”, had been adopted by the Anti-Dumping Committee a few days earlier.  It provided an
indication of the factors and criteria that authorities should take into account when deciding whether
to grant or deny requests by exporters to have additional time in which to supply information to
investigators.  This paper followed two other recommendations previously developed and approved
over the past two years – one on the timing of notifica tions to be made to the foreign authorities prior
to the initiation of an investigation, adopted in October 1998, and a second on the periods of time forthe collection of dumping and injury data, adopted in May 2000.  The Ad Hoc Group on
Implementation had also made substantial progress recently on yet another set of recommendations,
concerning the kinds of information to be included in preliminary affirmative determinations of
dumping and injury.  While some might claim this work was about process and procedures of anti-
dumping actions rather than methodology and substance, the work undertaken had been decided byconsensus, and the importance of this activity should not be undervalued.  The procedures of the anti-
dumping investigative process went to the heart of whether the anti-dumping authorities’ actions, and
the rules they followed, were based on openness and transparency, accorded full rights of
participation, and assured due process.  These issues mattered in terms of determining the true impact
of anti-dumping actions, and helped give all Members greater confidence that legitimate interestswere served regarding both market access and protection from injurious, unfair trade.
76. Members had to think carefully about how to  manage the process between now and Doha,
especially given the work remaining to do.  As indicated in the Chairman's checklist on preparations
for that meeting, implementation was integral.  Even if work was organized on parallel tracks, this hadto be done in a manner that would utilize resources and time effectively.  The US welcomed the
Chairman's proposal on this issue.  The process had worked well and there was a need for discussions
under the thematic approach on issues not yet examined in 2001 and on some that had already been
examined.  The Chairman should continue to hold a wider open-ended informal meeting following the
smaller consultations for transparency purposes, as this method would help ensure inclusiveness on a
topic important to all.  Concerning further work, it could be useful to lay out a general idea of the
further process including the number and timing of other special sessions.  Given what remained to beaccomplished, the US could envisage up to three such sessions, with full preparation through informal
meetings before each.   The spacing of these meetings should be left up to the Chairman, but there
could be perhaps one in June, another in July, and another in October.   The US also welcomed the
suggestion that the scheduling of any implementation meetings indicate the topics to be addressed.
84. The representative of India said his statement would cover three broad aspects: the
Chairman's report on the current status of consultations on implementation proposals, a response to
some of the points made by other delegations, and the organization of future work.  While his remarks
would cover only a few of the agreements, this was due to the shortage of time and not to a lack of
interest in the consultations on other agreements.  India also had a keen interest in areas that had notyet been the subject of consultations, such as textiles and anti-dumping.
85. On customs valuation, the report seemed to indicate it would be necessary to return to these
issues on another occasion, with a view to reaching a suitable decision.  While these issues were
highly complex, there was acknowledgement of the genuine difficulties and problems experienced, inparticular in respect of the first tiret on exchange of information on export values.  India looked
forward to further consultations in this area in or der to identify solutions that could deal with the
problems identified, since existing mechanisms and instruments were not at all sufficient.  One
delegation had said that regarding the first tiret of paragraph 21, the solutions proposed were not
appropriate.  The Customs Valuation Committee Chairman's report clearly acknowledged the genuineG/VAL/W/97
Page 21
difficulties faced and problems experienced in respect of the three tirets in paragraph 21, but some
Members were not convinced that the solutions proposed in the tirets were appropriate.  These
Members, after acknowledging the genuine difficulties faced by the proponents, were arguing that the
mechanism they themselves used to deal with these difficulties should also be used by the proponents,
even though the problems faced were different.  A further problem was the fact that the structure ofthe Committee Chairman's report coupled India's introduction of its proposals and its responses to
Members, and then presented questions and concerns of Members, giving the impression that not all
questions/concerns could be addressed by the proponents.  However, India had answered all
questions.  Whether Members had found those answers acceptable or convincing was another mater.
86. Regarding the paragraph 22 tiret issues under the Customs Valuation Agreement and whether
these issues should be sent to the Committee for technical consideration, he noted that the nextmeeting of that Committee was scheduled only for October 2001.  Therefore, if they were referred to
the Committee there should be a clear understanding that it would meet in a special session in June
and report to the General Council by the end of June.  India was grateful for the Chairman's
suggestion that the proponents reflect on how the language of the second and third tirets could be
clarified, and would work on this.  Regarding the implementation proposals on paragraph 21 issuesunder the TRIPS Agreement, the Chairman's report struck a pessimistic note.  India, however, was of
the view that with hard work, meaningful solutions  could be found there.  Regarding the relationship
between TRIPS and the Convention on Bio-diversit y (CBD), the Chairman of the TRIPS Council had
submitted a report on his own responsibility in December 2000, from which it was clear that an
examination of this issue had barely begun and was far from complete.  The TRIPS Council should beasked to report back to the General Council after its June meeting.  In this context, some of the
proposals in paragraph 21, especially those relating to exceptions to patentability and access to
essential drugs, were currently in the public eye.  India was pleased that the question of access to
drugs would be discussed in the TRIPS Council in June.  That Council should be asked to make a
comprehensive input to the General Council, especially on access to drugs and exceptions topatentability, as well as the relationship between TRIPS and the CBD, immediately after its June
meeting.  However, given the highly political nature of TRIPS issues, it might be necessary to have a
special session of the General Council to deal exclus ively with these issues in the light of the June
meeting and the report that the TRIPS Council might submit.  The implications of the TRIPS
Agreement in various areas were engaging the attention of governments, NGOs and civil society, and
Ministers at Doha could not ignore this issue.
E. M
EETING OF 20 J ULY 2001 (WT/GC/M/67 – PARAGRAPHS 13, 16, 25-27, 34-35, 50-51 AND
54-55)
 13. The issues the Director-General and he were proposing, with Members' agreement, for
submission to the relevant subsidiary bodies for their consideration and reporting to the General
Council by 30 September, were the following:
16. Tiret 56 – The proposal directing the Customs Valuation Committee to address Members'
concerns relating to fraud in customs matters.
25. The representative of Zimbabwe, on behalf of the African Group , said that
implementation-related issues and concerns was a subject to which all Members attached great
importance, as reflected in paragraphs 8 and 9 of the Geneva Ministerial Declaration, in the
preparatory process for the Third Ministerial Conference, and in numerous subsequent discussions in
the General Council.  He recalled in particular the General Council Decision of 15 December 2000,
against which the African Group welcomed efforts in the Chairman's paper to identify elements onwhich further progress could be made.  That  initiative had been timely, as progress on outstanding
implementation-related issues would be critical both to creating the right atmosphere as preparations
for Doha intensified, and to the outcome of Doha itself.  The African Group encouraged efforts to
reach a satisfactory conclusion to this matter, taking into account the 15 December 2000 Decision.G/VAL/W/97
Page 22
However, the proposals advanced in the paper were far from comprehensive and reflected only the
present stage of consultations.  The African Group was concerned at the lack of meaningful progress
in resolving outstanding implementation-related issues to date.  As the Chairman had recognised, key
issues relating to TRIMs, anti-dumping, and textiles and clothing had been left out of the paper
altogether.  The African Group stood ready to work  for consensus in taking forward the elements
identified thus far, on the understanding that the remaining issues would be taken up before and at
Doha in the light of the 15 December 2000 Decision, so that Ministers could give guidance on issues
that might not have been fully resolved.
26. In particular, and without prejudice to the positions of individual members of the African
Group, these Members attached special importance to  the following implementation issues that were
yet to be adequately addressed:  the proposals in tirets 2 and 4 were a good basis for advancing workin this area;  however, they urged the Committee on Market Access to expedite its consideration of
the proposal in tiret 4.  In addition to the proposal in tiret 5, there should be an urgent decision on
tiret 7, taking into account the elements contained in the proposals submitted by a group of countries
in document G/AG/W/49 and G/AG/W/ 49/Add.1.  Given the level of development of most African
countries, the phrase "longer time-frame" referred to in Article 10.2 of the SPS Agreement and thephrase "reasonable interval" in Article 2.12 of the TBT Agreement should be understood to mean not
less than 12 months, and the technical assistance provisions in these Agreements should be made
mandatory.  Further, the review of the operation and implementation of the SPS Agreement foreseen
in Article 12.7 should be conducted every two years.  The proposals on tiret 56 provided a good basis
for advancing work in this area, and the African Group was keenly awaiting finalisation of the text ontechnical assistance currently being considered by  the Customs Valuation Committee.  On Annex VII
to the Subsidies Agreement, this review should ta ke into account the specificities and development
needs of a number of African countries.  On tiret 85, the proposal did not fully accommodate the
African Group's concerns;  an acceptable formulation should clearly state that "developed countries
shall fully implement commitments undertaken by them in Mode 4".  Further, there was a need for anearly decision on the implementation of Article IV provisions of GATS.  Regarding tiret 90,
Article 66.2 of the TRIPS Agreement should be made mandatory.  On tiret 92, he recalled that the
African Group had submitted proposals to the TRIPS Council on the issue of TRIPS and public health
containing elements for an appropriate decision to be taken by Ministers at Doha.  Thus, it would be
advisable to await the outcome of current discus sions in the TRIPS Council.  Regarding line 4 of
tiret 96, the African Group preferred a formulation that made specific reference to making operational
and binding S&D provisions in WTO Agreements.  They welcomed the proposals on tirets 97 and 99.
27. These comments were limited to the proposals that had been made at the present stage and
were not exhaustive.  The African Group remained committed to the resolution of all outstanding
implementation-related issues and concerns in the light of the 15 December 2000 Decision.  Further
issues of concern to the African Group were the following:  the expeditious granting of the waiverrequest for the ACP/EU Partnership Agreement;  the need to revisit Article XXIV of GATT 1994 and
the 1979 Enabling Clause to ensure sufficient flexibility in regional trade agreements among
developing countries and between developed and developing countries;  further action towards
implementation of the Marrakesh Declaration on Achieving Greater Coherence in Global Economic
Policy-Making;  the need to make technical assistance a core activity of the WTO and in this regard tosubstantially increase the regular budget for tech nical assistance;  the need for the WTO and other
international organisations to continue and increase technical and capacity-building assistance
activities through the Integrated Framework and the strengthening and expansion to more African
countries of the Joint Integrated Technical Assistance Programme for Selected Least Developed and
Other African Countries (JITAP);  and the granting of permanent observer status to the OAU, theArab League and other intergovernmental organisations whose applications had been pending for a
long time.  All Members had a stake in seeing implementation-related issues through to a satisfactory
conclusion.G/VAL/W/97
Page 23
34. The representative of India recalled that the 3 May 2000 Decision gave a deadline for
resolution of implementation issues which was linked to the Fourth Ministerial Conference.  In good
faith his delegation had said it could use the G-7 paper as a trigger for further intensive consultations,
so that meaningful decisions could be taken at the present Special Session.  The Chairman and the
Director-General had recently circulated what they had called elements for moving the processforward.  While India understood and appreciated the spirit behind that effort, the paper had caused a
lot of anxiety for his delegation.  The first major problem was that many important subjects from
Section 1 of the G-7 paper, such as textiles, anti-dumping and TRIMs, had been left out of the paper.
India was also concerned that a large number of matters were being proposed for referral to subsidiary
bodies, as this was not a solution in and of itself.  One of India's major concerns about the paper
related to the TRIPS Agreement, where the paper identified some elements regarding TRIPS and
public health that would create an even worse situation than the existing one.  The ongoing discussionin the TRIPS Council on this matter should be allowed to conclude before further work was
attempted.  India, along with a number of other Members, was trying to make a contribution with a
view to fine-tuning what had been suggested in the G-7 paper and the Chairman's paper, and hoped
that in the days to come there could be intensiv e consultations on this matter in order to move the
process forward.  Sections 2, 3 and 4 of the G-7 paper were equally important and appropriateconsultations should be held on them with a view to finding solutions to all of these issues at the
earliest possible time.
35. Regarding the referral of some issues to subordinate bodies, the proponent of the proposal in
tiret 4 should be consulted on this action.  Regardin g tiret 12, this issue had already been referred to
the SPS Committee which was in the final stages of finalizing its report.  Therefore, it was neither
necessary nor useful to refer this tiret again to that Committee.  The latter should be asked to submit
its report by the end of July at the latest.  Regarding tiret 56, there was no purpose in sending this
matter back to the Customs Valuation Committee.  Re garding tiret 65, India could agree to refer it to
the subsidiary body, but there should be some overarching guidelines for consideration of this issue.Regarding tiret 68, the Subsidies Committee was currently examining this matter which should not be
referred again to that Committee.  Regarding ti ret 80, India could go along with the referral.
Regarding tiret 83, this was an intensely political question and not a technical issue, and it would be
more appropriate for the General Council to hold consultations on it.  Regarding tiret 96, India could
go along with the referral.  He suggested that the deadlines for reports from the subsidiary bodies be
staggered, with those on matters already referred having deadlines prior to 30 September, in order to
avoid having a large number of reports submitted at the same time.  Further, all necessary logistics forthe meetings of these bodies should be set well in advance in order to ensure completion of the work
by the deadline set.  India would continue to engage positively in the process on implementation
issues and hoped that intensive consultations would be held in order to try to reach solutions on at
least some of these issues, on the understanding that issues which had not yet been covered would be
taken up very soon.  He expressed India's gratitude to the US for its gesture in being the first speakerat the present meeting, and trusted that this gesture would be translated into meaningful decisions in
the days to come.
50. The representative of Pakistan said that notwithstanding the initiative by the G-7, and not
withstanding the Chairman's and the Director-G eneral's endeavours to put forward a text, his
delegation, as many other developing countries, had a sense of both disappointment and frustration at
the present stage.  There had not only been a delay in the outcome that had been so long anticipated,
but also a progressive diminution in the levels of ambition developing countries were being asked to
entertain on implementation.  While paragraph 21 of the draft Seattle text of 19 October 1999
contained roughly 50 proposals for early or immedi ate action, and the G-7 paper contained roughly 20
proposals for early action, the recently submitted Chairman's paper contained only around 10,
excluding the procedural proposals.  Further, the substance of the proposals was also disappointing.
The proposals would not add much to rectifying the imbalance of the Uruguay Round Agreements,
and most disappointing of all, thus far the key issues of textiles and anti-dumping, as well as TRIMs,
had not even been addressed.  While there had been consultations on TRIMs, these had thus far beenG/VAL/W/97
Page 24
unsatisfactory.  Consultations on textiles had started only one day earlier, and consultations on anti-
dumping implementation issues had yet to be held.  The fact that for more than two years, the General
Council had been unable to come to grips with proposals on textiles and anti-dumping indicated a
collective failure of will to respond to the concerns of developing countries.  For Pakistan, 60 per cent
of whose trade interests were concentrated in textiles and clothing, this failure was directly related tothe level of disappointment and frustration it felt with regard to the present exercise.  His delegation
wondered where this downward trend would e nd, or whether implementation proposals would
continue to be denuded until they were totally meaningless.
51. Regarding the question of referring issues to subsidiary bodies, Pakistan had been averse to
such a course of action because of its sense that issues so referred did not seem to re-surface.  It had
urged that such issues be returned the General Council as soon as possible.  Any deadline – and30 September was the outer limit for new referrals – should apply also to those issues already
referred.  Regarding the proposals for new referrals, there should be specific guidelines for action by
the subsidiary body in question.  Among the proposals in the Chairman's paper, tiret 12 had already
been referred on 18 October 2000 to the SPS Committee, which should be urged to finalize its work
and make its report at a definite date.  Tiret 56 had been referred on the same date to the CustomsValuation Committee, and it seemed pointless to refer it again.  That Committee should be asked to
report as soon as possible.  Tiret 68 had been referred on 15 December 2000 to the Subsidies
Committee, which should be urged to make its report.  On tiret 83, Pakistan agreed with those who
did not think this should be referred to the Subsidies Committee.  Regarding other issues, his
delegation was prepared to work with the Chairman on the specific guidelines to be provided for suchreferrals.  Despite some of the interventions made at the present meeting, Pakistan continued to be
extremely concerned about the lack of progress on implementation.  At the "reality check" meeting on
30 July, Members would have to evaluate where they were and where they should go in the process
towards Doha.  If by then Pakistan felt there was no prospect of meaningful results on implementation
issues, the levels of ambition for Doha would have to be severely constrained and, apart fromimplementation issues, focussed on progress relating to the built-in agenda.
54. The representative of Malaysia said that his delegation viewed the Chairman's paper as a
further step in the direction of attempting to find solutions.  It had taken note that the elements in the
paper should not be considered as exclusive or agreed or definitive, and that the Chairman would
continue consultations on all of the other proposals , including those in Section 4 of the G-7 paper.
However, time was running short.  These issues had been on the table for almost two years andneeded resolution immediately, in any case by the time of the Doha Ministerial Conference.  His
delegation, like many other developing countries, was deeply disappointed with the progress achieved
thus far.  Merely relegating subjects for consideration to subsidiary bodies, while it might give the
optical illusion that there was movement or prog ress, was not the solution.  What was needed were
concrete decisions that addressed the imbalances in existing WTO agreements and operationalized thedead letters in GATT 1994.  This was not to say that Malaysia was not happy with any of the
proposals in the Chairman's paper;  for example, on tiret 96 which referred work to the Committee on
Trade and Development, his delegation hoped that work in the Committee would have a positive
outcome.  While Malaysia was willing to consider providing guidance on at least some of the issues to
be referred to subsidiary bodies, the Like-Minded Group of countries intended to submit alternativesuggestions for the solutions outlined in the Chairman's paper.  It was hoped that this submission
would become part of the consultative proces s and would be taken as a positive contribution.
55. Regarding the proposed referrals, tiret 56 on customs evaluation and 68 on subsidies did not
need to be referred to the respective subsidia ry bodies, since the Committee on Customs Valuation
had already completed its work on tiret 56, and while recognizing that a problem of fraud existed, had
not found any solutions.  This issue should be dealt with in the General Council.  Similarly, the
Subsidies Committee had deliberated and continued to deliberate on tiret 68 under the mandate
provided earlier, and there was no utility in providing a new mandate.  Further, the report from that
Committee was due at the end of July.  If the matter remained unresolved at that point, the CommitteeG/VAL/W/97
Page 25
could be given a firm deadline for its deliberations.  With regard to tiret 83 on Annex VII to the
Subsidies Agreement, this should be dealt with in, and required a decision by, the General Council,
and there was no utility in passing it on to the Subsidies Committee for its input.  In closing, he noted
that the major trading partners had shown a very encouraging and positive attitude at the present
meeting and had consistently indicated their readiness and willingness to work to resolveimplementation issues.  Regrettably, however, that enthusiasm and vigour had not been reflected in
the consultations on these issues, as could be seen in the lack of progress.  Malaysia hoped that what
had been said at the present meeting by those Members would be reflected in future consultations, and
that the major trading partners would collectively strengthen their resolve to find genuine and
meaningful solutions to implementation issues.
F. M
EETINGS OF 3 OCTOBER 20001 AND 1 NOVEMBER 2001 (WT/GC/M/70 – PARAGRAPHS 5-6
AND 15-16)
5. First, with regard to the work programme on special and differential treatment under tiret 96,
it was his understanding that delegations had noted that agreement on the date of July 2002 for
General Council decisions in sub-paragraphs (i) and (ii) of that text was on the understanding that
these dates were targets which all Members would make best efforts to meet, and also that thisagreement was without prejudice to the nature of the decisions that might be taken at that time.
6. Second, with regard to the outstanding implementation issues, he wished to clarify that where
a specific negotiating mandate was provided in the draft Ministerial Declaration, the relevant
implementation issues would be addressed under that mandate, in accordance with paragraph 12(a) ofthat text.  For example, tiret 6 concerning agriculture would be addressed in the ongoing negotiations
on agriculture in paragraph 13 of the draft Declaration;  tirets 42- 44, 46-48 and 50-54 concerning the
Anti-Dumping Agreement would be addressed in the negotiations on WTO rules proposed in
paragraph 24 of the draft Declaration;  and tirets 64-66, 69-73, 76-79 and 81 concerning the Subsidies
Agreement would be addressed in the negotiations on WTO rules proposed in paragraph 24 of thedraft Declaration.  The other outstanding issues would be addressed as a matter of priority by the
relevant WTO bodies, which would report to the Trade Negotiations Committee (TNC) by the end of
2002 for appropriate action, in accordance with paragraph 12(b) of the draft Declaration.
15. The representative of Tanzania, on behalf of the LDCs, said that the present meeting provided
an opportunity to make a significant advance in dealing with the long-standing issue of
implementation.  Implementation issues put forwar d by LDCs had finally been included in the
consultative process leading to the results that Members were now considering.  The LDCs, as part of
the family of developing countries, had also supported the resolution of implementation proposals
made prior to Seattle which had remained the core of the consultations on implementation.  LDC
Ministers in Zanzibar had identified further LDC-specific implementation issues which needed to be
resolved.  The LDCs were pleased to note that the revised draft Decision reflected some of theirproposals.  However, in addition to the fact that a number of proposals had not been taken on board at
all, the way many proposals had been reflected did not meet the intended level of efficacy proposed,
and in most cases much weaker language had made the final product more of a best-endeavour
commitment. Thus, in most cases, what had been refe rred to in the text as "LDC proposals" were not
actually what the LDCs had proposed, but rather what the Secretariat had perceived to be the bestresponse to the LDCs' original proposals.
16. Among the proposals the LDCs had submitted and on which, during the informal
consultations, they had understood there to be consensus to resolve by the Fourth Ministerial
Conference, were the following:  On the Agr eement on Agriculture, the LDCs sought bound, duty-
free and quota-free market access conditions for exports originating in LDCs which would cover all
agricultural products in all forms, i.e. primary, semi-processed and processed.  This issue was not
reflected in the draft Decision, although it was well known how fundamental market access was to the
LDCs.  On the Agreement on Implementation of Article VII of GATT 1994 (the Customs ValuationG/VAL/W/97
Page 26
Agreement), apart from extension of the transition period provided for in Article 20 of that Agreement
to allow LDCs to acquire the necessary technical assistance and expertise to implement the
Agreement without affecting their respective comp arative advantages under paragraph 2 of Annex III
of the Agreement, they had sought to be allowed to continue their respective reservations concerning
minimum values for a longer period.  This was an issue of fundamental importance to LDCs whichhad been omitted in the revised text.  Regarding the proposal for binding and effective
operationalization of special and differential treatment provisions, the current reflection of this was of
a non-committal nature and was disappointing.  On the Agreements on Sanitary and Phytosanitary
Measures and on Technical Barriers to Trade, the LDCs were pleased that their proposals had been
upgraded and brought forward to be resolved by  Ministers at Doha, although the proposals had
unfortunately been diluted.  On TRIMS, whereas in the course of consultations the LDCs had had the
impression that their proposals for exemption were generally supported by Members, the resultingtext did not show clear commitments, and the purported extension or exemption would be subject to
terms and conditions to be negotiated.  On services, their proposals had been omitted in the draft text
and, given the importance the LDCs attached to these proposals, they wished to see them dealt with in
one way or another.  These were only some of the specific concerns the LDCs had with regard to the
draft Decision on implementation.  However, they agreed with others on the necessity to create thenecessary impetus to solve the long-standing im plementation issues, and thus could support the
adoption of the draft Decision as a package, but without precluding the possibility of further
examination of these issues in future and with the hope that the other outstanding issues would be
resolved speedily in the context of the framework proposed in paragraph 12 of the draft Ministerial
Declaration.
III. GENERAL COUNCIL  DECISION
A. D
ECISION OF 15 D ECEMBER 2000 (WT/L/384)
GENERAL COUNCIL
Implementation-Related Issues and Concerns
Decision of 15 December 2000
The General Council,
Having regard  to Articles IV.1, IV.2, IV.5 and IX.1 of the Marrakesh Agreement Establishing
the World Trade Organization (WTO);
Considering the importance which Members attach to implementation-related issues and
concerns as reflected in paragraphs 8 and 9 of the Geneva Ministerial Declaration, in the preparatoryprocess for the third Ministerial Conference and in numerous subsequent discussions in the General
Council;
Considering that the Decision of the General Council of 3 May 2000 provides that the
General Council in Special Sessions shall address issues and concerns raised by Members inconnection with the implementation of some WTO Agreements and Decisions;
Recalling  further that the Decision of 3 May 2000 provides that the General Council shall
assess the existing difficulties, identify ways needed to resolve them, and take decisions for
appropriate action;G/VAL/W/97
Page 27
Taking into account  the work programme on implementation issues agreed by the General
Council at its first Special Session on 22 June 2000 which provides that, in the light of the progress
made until then, the third Special Session will take decisions for appropriate action where possible;
Recalling  the mandate given to the Chairman of the Council for Trade in Goods and the
consultations held on the issue of transition periods under the Agreement on Trade-Related
Investment Measures;
Taking into consideration  the requests made to the Director-General to work with the relevant
international standard-setting organizations and relevant intergovernmental organizations on the issue
of the participation of developing countries in their work;
Recalling  further that the following implementati on-related issues were referred to the
relevant WTO bodies at the Special Session held on 18 October 2000:
- in the area of Agriculture, the development of internationally agreed disciplines to
govern the provision of export credits, export credit guarantees or insurance
programmes pursuant to Article 10.2 of the Agreement on Agriculture, taking intoaccount the provisions of paragraph 4 of the Decision on Measures Concerning the
Possible Negative Effects of the Reform Programme on Least-Developed and Net
Food-Importing Developing Countries;
- in the area of Sanitary and Phytosanitary measures, the concerns of developing
countries regarding the equivalence of such measures;
- in the area of Technical Barriers to Trade, the problems faced by developing
countries in both international standards and conformity assessment;
- in the area of Customs Valuation, the idea of information exchange between customs
administrations on export values in doubtful cases, the addition of the cost of services
in Article 8:1(b)(iv) and aspects of the residual method of determining customs valueunder Article 7 of the Customs Valuation Agreement; and,
- in the area of Trade-Related Aspects of Intellectual Property Rights (TRIPS), the
issue of the relationship between the TRIPS Agreement and the Convention on
Biological Diversity and the issue of the implementation of Article 66.2 of the
Agreement on technology transfer.
Noting  the reports on the above issues from the Chairpersons of the Council for Trade in
Goods, the Council for Trade-Related Aspects of Intellectual Property Rights, and the Committees on
Agriculture, Sanitary and Phytosanitary Measures, Technical Barriers to Trade and Customs
Valuation, and from the Director-General;
 Decides  as follows:
1. Agreement on Agriculture
1.1 Members shall ensure that their tariff rate quota regimes (TRQs) are administered in a
transparent, equitable and non-discriminatory manner.  In that context, they shallensure that the notifications they provide to the Committee on Agriculture contain all
the relevant information including details on guidelines and procedures on the
allotment of TRQs.  Members administering TRQs shall submit addenda to their
notifications to the Committee on Agriculture (Table MA:1) by the time of the second
regular meeting of the Committee in 2001.G/VAL/W/97
Page 28
1.2 The Committee on Agriculture shall examine possible means of improving the
effectiveness of the implementation of the Decision on Measures Concerning the
Possible Negative Effects of the Reform Programme on Least-Developed and Net
Food-Importing Developing Countries and report to the General Council at the
second regular meeting of the Council in 2001.
2. Agreement on the Application of Sanitary and Phytosanitary Measures
In accordance with the request to the Director-Gen eral to work with the relevant international
standard-setting organizations on the issue of the participation of developing countries in their
work, these organizations are urged to ensure the participation of Members at different levels
of development and from all geographic regions, throughout all phases of standarddevelopment.
3. Agreement on Technical Barriers to Trade
In accordance with the request to the Director-Gen eral to work with the relevant international
standard-setting organizations on the issue of the participation of developing countries in their
work, these organizations are urged to ensure the participation of Members at different levels
of development and from all geographic regions, throughout all phases of standard
development.
4. Agreement on the Implementation of Article VII of the General Agreement on Tariffs and
Trade 1994
Noting that the process of examination and approval, in the Customs Valuation Committee, of
individual requests from Members for extension of the five-year delay period in Article 20.1is proceeding well, the General Council encourages the Committee to continue this work.
5. Agreement on Rules of Origin
Members undertake to expedite the remaining work on the harmonization of non-preferential
rules of origin, so as to complete it by the time of the Fourth Ministerial Conference, or by the
end of 2001 at the latest.  The Chairman of the Committee on Rules of Origin shall reportregularly, on his own responsibility, to the General Council on the progress being made.  The
first such report would be submitted to the Council at its first regular meeting in 2001, and
subsequently at each regular meeting until the completion of the work programme.
6. Agreement on Subsidies and Countervailing Measures
6.1 Taking into account the unique situation of Honduras as the only original Member of
the WTO with a GNP per capita of less than US$ 1000 that was not included in
Annex VII(b) to the Agreement on Subs idies and Countervailing Measures (SCM
Agreement), Members call upon the Director-General to take appropriate steps, inaccordance with WTO usual practice, to rectify the omission of Honduras from the
list of Annex VII(b) countries.
6.2 The Committee on Subsidies and Countervailing Measures (SCM Committee) shall
examine as an important part of its work all issues relating to Articles 27.5 and 27.6of the SCM Agreement, including the possib ility to establish export competitiveness
on the basis of a period longer than two years.G/VAL/W/97
Page 29
6.3 The SCM Committee shall examine as an important part of its work the issues of
aggregate and generalized rates of remission of import duties and of the definition of
"inputs consumed in the production process", taking into account the particular needs
of developing-country Members.
7. Further Work
The General Council's Decision of 3 May 2000 on Implementation-Related Issues is reaffirmed.  The
General Council shall address the outstanding implementation-related issues and concerns, including
those set out in paragraphs 21 and 22 of the revised Draft Ministerial Text dated 19 October 1999
(Job(99)/5868/Rev.1), as well as any other implementation-related issues raised by Members, as
envisaged in the Decision of 3 May and the work programme agreed on 22 June 2000, with a view tocompleting the process no later than the Fourth Session of the Ministerial Conference.
IV. DISCUSSIONS IN THE COMMITTEE ON CUSTOMS VALUATIONS
A. M
INUTES OF THE MEETING OF 7, 13, 24, A ND 29 N OVEMBER 2000 (G/VAL/M/17 – ITEM 2)
2. Implementation issues referred to the Committee by the General Council contained in
paragraph 21(h) of the WTO document Job(99)/5868/Rev.1, 19 October 1999.
2.1 The Chairman informed the Committee that the General Council, at its meeting of 18-19
October, had requested the Committee to consider three proposals related to implementation of the
Customs Valuation Agreement.  These three proposals were taken from paragraph 21(h) of WTOdocument Job(99)/5868/Rev.1 of 19 October 1999.  In its request, the General Council asked that the
Chairman report on the outcome of the Committee's consideration of these items to the Council before
its Special Session on Implementation in December.  This implied that the Committee did not have a
great deal of time to consider these items.  Since the October meeting of the General Council, he had
consulted on these items among Members.  There were a number of questions and views which stillneeded clarification and he opened the floor for discussion.
Tiret 1: A multilateral solution that enables customs administrations of importing countries to
seek and obtain information on export values in a time-bound manner, in doubtful
cases, shall be included in the Agreement.
2.2 The representative of India stated that all three proposals emanated from his delegation which
had explained them when they were introduced in the General Council.  Briefly, the first tiret was
proposed to facilitate implementation and rule out cases which did not represent the true transaction
value.  His delegation found that, after 12 years of experience applying the Agreement, such a
solution was necessary, and he was prepared to respond to Members' questions.
2.3 The representative of Senegal stated that developing countries had difficulties implementing
this Agreement and his delegation supported India, which had been implementing the Agreement for
12 years, and which found it necessary to make this proposal.  He added that many countries,
particularly developed countries, had not signed the Nairobi Convention.  Mutual administrative
assistance was necessary to be able to benefit from the cooperation of certain countries since his
country was basically an importing country.  Ofte n his Government heard from other Members that
regulations did not allow the sharing of information and data.  However, export declarations existed
and, when sometimes provided to his Government's customs administration, were useful.
2.4 The representative of Venezuela voiced support for the Indian proposal.
2.5 The representative of Pakistan also supported the Indian proposal which provided a solution
to a general problem faced by many developing countries.  A multilateral solution such as proposed,G/VAL/W/97
Page 30
would help all Members' customs administrations to resolve issues which pertained to basically
fraudulent transactions and documents.  The main point in the proposal related to provision of the
information in a "time bound manner".  His delegation's experience showed that requests for
information were often shelved and no responses provided.  A prescribed time-frame would benefit all
Members.
2.6 The representative of Jamaica supported the Indian proposal and endorsed the comments
made by Senegal and Pakistan.2.7 The representative of Thailand informed the Committee that his capital was still considering
the proposal, however, he presented preliminary observations.  All Members were concerned about
fraud which could distort trade and revenue collection.  But his delegation needed clarification on a
number of points.  First, what was meant by the term "to seek and obtain information" and how
customs authorities of importing countries go about seeking and obtaining the information.  Second, ifthe meaning of "seek and obtain information" was that the customs authority of the importing country
would contact the customs authority of exporting c ountries informally or formally, what would the
legal implications be if the latter could not provide the information with reason in a time bound
manner, bearing in mind that this proposal would be included in the Agreement.  Third, how would
the term "doubtful case" be defined and how could Members be assured that this would not be used asa trade barrier?  Fourth, Thailand was subject to an Information Act which did not allow the
government agencies to provide this kind of information to others.  Finally, he understood that
provisions in the Nairobi Convention allowed importing countries to seek and obtain such information
from other Members of the Convention.
2.8 The representative of Colombia also voiced preliminary views on the proposal.  In view of the
difficulties customs faced every day trying to obtain information which would allow them to disprove
fraudulent declared values by importers, it was important to have a multilateral commitment for
customs administrations to exchange information on values.  This commitment should be accepted by
all Members and established to avoid becoming an obstacle to the free movement of goods and a
discretionary mechanism.  He added that some Members had stated that the information being soughtwas confidential.  Article X of the Agreement allowed customs administrations to maintain
confidentiality unless an authorization was obtain ed by the exporting country.  The information
exchanged would be of an official nature to which other customs might have access according to the
mechanism set up.  There should be a commitment that this information would only be exchanged in
order to verify data and would not be used for othe r ends or for cases when the differences in prices
were relatively reduced.  Further, regulations would be necessary on the time limits and conditions for
the exchange for any dispute settlement procedures.  The guideline should always be reciprocity.
2.9 The representative of the Dominican Republic supported the Indian proposal as his delegation
believed that it would help countries such as his own in the implementation of Article VII of the
GATT.  In no case should transparency become an obstacle to trade.
2.10 The representative of India responded by presenting a case-study of imports of camera parts
from a non-WTO Member that showed the difficulties his customs administration was facing.  The
case looked unusual because the parts were sub-assemblies and normally cameras were imported
assembled.  Upon examination, the value declared was US$ 4800, the goods were coming from a third
country (not the country of origin) which informed Indian custom that the export declaration in their
country was for US$ 37,000.  This was a case where the declared value was different and, in fact,
represented only 13 per cent of the actual value declared by the exporting country.  The Indiancustoms found that there were eleven more such co nsignments with similar values.  The information
received from the exporter could not be used because the customs authorities of the third country said
that the information was being provided in confid ence.  If there was a multilateral arrangement for
obtaining this information, perhaps it could have been used.
2.11 A second case dealt with imports of 108 consignments of footwear which were suspected of
being undervalued.  Upon examination, the Indian cu stoms found that the supplier in the exporting
country did not exist.  In these types of cases, assistance was needed from customs administrations.G/VAL/W/97
Page 31
With respect to the concern that seeking informati on could be misused as a trade barrier, in both the
situations presented, clearance of the goods was allowed subject to the final determination of value.
The subsequent checks made revealed that the prices were much less than the declared values.  He
added that such cases were infrequent and that each country's customs administration had various
assessment and management methods to zero in on doubtful cases.
2.13 He confirmed that the Nairobi Convention was not signed by most delegations.  If it was
adhered to by most countries, the problems in implementing the Agreement would be much easier.
As far as the Information Act mentioned by Thailand was concerned, he stressed that the information
received from importers and exporters was protected from being divulged by Indian law.  Only when
a "doubtful case" was actually proven to be a case of fraud, and had to be tried in a judicial forum,
then the law would allow the information to be rev ealed.  This was also the spirit of the Agreement
which said that information collected for valuation purposes could not be divulged.
2.14 The representative of the United States reiterated Thailand's questions, underscoring several
which it considered unanswered.  For example,  what was meant by "time bound" and did this
envisage formal or informal procedures?  The proposal spoke in terms of "doubtful cases";  the
Nairobi Convention spoke in terms of "good reason to believe that a serious customs offence has been
committed".  Was the proposal being made attempting to equate these two terms, and what exactlywas meant by the term "doubtful"?  Was "doubtful" defined as a price looking as if it was too low or
too high or were there other criteria?  He also sought confirmation that developing countries would
also provide such information.  His delegation was also unclear as to whether, in the case of the
camera parts presented by India, a bilateral agreement existed between India and the other country,
and what was the reason given that this information could not be used.  Was the latter due to the lawsof the country which provided the information?  Finally, his delegation sought clarification as to why
a multilateral agreement would cure the problem when it seemed that the problem was the absence of
a bilateral agreement to address this situation.
2.15 The representative of New Zealand posed additional questions.  First, what objective criteria
existed for determining what was a "doubtful case";  how were the two case-studies cited by India
determined to merit investigation? Second, what would the legal implications be for a customs
administration that was not able to provide the information requested or not in a "time bound
manner".  She added that some of the information envisaged under the proposal was not actually kept
by her Government's customs administration.  It woul d be difficult, in some circumstances, for her
customs administration to provide the exact information on export values;  it would require a lot of
work and statistical changes to the domestic requirements for the maintenance of information.  This
question related to the question of confidentiality as well.  Third, how would the Indian proposal fitwith bilateral agreements, the Nairobi Convention a nd other existing international instruments in this
area?
2.16 The representative of Australia had questions similar to Thailand and other delegations.  His
delegation considered that WTO Members were responsible for ensuring that importers complied with
domestic laws on valuation.  When there were serious difficulties and all domestic procedures hadbeen exhausted, then cooperation could be sought with other customs administrations.  His delegation
was concerned that the proposal put forward by India might place undue burden on customs
administrations to provide information to importing countries.  This would be an inappropriate
diversion of resources from customs' prime responsibility.  He invited India to respond to these
concerns to clarify whether they were, in fact, justified.  Secondly, he noted that there were existinginstruments under which WTO importing countries could seek cooperation with other WTO Members
such as the Nairobi Convention, bilateral agreements, and the WTO Ministerial Decision on Cases
Where Customs Have Reason to Doubt the Truth or  Accuracy of the Declared Value (hereafter,
Ministerial Decision).  He asked how the proposal would fit in with these existing instruments and
why were not these instruments sufficient to deal with the problems described by India.
2.17 The representative of Canada said that his delegation had a question regarding the reasons for
this proposal in the first place - had other methods been tried, had they worked, if not, why?  On theG/VAL/W/97
Page 32
proposal itself, he asked if the information received from exporting countries was verified or audited?
How could it be ensured that the information was accurate given that export data was not always
reliable, and that it would be used for the application of the Customs Valuation Agreement?  His
delegation was also interested in knowing what peri od of time would be required.  Also, what was the
standard of proof of a doubtful case?  Under what criteria would the information have to be providedsince the proposal implied that the information would be gathered by a foreign country from the
exporting country which might also have its own confidentiality requirements.  This latter aspect was
critical.  His delegation was worried that this proposal would initiate shifting the burden of
enforcement from the importing country to the exporting country.  The Agreement was based on the
fact that the enforcement should be by the former.  Finally, what would the proponents of this
proposal do with the price data requested and for what would it be used, particularly in light of tiret 3
and of the statement by the Dominican Republic which referred to Article 7?
2.18 The representative of Singapore asked what type of fraud was causing India's problem?  The
examples provided did not clarify the question for her delegation which was convinced that fraud was
not a customs valuation issue.  On what facts did India suspect that there was fraudulent declaration of
the customs value declared by the importer;  what was the benchmark for suspicion of fraud?  Was it
based on the comparison of values declared by other importers such that this declaration stood out forbeing much lower or higher than the others?  Sh e asked for elaboration on how India would detect a
suspicious import.  With India being such a large market, there could not only be one importer for the
goods suspected of fraudulent declaration.  There would have to be other importers importing the
same good from different entry points into India.  Did India compare and collate such information
and, from this, determine if the value declared might be incorrect.  How did India currently verify theaccuracy of the declared value - what type of supporting documentation did India request from the
importer (examples cited were purchasing orders, bill of ladings, commercial invoices, etc.)?  She also
asked at what stage of the investigation would India require assistance from other customs
administrations?  She asked if India could further elaborate on the problems faced in specific cases.  If
India suspected such wide-spread collusion among traders, then could another customs administrationrely on the information submitted by an Indian exporter?  If this was to be a multilateral solution,
other customs administrations may need to obtain information from the Indian customs
administration.  Would this help other customs administrations if they could not verify that the
information given to them by Indian authorities was accurate?  If, alternatively, there was not such
wide-spread collusion, should not India be able to use as a benchmark for accuracy the import values
declared by other importers in India and then ask the fraudulent importer to justify why its price was
so different?  Her delegation wondered why India could not deal with the fraud problem on the homefront like other customs authorities?  Her Government handled fraud at the importing end, by the
importing authority as they had better access to invoices and other supporting declarations.
2.19 She also asked what was the level of detail required on the export value.  For example, her
government collected export data for statistical purposes, not on a transaction-by-transaction basis.
Hence, this data would not contain the level of detail that would enable India to cross-matchinformation on the import declaration.  For the data to be useful to India, there would have to be
specific breakdowns of export prices for specific transactions.  This would require the exporting
authorities to look into the exporters' materials to  check for the data of the particular corresponding
shipment.  Even if the export value did not match the import declaration, it was not necessarily fraud.
If the collusion which India spoke about referred to collusion between the importer and the exporter,receiving the export value from the exporting author ity or the exporter would not help to establish
whether there was fraud.  She asked also what was meant by "doubtful cases"?  In addition, India's
proposal would require exporting countries to divulge confidential information.  Several countries
could not divulge such information which was prot ected by secrecy laws.  India mentioned its own
legislation which protected information given by exporting authorities.  This was only the secondstage of information, however.  There were certain procedures in the domestic legislation that might
prevent even the provision of such confidential inform ation in the first place.  She also asked if India
and other developing countries which supported the proposal had the resources and would be in a
position to meet the additional demands that would be imposed by it and in a "time bound manner"?G/VAL/W/97
Page 33
Finally, she considered that this proposal undermined the basic premise of the Agreement by shifting
the burden of proof to the exporting authorities.  In order to assess the existence of fraud, the
information would have to be accurate.  If the proposal meant that exporting authorities would have to
verify the accuracy of the information submitted to them, this would amount to shifting the
investigative burden to the exporting country's authorities.
2.20 The representative of the European Economic Communities stated that his delegation
associated itself with all of the questions raised which were appropriate given that the successful
implementation of a multilateral Agreement was under consideration.  The work associated with this
Agreement belonged to the country of importation where there were at least five parties who knew the
reality of the transaction and on the basis of which the Agreement was constructed - the importer, the
customs administration, the tax administration, the financial authorities, external accountants, in
addition to the many parties who ought to know a nd would know the realities of the business affair.
All the powers of the Agreement were vested in the authorities of the importing country where all the
relevant information existed also, including the goods and evidence.  The exporting country was
simply the place where the export took place and there may be other intervening countries where the
trade would cross frontiers.  Under these circumstances, after twenty years of applying the
Agreement, it would not be a wise move to shift the burden, facility or competence of implementationand administration of the Agreement.  His delegation was interested in hearing from India whether
they had a particular problem, of a particular nature, which may need to be discussed and for which
perhaps they, themselves, could only provide the solution if the cause was the availability of
information in the appropriate trading circuits.
2.21 He stressed that the broad principles must be upheld.  These included confidentiality, not
shifting the burden of commerce on the exporting customs administration, and the fact that the powers
to implement the Agreement were fully available in the importing country including access to
information and those emanating from the work that has done on the Agreement since its inception,
i.e.  the Ministerial Decision.  The powers therein should be used to the fullest and, as such, they
provided the full armoury of tools that could be us ed to examine cases and try to find existing fraud.
For the most part, importers were willing to cooperate with importing authorities.  His delegation did
not consider that movement towards a radical solution was necessary when the ordinary good
measures, good practice and good administration of the Agreement should enable dealing with the
kinds of problems which arose on a daily basis for customs administrations.
2.22 The representative of Korea expressed appreciation to India for promoting the implementation
of the Agreement.  His delegation understood the difficulties faced by India in implementing.
However, it shared the views expressed by Thailand, the United States, New Zealand and Singapore.As a general comment, it seemed that the approach suggested by the proposal may be difficult to
apply to actual circumstances in which the transaction value is determined in accordance with various
elements.  Moreover, such approaches may obviate the demand for the Agreement.  He added that
export prices varied considerably depending on individual situations.  In would not be technically
easy to identify an appropriate export price to notify.  In addition, providing customs administrationsof importing countries with information on export variables was, in most cases, not allowed by
domestic law of the exporting country if the information was regarded as confidential.  He added that
the purpose of declaring export values to customs in exporting countries was basically for statistical
purposes.  So, in many cases, the export variables could not be used as a reasonable basis to determine
the customs value of the imported goods.  Finally, according to India's proposal, in case the customsadministration of the importing country considered that there was fraud in the declared price, the
administration would request the exporting country to provide information on export values and
would use such information as the primary basis for the customs value.  This would undermine the
Agreement under which the customs administration should use the transaction value as the primary
basis for the customs value.
2.23 The representative of Brazil saw merit in the underlying objectives of the proposal which
were to combat fraud.  His delegation had no final position as the matter was still being examined in
his capital.  He singled out the important element of confidentiality and his authorities wereG/VAL/W/97
Page 34
examining the legal implications of providing the information proposed.  He added that if it was
agreed that a multilateral solution to this matter was necessary, a great deal of work would be
necessary on the procedural side in order to ensure that it would be used in a fair manner.
2.24 The representative of Switzerland shared the view expressed by Singapore that the problem of
fraud was not a valuation problem.  Fraud should be dealt with at the national level of each country
and not within the scope of the Agreement and the WTO was not the appropriate place to discuss the
problem of fraud.  Her delegation acknowledged, however, that some countries were facing problems
relating to fraud in the area of customs valuation.  But, like other delegations, her delegation believed
that any proposal suggested to resolve these problems should respect national legislations of Members
and take into account the constraints of such laws.  In order to help better understand the problems
being discussed, she asked if India could elaborate more on the concrete character of its difficulties
and on the way it had so far tried to solve them.  On this basis and referring to what Singapore hadsaid, she asked what India believed to be the origin or cause of the problems encountered.  In other
words, what drove traders to falsify the customs declarations?  She also asked India to give precise
information about the scope and economic impact of the problem it faced.  Furthermore, her
delegation was interested in knowing what measures India had taken so far to combat fraud and for
which reason these measures had not been efficient and why India was not using preshipmentinspection to combat fraud.  Finally, she asked why India was having difficulty in getting information
from its own importers as foreseen in paragraph 6, Annex III of the Agreement?
2.25 The representative of Hong Kong, China noted his delegation's support for the idea of
cooperation among customs administrations for the effective implementation of the Agreement.
Nevertheless, his delegation shared many of the questions raised initially by Thailand and elaboratedupon by other delegations.  Without going into details, he stated that he shared the US question as to
how an international agreement would help solve the sorts of problems identified through the example
of camera parts.  He did not see the connection, pa rticularly in view of the confidentiality issue.
2.26 The representative of Japan stated that most of his delegation's questions had already been
raised by previous speakers.  However, he asked what was the magnitude of the problem being faced
by India.  This had to be the starting-point for an y technical analysis.  He also wished to know what
kind of information the importing country could prov ide when assistance was sought, for example, the
date of the shipment, the export port, etc.  His delegation would need to know what kind of
information would be provided by the importing countries to assist the exporting countries in
providing the information.  Further, his delegati on would like to know the meaning of "time bound
manner" as well as the term "doubtful cases".  The resource implications of the proposal would have
to be analyzed and his Government might be obliged to modify its export clearance system toaccommodate this proposal.  His delegation asked if compensation was envisaged in the event that
business interests of the exporters would be affected or damaged by this proposal?  Finally, he asked
if while seeking assistance, would the importing country stop the import clearance system?
2.27 The representative of Chile confirmed that the problem of under-valuation was a problem for
many countries.  The problem and the proposal was being studied in his capital and he did not have a
precise position on the matter.  He considered that all the questions raised were valuable and were
similar to those of his own administration.  It might be useful to have a study done on what had been
done at the bilateral, plurilateral and multilateral levels in other fora to deal with the problems cited.
2.28 The representative of India attempted to answer the questions raised.  First, he explained that
the term "time bound" meant promptly and without inordinate delay when an export value was
requested.  His delegation had not specified a precise time-limit.  Second, his delegation was looking
for a formal solution.  While it had been mentioned that there some domestic laws which would not
permit the exchange of such information, his delegation believed that if there was a formal WTO
discipline, exporting countries could exchange the information asked for by importing countries.
Third, his delegation's proposal was confined to the meaning of "doubtful cases" found in theMinisterial Decision.  There could be some difference between what was referred to under this
Decision and what was referred to under the Nairobi Convention.  Fourth, he confirmed that hisG/VAL/W/97
Page 35
delegation was proposing a multilateral solution that would require information from all countries,
whether developed or developing and his delegation was willing to share information when asked.
Fifth, in his delegation's experience, bilateral solutions did not work.  His delegation had a few such
agreements and found it very difficult to enter into such agreements with all its trading partners.  A
multilateral solution was preferable to a number of different bilateral solutions.
2.29 Sixth, regarding the questions on how Indian customs chose doubtful cases, he considered this
a secret of Indian customs.  All customs administrations had similar techniques to identify doubtful
cases.  In the two examples given, he did not consid er that he had to justify how customs had selected
these cases.  It was proven in one case that the export value and the import value were significantly
different.  Whatever method Indian customs had us ed was valid as justified by the fact that the
declared value was fraudulent.  The methods applied were valid because they zeroed in on the right
cases.  Seventh, his delegation understood that most countries had export values, either exportdeclarations, export invoices, or through computer -databases.  There was a six-digit code for the HS
classification system, but many countries had more elaborate sub-divisions under the HS system and
they compiled trade statistics for each of the statistical sub-divisions and country-wise to determine
which country was exporting and importing.  This information was available in most countries and it
was not so difficult to provide such information.  He clarified that of, for example, one millionimports, information would not be sought on all of these, but only a few where customs had doubts.
In addition, customs clearance continued even where an investigation was on-going, as the Agreement
obliged.
2.30 Regarding the point made by Australia that the proposal would create an undue burden on
customs administrations, his delegation did not believe so.  He added that, although India had nobilateral agreement with Australia, their cooperation with Australia was very good and a large amount
of under-invoicing was detected through the assistance of Australian customs.  He provided a case of
apples imported from Australia at Australian$ 15.00 for a carton of 20 cases.  Indian customs had
posed as a buyer and had requested a sale from the supplier who admitted that the price was actually
Australian$ 28.00, but a relationship could be established whereby the difference between 28 and 15Australian$ would be owed at a later date.
2.31 On Canada's point that the Indian proposal was not a solution, he added that the experience of
Indian customs was different than that of developed countries.  Countries with duty rates of 2 per cent
or below had a different type of problem in tackling customs fraud cases than countries like India,
which depended more on customs revenue.  Although India had tried to reduce duty rates
considerably in recent years, it still found that under-valuation persisted.  He requested developed
countries to look at the problems that India and many other developing countries faced such asmeeting the fiscal deficit without which further liberalization was not possible.  In addition, there was
a need to support honest trade and stop illegal activity.  He added that Canada's argument of shifting
the burden from the importing country administration to the exporting country administration was not
correct.  What was sought was one additional piece of information to help customs determine the
correct customs value.  His administration was fully competent and had a programme with RevenueCanada for assistance.  Following their visits to Indian customs, Canadians had noted satisfaction with
India's work.  Therefore, it was not that India was not doing enough to reform its customs and it did
conduct its own investigation, but Indian customs considered that this particular piece of information
was not available within the country and would be an important link in the process of establishing the
correct values under the Agreement.
2.32 Some of the questions from Singapore had been raised by others.  But he added that India had
a particular problem with third-country invoicing.  He cited a case of European-originating motor
vehicle parts which went to a third country and which were invoiced in India far below the price in the
third country.  India went to the third-country supplier which confirmed selling at a much higher
price.  In cases involving third-country invoicing and where the goods did not undergo furthertransformation, India had difficult problems.  For these types of cases bilateral solutions would not
help, but a multilateral solution was necessary because values from the country of origin were
necessary.  On the question of how wide-spread collusion was, he was grateful that it was a limitedG/VAL/W/97
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problem.  However, given India's size and the amount of imports in the large market, it was
considerable and needed to be dealt with not only for revenue purposes but also for stopping trade
distortions caused by over- and under-invoicing.  With respect to the issue of data collection and
whether such data would be at the level necessary for the requirements of the proposal, he added that,
under the proposal, his authorities would be satisfied with whatever statistical data was collected.
2.33 On the matter of confidentiality, he drew the attention of the Committee to Article 10 of the
Agreement which said that information obtained would be kept confidential except to the extent that it
would be required to be disclosed in judicial pr oceedings.  So, when information was obtained under
the proposal, and it was found that it matched the declared value, it would be kept confidential as
there would be no reason to disclose it.  Only if there was a wide variation in prices and there was
cause for some action to be taken in a judicial proceeding, it would be disclosed.  This was foreseen
under Article 10 of the Agreement anyway.  He added that Indian customs was also bound by nationallaw not to disclose this information as well as by the specific wording of Article 10.  He asked why
exporting countries would be interested in protecti ng information in the case of fraud?  Would they
support fraudulent transactions?  Article 10 did not support the protection of fraudulent cases by
stating that information could be disclosed in the context of judicial proceedings which would only be
undertaken in the case of a fraudulent transaction.  He mentioned that when some exporters from acountry indulged in fraudulent transactions, it harm ed the interests of the other exporters in the
country of origin of the product who were paying the correct amount of duty on the declared value.
Therefore, it was as much in the interest of the exporting countries to cooperate with the importing
country administrations to root out the fraudulent cases.
2.34 On the question of whether developing countries  themselves would be able to undertake the
obligations of the proposal, he said that his country was fully committed to helping other countries
through the exchange of information among customs in a prompt manner.  He noted that his
delegation was prepared to provide the specific details of all the consignments - the bill of lading
number, the invoice number, the container details, and the vessel on which the goods came, etc.  In
some cases, under-valuation was tied to money launde ring and drug-related offences.  He agreed with
the EC comment that all the powers under the Agreement were with the importing country, but
unfortunately, the importing country did not have all the information it needed.  It was operating in
the environment of the importing country and some information had to come from the exporting side.
He noted that the OECD countries were now look ing towards full cooperation among countries in
administering domestic taxes.  Here was a situation where goods went from one country to another,
either directly or through several countries.  There was a greater need for mutual cooperation and
exchange of information.  Two basic reasons for which the WCO was established were to harmonizecustoms procedures and to bring about an exchange of information and mutual cooperation among
customs administrations.  Although the importing country had all the authority, without the
information requested, the Indian experience indicated that the task was difficult.
2.35 He fully recognized Korea's point that exporting prices varied considerably.  His delegation
was only asking for the price declared at the exporting end.  By this, customs would not be looking atanother consignment which might have been different.  The proposal was not designed to upset this
fact, but merely to check the price at the other end.  He acknowledged that a situation where the
exporter and importer were colluding would not be addressed by the proposal and his delegation was
aware of this.  His delegation considered that if such a multilateral solution were in place, customs
would have less need to actually ask for values once the exporters and importers knew the existenceof the arrangement.  With respect to Switzerland's point that the WTO was not the appropriate forum
to discuss fraud, his delegation considered that it was since this was a WTO Agreement and these
issues arose out of the implementation of this Agreement.  From the experience of his country, these
issues needed to addressed.  He noted that although the Agreement was 21 years old, many countries
were not able to implement it fully and this said a lot by itself and highlighted that there were issues
that needed to be addressed.  Although the ideal situation would be to get rid of customs duties, until
such time, the problems would exist and a solution was needed to tackle them.  Regarding Japan's
question on the magnitude of the problem, he noted that it depended on the good.  The problem didG/VAL/W/97
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not exist for all goods but for some, in particular, second-hand goods which developing countries
imported, metal scraps, and third-country invoicing.  When goods were procured directly from the
manufacturers as opposed to traders, the problem was much less.  He was puzzled by the matter raised
by Japan concerning damage to exporters.  He reiterated that if the information proved that the
transaction was genuine, there would be no question of divulging the information and would result inmore rapid conclusion of the investigation.  If there was a case of fraud and, as a result, the
information was used, he did not see why damages woul d have to be paid to the exporters.  The matter
would have to be dealt with under the relevant law which he did not think provided for any damages.
He considered the final question by Japan on delaying the import clearance procedure a separate
issue.  The idea of requesting information was to cross-check and in cases where there was no
problem with the declared value, it would actually expedite the clearance.  In any case, it would take
time for the requested information to come, and Indian customs released the goods in accordance withthe Agreement.
2.36 The representative of the United States noted that the US customs administration recently
expressed satisfaction when it was presented with a new draft by India of a potential mutual
cooperation customs agreement which it was presently reviewing.  In seeking further specificity, he
asked if "doubt" was equated with "fraud" or with the definition under the Nairobi Convention whichhad a specific standard, because he knew of some administrations where doubt was cast in virtually
every transaction.   With regard to the case of Indian imports of Australian apples, he asked if India
acted upon the information that it had obtained and, if so, how would the proposal have changed the
procedures in this example.  His delegation saw no link between the proposal and this case.  A third
question related to resources and whether India had examined how many requests it would envisionmaking in one year, either in terms of number or percentage of imports.  He noted that the US was
importing about US$ 1 trillion a year.  In translating India's experience to the US, he would be
grateful for an estimate as to how many requests were envisioned as a percentage of its own  imports.
Fourthly, he asked what was meant by the word "information".  He remained unclear as to what
information was being sought - was it the declared value?  Many countries did not include certainelements in their declared value that were in the Agreement.  How would the proposal envision
dealing with aggregate values which many countries compiled on the export side.  Did the proposal
envision countries changing their methods for calculati ng declared value?  If not, what would be the
utility of examining a value that had not been constructed consistent with the hierarchy of the
Agreement?  Finally, he asked what specific information India would be willing to share under this
proposal as an exporter and what elements were in its declared value?  Would there be other types of
valuation-related information that India would be willing to share under this proposal?  Would therebe an expectation that customs administrations of exporting countries visit offices of exporting
companies and would India would be willing to check its own importers and exporters for such
information?
2.37 The representative of Canada sought further clarification on the type of information desired
by India.  Since it was not known when information might be requested, it would have to be collected
for all imports which implied a significant resource problem.  Laws might have to be changed in order
to collect the correct information as requested.  This related to the question of whether India verified
the data it received;  did it send auditors to make sure that the data being reported by its exporters was
accurate?  Most export data was provided for statistical purposes at various levels of aggregation and
notification for enforcement purposes, therefore, verification was not conducted on its accuracy.Although requests might only come one or two times a year, the data would have to be collected every
day.  Furthermore, he asked what India wanted to do with the price data it would receive?  His
delegation was interested in knowing why they needed  this information, particularly in light of the
Dominican Republic's statement regarding Article 7, and because of the proposal in tiret 3 which also
dealt with Article 7.  With regard to what was meant by "doubtful", he agreed that, with respect to the
Ministerial Decision, India was correct in stating it was up to customs to determine because here the
only investigation would be on an Indian importer.  However, if another country were to provide
confidential business information to another country's customs service, more specificity than
"doubtful" was needed.  He also sought more detail on India's comment that it requested a multilateralG/VAL/W/97
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solution to see the values in the country of origin.  This complicated matters because it implied tracing
transactions and the value at the point of production because the final value of sale of the good could
be very different.
2.38 Finally, he confirmed that Indian customs was moving down the right road in terms of
implementing the Agreement and this was why his delegation was puzzled as to why it was makingthis proposal.  India had admitted that this proposal would not address the situation of collusion
between importers and exporters.  In addition, under-valuation usually implied that the adjustments
under Article 8 were not added in and the exporting country would not have any information on these
elements.  Therefore, this proposal would only cover fraud which was being carried out by the
importer.  If this was so, the best source of info rmation would be in the importing country.  The WCO
suggested possible ways of dealing with fraud, such as record-keeping, research and analysis, risk
assessment, high-risk and low-risk enforcement areas, etc.  His delegation was still not clear whyfraud by the importer could not be dealt with through normal fraud investigations.  His delegation was
worried that this proposal was a substitute for using proper fraud methodologies and modern customs
techniques which he considered important for implementing the Agreement.
2.39 The representative of Australia reiterated its support for full cooperation in this area.
However, the case of the Australian apples showed that cooperation already existed and that India was
able to obtain the information that it was seeking.  This appeared to contradict India's earlier statement
that there was currently no way of obtaining the sort of information sought under this proposal.  In
light of this, his delegation still did not understand why a formal, or mandatory, multilateral solution
was required.
2.41 The representative of Singapore acknowledged that all delegations were concerned with
genuine fraud and that each country combated such cases.  She sought clear, specific answers as to
what was meant by "doubtful cases".  In practical terms, it seemed to mean that each time Indian
customs had doubts or simply questions about a declared value, exporting countries' customs
administrations would be required to investigate its e xporters in order to obtain the export data and the
values needed to support India's investigation.  This was not even at the point of legal proceedings,but only in the case of doubt.  This would imply several practical as well as legal difficulties.
Singapore exporters provided export and business  information to Singapore customs administrations
under confidence, the latter not being at liberty to divulge this information.  If there was a legal
investigation under judicial proceedings, this would imply a different situation.  However, her
delegation could not accept that it would have to go after its own exporters when they were not the
subject of any fraud investigation.  Therefore, the solution would first have to start at the importing
country where investigation of importers would have to be exhausted, including use of the computedvalue.  When all such efforts had been exhausted, then cooperation should be explored.  This led to
the question of what level of information would be needed.  She was puzzled by the statement by
India that they would be satisfied by whatever statis tics were available.  Her delegation did not see the
utility in using broad data.  Even if this information was available and could be provided, it would not
be of utility to the Indian customs in solving fraud.  Finally, she emphasized that money launderingand drugs had nothing to do with the Agreement.
2.42 The representative of the European Communities, on the question of "doubt", noted that there
were two different concepts in the Ministerial Decision and in the Nairobi Convention.  Neither of
these concepts could provide the basis for a multilateral agreement because customs administrations
doubted all the time and would be requesting information from around the world continuously.  Thiswas the reality from his experience.  Simple doubt was not sufficient to create such an instrument that
was under discussion.  The concept in the Nairobi Convention did not warrant further information
because a strong case already existed, and the provisions of the Ministerial Decision would have
already been used.  In addition, he questioned whether such a proposal could be made operational
because of the amount of resources and the questions of confidentiality.  Cooperation mechanismsexisted under the WCO and the types of products men tioned by India could be dealt with by Indian
customs.G/VAL/W/97
Page 39
2.43 The representative of the Dominican Republic clarified that when he was speaking of Article
7 in this context, he meant the Agreement on Implementation of Article VII of the GATT 1994.  He
stressed that one of the obstacles for developing countries in the implementation of this Agreement
was that it was impossible to demonstrate the origin al transaction.  Developing countries could have
more faith in the invoice presented by the importer if they had more information.  In his delegation'ssupport for the Indian proposal, it agreed with the main thrust of the proposal which would strengthen
the efforts of countries such as his own, which were trying to implement the Agreement.  He noted
that many of the questions raised were reasonable and should be taken into consideration.  However,
he considered that international trade transactions needed to be more transparent and this was what the
WTO was working towards.  But, this came into co nflict with the question of confidentiality.  He
added that Article 6.2 of the Agreement stated that appeal could be made to the authorities of other
countries in order to obtain information for the computed value.  This was similar to what the Indianproposal was trying to accomplish and showed a pre cedent for third countries assisting in verifying
the customs value.  Of course, the proposal would imply modification of the Agreement which had
consequences.  Although further study was necessary, his delegation did not believe that the proposal
should be rejected.
2.44 The representative of India thanked the US delegation for mentioning the draft bilateral
agreement which was under discussion and looked forward to resolving matters through this
agreement.  He noted that a study recently completed showed that there were few cases, if any, of
under-invoicing coming from the US.  However, there were cases of over-invoicing of goods going to
the US from India.  If this was true, Indian customs may not ask for any information from the US
under the proposal.  He added that the Nairobi Conven tion did deal with cases of fraud, in particular,
cases where there were reasonable grounds for suspecting fraud.  But, as noted earlier, this
Convention was not accepted by most countries, including most developed countries, and this was
where the problem lay.  Out of the few countries which had accepted the Convention, there were few,
only 23, which had acceded to Annex II of the Agreement which dealt with valuation and assessment
of cases.  The Ministerial Decision spoke of "doubtf ul cases" and he considered that when there was
doubt, there was a reasonable ground for assuming fraud and then proof was needed.  In cases where
Indian customs could establish that fraud existed in "doubtful cases", it would not ask exporting
countries for information, unless documentation was needed.  With respect to the concern that it
would be Indian customs deciding on the "doubtful  cases", he saw no other option and assured the
Committee that Indian customs did a good job of se lecting such cases.  Information would only be
requested when absolutely necessary and would be examined at the highest level, by the Director-
General of the Center for Revenue Intelligence.  Therefore, he did not consider that this would cast anundue burden on other countries.
2.45 In the three cases he referred to, although fraud was established, the problem was not solved
because information such as from another country, was needed.  In the case of the Australian apples,
the information from the supplier was found via the internet because Indian customs did not have an
agreement with Australian customs.   Although it pointed to a clear case of under-valuation, it could
not be used.  This as why there was not a contradiction in what India was proposing because if a
multilateral solution existed, the information could have been easily obtained from Australian
authorities.  These were the kinds of cases where Indian customs would like to have more information
from other administrations and where a formal and mandatory solution was necessary.  Similarly in
the case of camera parts, the information was retrieved from the third country and could not be usedbecause it was supplied in confidence.  If the pr oposed multilateral solution existed, the information
could be requested and used.  In the third case, the verification of the supplier was done by Indian
customs and again in such a manner that the information could not be used in a judicial procedure.
However, if the information was had through the other country's administration, it could have been a
valid piece of evidence.
2.46 With respect to the question of exactly what type of information was sought, he clarified that
it was simply the declared value at the export side.  India would be willing to share the same type of
information to other countries.  While this information would not be the only piece of informationG/VAL/W/97
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which would solve our problems, it would go a long way in helping Indian customs to value the goods
and tackle the fraud problem.  On Canada's question of whether India verified data, he explained that
some verification was done, but not as elaboratel y as for imports, which he thought was the same
situation in most countries.  He assumed that the data provided in the exporting country, where the
exporter was not subject to any duty or control, would be accurate and some problems could be solvedsimply by looking at this data.  The countries where this proposal would be most useful would be
countries with which India did not have bilateral agreements and from which it found difficult to
obtain information.  Information would not be sought to a great extent from Canada.  He added that
his delegation was aware that to arrive at the transaction value, adjustments under Article 8 had to be
made, but this was a different matter, and Indian customs could take care of situations where such
adjustments were not provided or not added.  The problem existed where the declared value, in the
first instance, was fraudulent.  The proposal was not a substitute for dealing with fraud or forestablishing a fraud investigation mechanism.
2.47 He added that the information that the exporter gave to the exporting country's customs
administration was no doubt confidential.  If it was given to Indian customs in the few cases it would
be requested, Indian customs would treat the information in the same fashion under India's domestic
law.  Under the proposal, there was no request for exporting customs administrations to investigatecompanies.  Under the Nairobi Convention, where there was reasonable fraud established, such
investigation could be requested, but this was not part of this proposal.  Finally, he did not consider
that the EC, being such a rich group of countries, would be concerned with any resource problem
associated with this proposal.  It was European goods which were coming through third countries
which were posing problems and this was undercutting EC supplies.  So, the EC should be moreinterested in providing values to India because products coming directly from the EC were not under-
valued and the correct amount of duty was being paid.  The solution would also assist the EC
suppliers to correct this problem.  India was doing whatever it could to investigate and combat fraud,
but this was an additional piece of information which would assist it in its work.
Tiret 2: 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).
2.48 The representative of India informed Members that this proposal dealt with Article 8:1(b)(iv)
of the Agreement.  Article 8 of the Agreement c ontained adjustments to be made to determine the
transaction value;  sub-paragraph (b) listed the goods and services supplied by the buyer free of
charge or at a reduced cost for use in connecti on with the production and sale for export of the
imported goods, which must be included in the transaction on value to the extent that such value hadnot been included in the price actually paid or payable.  The logic was that these goods and services
formed part of the value of the imported goods, even though they had been supplied by the buyer.
The goods listed under items i-iii would be included in the customs value if they were supplied by the
buyer even though they may be supplied from the importing country.  However, in the case of item iv,
a distinction was made and the value included only if the service came from outside the importingcountry.  Thus, there was a difference between the goods listed in items i-iii and the services listed in
item iv which he considered was giving rise to artificial bifurcation of values.  Many times, part of the
value of the services listed in item  iv was listed as coming from inside the importing country where it
would not be included in the customs value when actually it may have been done elsewhere and
should be included in the value.  This gave an open invitation to unscrupulous importers to split thevalue.  Therefore, his delegation proposed that the services, even if coming from the importing
country, should be a part of the value, and all the items under Article 8.1(b) should be included in the
value.
2.49 The representative of the European Communities considered that the proposal was asking that
something that had been part of the Agreement since its inception be changed.  Such a change would
have a hard, economic effect because commerce and industry had assumed specific rights and had
built their businesses around the valuation treatment presently in the Agreement.  In considering how
to deal with the problem India had mentioned of spli tting values into cost elements attributed to theG/VAL/W/97
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imported goods, and those which were internally sourced, existing and new tools which identified the
actual services involved and their costs should be considered.  It would be premature to claim that
there was a problem in this regard that begged changing the rules as a solution.  If the problem existed
and it was related to how importers structured costs and presented them to customs, it could be a
communication or information-gathering problem and a technical analysis would be required ratherthan a change in the legal basis of the Agreement.
2.50 The representative of Canada supported the statement by the European Communities.  His
customs administration had similar questions regarding the real aspects of the problem, how it
manifested itself and why it could not be addressed through other customs techniques, particularly
since the buyer was supplying the services mentioned in item 8.1(b)(iv).  The buyer could always be
approached and audited if there were problems.  He asked also whether adding the costs in would
solve the problem, or would it just add another problem of determining whether the correct amountwas added in.  He also considered that there were other techniques to address this matter and this
proposal was not a solution to fraud.
2.51 The representative of the United States also asked what the problem was that needed to be
addressed.  Fraud and bifurcation of the value also happened in other ways so the problem would still
exist.  His delegation also wondered what the economic rationale would be for including the cost ofservices performed in the country of importation.  There was an incentive built into the Agreement
and he wondered what the rationale was for affecting the performance of such services in the country
of importation.  Further, he wondered why this proposal was made, particularly when the information
needed to verify the operation of this provision was available in the importing country.
2.52 The representative of Japan shared the questions and concerns expressed by other Members.
His delegation also wondered what the real problem was and the economic rationale for the proposal.
Businesses were operating under the provisions of the Agreement for a long time and an unnecessary
change in the Agreement would cause undue burden.
2.53 The representative of India, in responding to the questions on the economic rationale for the
proposal, explained that under Article 8.1(b), the first three items could be supplied either by the
exporting, importing or a third country.  No distinction had been made and the costs of these goods
would be included in the customs value.  His delegation's proposal concerned the last item under
Article 8.1(b) which dealt with services that also c ould come from either the exporting, importing or a
third country, but would only be included in the value when coming from a country other than the
importing country.  His delegation considered that all four items should be treated in the same way in
assessing the customs value.  There was an innate contradiction in these provisions and there was an
economic justification in treating them all the same way.  If the services came from a third country,the importer would sometimes have to pay for them.  Lately, his delegation noticed that for some
importations, the basic design came from another country but reengineering would be done in the
country of importation.  Although little would be done, the cost would be extensively manipulated to
show a large amount of engineering from the importing country.  He provided an example of a
product which was valued at a thousand million currency units, and the bifurcated value waspresented as 700 million units for the value and 300 million units for the engineering done in India.
Upon examination, it was found that this was not the case.  Other cases were more difficult to prove,
since money transfers were difficult to trace.  His delegation, therefore, thought that the Agreement
could eliminate this distinction.  Regarding the comment about the long-standing practice, he
understood that countries where much of these services were being provided wanted to continue toexclude these costs.  He, therefore, proposed that those countries could continue the treatment under
the Agreement by way of an exemption.
2.54 The representative of Singapore considered that there was an underlying rationale to the
different treatment of these provisions.  She believed that the Agreement was designed to encourage
or facilitate development of the services under item iv in the importing countries by not including
these costs in the importer's price.  It was designed to help countries develop their own serviceG/VAL/W/97
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industries.  If these were to be included in the cu stoms value, would it not be a means of inflating the
import price which would in the end be paid by the domestic consumers.
2.55 The representative of Thailand, while acknowledging that this proposal would be beneficial to
the revenue collection of the importing country, noted that it could create a problem of double
taxation for importers.  In addition, the consumer of the importing country would have to bear theburden of the additional costs.  The cost of a service provided by the buyer may have been subject to
domestic taxation and would then be taxed again in the form of an import duty.  Therefore, the
importer could be paying tax on this service twice.
2.56 The representative of India did not consider that the objective of the Agreement was to
encourage importing countries to develop service industries.  The main purpose of the Agreement was
to arrive at the customs value of the imported goods.  Other elements under this Article had to be
added to the value, so why not the services mentioned in item iv  If any country wanted to exempt
charges on these services, they could always design fiscal policy to do so or exempt them from
customs duty.  His delegation considered that these were legitimate costs which formed the value of
the imported good.
2.57 The representative of the United States recalled that the reason for the exemption under
Article 8.1(b)(iv) was because it pertained to services carried out in the importing country.  In the
United States as well as in other countries, there were exemptions for tariffs pertaining to goods that
had been sent abroad and returned.  Items i-iii contained exemptions as described by tariff laws of
Members and these pertained to goods.  However, with regard to item iv which pertained to services,
it was more problematic to create such an exemption.   This was the rationale for this exemption.  In
addition, there was the secondary matter of double taxation.  He also asked why it was more difficultto prove fraud in this situation as opposed to any other type of activity in the importing country?  He
requested another explanation from India as to what the real problem was that gave rise to the
proposal.
2.58 The representative of Canada still did not understand why this proposal would solve the
problem identified by India because importers would still have to be audited to determine whether the
amount was correct.  At the time of the negotiation of the Agreement, it was agreed that the present
provisions were desirable.  The proposed change could have disruptive effects on business
arrangements and raise the value for duty purposes.
2.59 The representative of India noted that it was not always possible to bring out the details of
fraudulent transactions through internal audits because financial transactions were so intricate and
payment for the services would go back to the actual  supplier.  With regard to the US comment that it
was difficult to provide an exemption for these services, he disagreed stating that the servicerepresented part of the imported good which could always be exempted either partially or fully to
reflect these services.  Those countries that wanted to exempt these services from the transaction
value could have the option, but his delegation wanted to give the same treatment to items i-iv of
Article 8.1(b).  The problem mentioned by Thailand of double taxation existed also for the goods in
items i-iii.
2.60 The representative of Canada agreed that the problem mentioned by India was fraud.
However, even if the amount had to be added into the value, the fraudulent importer could still not do
so and ignore the requirement.  If Indian customs could not find the financial transaction in the first
instance, why would they be able to find it if the proposal was adopted.  His delegation did not see
how this particular proposal would solve fraud.  This was inconsistent with free trade.  He concludedthat there were other fraud/enforcement techniques to deal with the problem noted.
2.61 The representative of New Zealand considered that the proposal would be contradictory to the
economic rationale of the provision which was to encourage development of such service industries in
the importing country.  This would be against the interest of developing countries and she was
confused as to why India would propose this.  In addition, what was meant by the term "the buyer" in
this proposal?  Was the buyer just the one person who purchased the imported goods or was it meantG/VAL/W/97
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to cover services provided by companies other than  the buyer of the goods?  This would not fit with
the language of the Agreement which spoke of the services "undertaken elsewhere than in the country
of importation…".  Finally, she asked how this w ould work in practice when such services would
continue on an on-going basis after the good had actually entered the importing country, including
value-added, etc..  How long would the work done by the buyer continue to be valued for customspurposes?
2.62 The representative of India clarified that the phrase used in the proposal corresponded to the
situation where these charges were excluded from the customs value.  In Article 8.1(b), the opening
statement spoke of "the value of the following goods and services that were supplied directly or
indirectly by the buyer free of charge or at reduced cost…". Under item iv of this Article, the services
mentioned were exempted if they were undertaken in the country of importation.  However, the main
clause was that the goods and services had to be supplied free or at reduced cost by the buyer.Therefore, it was the buyer that had to provide the goods and services.  Regarding the point by
Canada that if the phrase "undertaken elsewhere than in the country of importation" was not there,
what difference would it make, he considered th at it would make a huge difference.  Importers,
particularly fraudulent ones, could not take advantage of the provision.  Because the term was there, it
encouraged bifurcation of the values.  He reiterat ed that the Agreement was not meant to encourage
industries of particular sectors, but to determine customs value of imported goods.  His proposal was
that all elements that make up this value should be included.
Tiret 3: 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.
2.63 The representative of India clarified that the proposal meant domestic market price in the
exporting country;  the intention was not to include the selling price in the country of importation.
The two methods proposed were presently items (c) and (e) of the list of  prohibited methods under
Article 7 of the Agreement.  These prices were presently used in other Agreements such as the Anti-
Dumping Agreement. He clarified that Article 7 and these two additional proposed methods wouldonly be used as a last resort when the other methods could not be used.  By denying the use of these
two prices, which were the nearest equivalent to the actual value, the concept of Article VII of the
GATT 1994, his customs administration considered that it was not able to arrive at the proper value
for customs purposes.
2.64 The representative of Canada considered that there must have been good reasons why these
two methods were prohibited under the Agreement when it was negotiated.  He asked what was meant
by "all residual eventualities"?  He also asked where would customs administrations retrieve the
information necessary for the two proposed methods and for the appropriate adjustments which would
have to be made to these prices?
2.65  The representative of New Zealand also asked what was meant by "all residual
eventualities"?  She also asked if the concept of domestic market price in the exporting country was
the same as the concept in the Anti-Dumping Agreement?
2.66 The representative of India clarified that the proposal referred to the prices in Article 7(c) and
(e) and not other "eventualities".  This was what was meant by the term "residual eventualities".
Further, his delegation examined the Anti-Dumping Agreement and found that these types of prices
were allowed to be used in that context to compare values.  Why not in the context of the Customs
Valuation Agreement?  He confirmed that his delegation was committed to the first method under the
Agreement (the transaction value) and if that faile d, the following methods in the Agreement.  If all of
them failed and the customs administration arrived at Article 7, it wished to be able to use the twoprices proposed which were presently prohibited.  He did not have any examples of using these
methods because they were presently not allowed.G/VAL/W/97
Page 44
2.67 The representative of Singapore stressed that the prices in the Anti-Dumping Agreement and
in the Customs Valuation Agreement represented two different concepts.  In the former, the objective
was to show price discrimination so a comparison of the domestic price in the exporting country and
the export price to the importing country or to a third country was necessary.  But in the context of the
Customs Valuation Agreement the objective was to determine the value of the transacted goods.  Thisshould be based on the actual transaction price agreed between the exporter and the importer.  This
was why in the Customs Valuation Agreement, it was clearly stated that the two proposed prices were
not to be used.  She also asked how the information for the proposed prices would be obtained.  They
would not be reflective of the actual transaction value.  In the domestic market of the exporting
country, the price could be very high because of overhead costs, advertisements, and other costs that
were incurred on the domestic market.  Allowing the use of the domestic market price in the exporting
country could result in high, fictitious export values.  Regarding the export value to a third country,she asked which third country would be chosen - woul d it be the highest priced country or the lowest?
Would customs administrations shop for the best price among third countries and how would they
determine which best reflected the transaction value?
2.68 The representative of India reminded Member s that the Customs Valuation Agreement did
not only contain the transaction value method.  To the greatest extent possible, this method should be
used and if it could be, the proposed prices would not be needed nor would be relevant.  If all the
methods failed, then Article 7 would be relevant.  His proposal only requested that two methods that
were presently excluded under Article 7 be allowed to be used when everything else failed.  In
addition, these two methods were allowed under another WTO Agreement, so why not under thisAgreement?  It was already explained in these other Agreements how to find the values so he did not
see the difficulty in obtaining them for use in this context.
2.69 The representative the United States remained puzzled over the rationale for this proposal.
He asked what was meant by the term "with appropriate adjustments"?  Would this include
adjustments up or down?  He also asked which ma rket prices would be used and how would they be
determined?  Would a wholesale catalogue price or a shopping center price be used?  How could it be
ensured that the prices would not be determined in an arbitrary manner?  Finally, he asked why the
Anti-Dumping Agreement was being discussed in this context and wondered why it was relevant
given the considerably and explicitly different functions of the determinations made under it and the
Valuation Agreement?
2.70 The representative of India clarified that under the proposal, the prices could not be used
directly but adjustments to the prices would have to be made.  One example was with respect to FOB
or CIF basis.  If the exporting country had a different valuation basis, the price would have to be
adjusted to take into account these additional char ges.  Further, under the similar and identical
methods, adjustments had to be made for quantity.  The proposal was not bringing concepts of otherAgreements into the Valuation Agreement.  These two prices were being used in the Anti-Dumping
Agreement and should be allowed in extreme circumstances under the Valuation Agreement.
2.71 The representative of Canada considered that it was necessary to ascertain why these two
price methods were excluded in the first place.  He did not believe that using these two methods
would facilitate implementation of the Agreement because if, as India stated, the information would
be obtained in the same way as it was under the Anti-Dumping Agreement,  this would imply a very
complicated process.  Therefore, he was not sure why this proposal was being made.  He was still
unclear as to how the information on the prices, the adjustments and their values would be obtained.
2.72 The representative of the European Communities suggested that these two methods were
excluded because it was considered that there was no point in referring to sources which would be
difficult to obtain and make relevant to the transaction value.  In addition, he did not consider it
prudent to stray into other Agreements which had completely different concepts and contexts.  He
reminded delegations of the importance of the Interpretative Notes to Article 7 which stressed theG/VAL/W/97
Page 45
importance of previously determined values and that, under Article 7, the previous methods should be
used with reasonable flexibility in their application.  The Agreement itself clarified that such
flexibility could be possible within the provisions of Article 7 and it was unnecessary to look further.
2.73 The representative of Thailand considered that this proposal, as it dealt with the residual
method, could provide more flexibility to the Agreement, particularly in the case where new,
innovative products were involved.  Previous records of prices of such products did not exist in the
importing country.  Therefore, he considered that this proposal would facilitate the task of customs
administrations.
2.74 The representative of Japan also wondered how customs administrations would obtain the
information necessary to determine the domestic market price in the exporting country and the price
in a third country, as well as that necessary to determine the adjustments.  If a proper adjustment was
sought, it might be necessary to examine the exporters' financial books.  If there were significant
promotion or advertising costs such as television commercials, it would be necessary to quantify these
costs to make an appropriate adjustment.  This could create problems.  Further, the Agreement was
written in such a manner as to ensure a certain le vel of predictability for importers.  However, the
importer would not know the domestic market price in the country of importation nor the export price
in a third country.  The importer would only know th e transaction value.  Therefore, if the proposal
was accepted, the element of predictability for importers would be damaged.
2.75 The representative of India stated that the proposal would not effect the predictability inherent
in the Agreement because the transaction value would remain the primary method of valuation.  If the
transaction value could be applied, there would be no need to use any other method.  However, as
Thailand pointed out, one example when it could be necessary to use other methods was with respect
to new, innovative goods for which the transaction method could not be used and there were no other
means of determining the price.  Article 7 would then be used and the two proposed prices would
augment the choices of methods based on information that would not be available in the country of
importation.
2.76 The representative of Canada reiterated his que stions as to why this proposal was necessary
and how the information would be collected.  He added that if the sources mentioned by the United
States were going to be used to determine the prices, these would only be starting points and certainly
not end points to determining the prices. He asked how it would make application of Article 7 easiersince it was unclear how the information would be procured.  He also considered Japan's comments
relevant.
2.77 The Chairman took note of the statements ma de.  He noted that a number of Members were
still considering the proposals.  He also noted that a number of technical questions had been raised
during this discussion and that he would prepare a report of this discussion and his consultations for
the General Council on his own responsibility.  He would circulate it for technical clarification and
this would be the extent of input from Members at that point in time.
B. REPORT OF THE CHAIRMAN OF THE COMMITTEE ON CUSTOMS VALUATION TO THE GENERAL
COUNCIL (G/VAL/36)
REPORT OF THE CHAIRMAN OF THE
COMMITTEE ON CUSTOMS VALUATION TO THE GENERAL COUNCIL
1. Following the meeting of the General Council in special session on 18-19 October, I carried
out several rounds of informal consultations among Members, and on 7 November 2000, the Customs
Valuation Committee held a formal meeting, of which a large part was devoted to discussion of the
proposals.  I believe that these consultations and discussion allowed the consideration of theseG/VAL/W/97
Page 46
proposals to move from a political debate to a technically in-depth analysis of the issues.  The report
below is based on my consultations as well as the Committee's consideration of the three proposals.
While it is an overview of the analysis where much of the technical details have been necessarily
summarized, it remains a technical report.  I believe in  order to do justice to the full technical debate,
interested Members should refer to the report of the Committee's 7 November 2000 meeting(G/VAL/M/17, to be issued).
Tiret 1:  A multilateral solution that enables customs administrations of importing countries to
seek and obtain information on export values in a time-bound manner, in doubtful cases, shall
be included in the Agreement.
2. The proponent explained, through the use of specific cases, that this proposal emanated from
his delegation's experience applying the Agreement and the difficulties encountered therein in
combatting fraudulent transactions, in particular under-valuation of the importer's declared price.Although his customs administration had mechanisms in place to investigate fraudulent declarations
by importers, often the information obtained showing the fraud could not be used in judicial
proceedings because the information was either obtained through non-official sources or on a
confidential basis.  The proponent was therefore seeking a formal, binding, multilateral solution
which would authorize the provision of the necessary information from the customs administrations ofthe exporting country. If fraud was substantiated by this information, it would be admissible in
judicial proceedings.   Furthermore, fraudulent transactions were often in the form of third-country
invoicing for which it was often necessary to go to the original source of the product to obtain an
export price.  In the proponent's view, a multilateral solution would ensure that all WTO Members
were obliged to provide export price information which would reduce the possibilities for thesefraudulent importers to escape detection and ultimately prosecution in courts. The proposal was aimed
at establishing such a mechanism through which customs administrations of importing countries,
when they came upon a case where they had reasonable ground for assuming a fraud, i.e. a "doubtful
case", could request export price information from customs administrations of exporting countries and
expect a prompt response.  This information would be kept confidential unless and until such time asthe fraud was substantiated and the information was necessary for proof in a judicial proceeding, in
accordance with Article 10 of the Agreement on Customs Valuation.  The proponent acknowledged
that a situation where the exporter and importer were colluding would not be addressed by the
proposal.
3. Members appreciated that fraud was a problem in international commerce and sympathized
with the proponent's difficulties.  Many had faced similar problems and were working with the World
Customs Organization (WCO) and other providers of technical assistance to develop appropriatecustoms techniques and enforcement procedures.  Several Members noted that this was a problem
germane to developing countries where high rates of duties, reliance on customs revenue, and porous
borders were realities.  Some developing countries supported the proposal, particularly those that were
at the pre-implementation or early stages of the transition to the WTO system of valuation.
4. The majority of Members considered that the proposal was not the appropriate solution to
combating fraud.  They pointed to other appropriate mechanisms which in their experience were
effective.  Some mentioned, as examples, bilateral agreements between customs administrations, the
WCO Nairobi Convention, and the WTO Ministerial Decision Regarding Cases Where Customs Have
Reasons to Doubt the Truth or Accuracy of Declared Values.  The proponent considered that bilateral
solutions did not work, although his customs administration was party to some such agreements,because they were difficult to enter into with all trading partners. Also, a multilateral solution would
provide a solution to third-country invoicing where the goods did not undergo further transformation.
In this latter case, the proponent considered a multilateral solution necessary because values from the
country of origin were necessary.  Furthermore, in the proponent's view, the Nairobi Convention was
not signed by most delegations and of those that had signed, only 23 had acceded to the Annexdealing with exchange of information on the assessable valueG/VAL/W/97
Page 47
5. Many Members wondered what was particular about the proponent's problems with fraud that
it could not deal with it in the country of import as was foreseen under the Agreement. The importer
could deal with fraud through a variety of techniqu es such as record-keeping, research and analysis,
risk assessment, high-risk and low-risk enforcement areas, etc.  There was concern that this proposal
was a substitute for using proper fraud methodologies and modern customs techniques which wereimportant for implementing the Agreement.  The proponent explained that the problem was a limited
one and some goods were more subject to fraud than others.  It stressed that it wished to have this
additional piece of information from the customs administrations of the exporting country to support
its own investigations.  This raised an important  concern for some Members that the proposal, if
adopted, would shift the burden of proof  from the importing country, where all the powers of the
Agreement and necessary evidence presently lay, to the exporting country. If the proposal meant that
exporting authorities would have to verify the accu racy of the information submitted to them, this
would amount to shifting the investigative bur den to the exporting country's authorities.
6. Other technical issues and questions concerned the meaning of the term "doubtful cases"  in
the proposal and how customs would go about determining what was a "doubtful case."  Although it
was acknowledged that the importing country had the right to determine what was a doubtful case for
its own internal investigations, legal difficulties could arise if the determination imposed obligationson exporting countries' customs administrations.
7. Although acknowledging the proponent's reference to Article 10 of the Agreement, several
Members noted that, according to their national legislation, information provided by exporters to their
national customs administration was governed by confidentiality requirements  which restricted
divulging this information to other bodies.  Even  before exporting authorities could provide the
information, there may be certain domestic procedures that might stand in the way.  One Member, in
support of the proposal, noted that Article 6.2 of the Agreement stated that a request could be made to
the authorities of other countries in order to obta in information for determining the computed value.
This was similar to what the proposal was trying to accomplish and showed a precedent for third
countries assisting in verifying the customs value.
8. Some Members were concerned that the proposal might place undue burden on customs
administrations to provide information to importing countries.  This would be an inappropriate
diversion of resources from customs' prime responsibility. The resource implications  of the proposal
would have to be analyzed and export clearance systems might have to be modified to accommodate
this proposal.  Questions were asked as to whether there would there be an expectation that customs
administrations of exporting countries would visit offices of exporting companies and would the
proponent's customs administration be willing to check its own importers and exporters for suchinformation.  Although many countries did collect export price data, many Members explained that it
was done primarily for statistical purposes and was not verified, nor was at a transaction-by-
transaction basis, which would be necessary for the functioning of this proposal.  Further, it was not
clear whether the proposal required customs administrations to examine exporters' books to determine
the price data for a particular shipment.  If so, it would be problematic.  It was also noted that exportprices varied considerably depending on the situation.  Therefore, export variables could not under the
Agreement be used as a reasonable basis to determine the customs value of the imported goods.
9. Many Members questioned what was meant by the term "time-bound manner " and what
the legal implications would be if an exporting countries' customs administration was not able to
provide the information requested in a "time bound manner".  The proponent explained that the term"time bound" meant promptly and without inordinate delay when an export value was requested.
Another Member asked what was meant by the term "to seek and obtain information " and how
customs authorities of importing countries would go about seeking and obtaining the information. A
final question concerned whether the importing country would stop the import clearance system
pending the investigation  envisioned by the proposal.  It was clarified that the idea of requesting
information was to cross-check and in cases where there was no problem with the declared value, it
would actually expedite the clearance.  In any case, importing customs administrations would be
bound by Article 13 of the Agreement to  release the goods.G/VAL/W/97
Page 48
Tiret 2:  The addition of cost of services su ch 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).
10. The proponent explained that the objective of this proposal was to allow the inclusion of the
services listed in Article 8:1(b)(iv) of the Agreemen t into the calculation of the customs value, even if
these services were undertaken in the country of importation.  Presently they are only allowed to be
included if they are provided by the buyer but undertaken elsewhere than in the country of import.
The goods listed under the first three items under Article 8:1(b) could be supplied either by the
exporting, importing or a third country.  No distinction was made and in all three cases, the costs of
the listed goods would be included in the customs value.  As far as the proponent was concerned,
there was a logic in providing the same treatment for the services listed in item four of this Article.
The proponent explained that the different treatment for goods on one hand, and for services on theother, under this Article was giving rise to bifurcation of values by fraudulent importers who often
tried to deduct part of the value by claiming that such services, which comprised part of the value,
were provided by the buyer and undertaken in the country of importation.  Cases were often difficult
to prove, since money transfers were difficult to trace.
11. It was difficult for many Members to appreciate how this proposal would alleviate the
problem cited by the proponent of fraudulent importers  splitting values into cost elements internally
and externally sourced.  They noted that fraudulent importers could always try to find other ways of
evading the declaration of the value of these services or declaring lower amounts, even if they were
internally sourced and required to be part of the value. Acknowledging that it could be difficult to
trace financial transactions in today's world of information technology, some asked why suchtransactions would be found through this proposal.  Importers would still have to be monitored and
audited if there were problems in their declarations and there were other tools, instruments and
techniques to deal with fraud and to identify  the actual services involved and their costs.
12. Several Members noted that the Agreement's structure had not changed since its inception
twenty years ago and that it would cause serious di sruption to industry and commerce which had built
up their businesses around the particular valuation treatment presently in the Agreement.  Some
Members wondered what the economic rationale woul d be for including the costs of these services
performed in the country of importation.  By not including internally sourced services into the
customs value, the Agreement as it was presently structured, provided an economic incentive for the
use of these services that were domestically sourced. Another Member explained that the exemption
under Article 8.1(b)(iv) existed because the provision pertained to services carried out in the
importing country.
13. Another Member was concerned that if such services were to be included in the customs
value, it would be a means of inflating the import price which would in the end be paid by the
domestic consumers.  Another Member, while acknowledging the beneficial revenue collection
effects of this proposal for the importing country, noted that it could create a problem of double
taxation for importers.  The cost of a service provided by the buyer may have been subject to domestictaxation and would then be taxed again in the form of an import duty.  Therefore, the importer could
be paying tax on this service twice.
Tiret 3:  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.
14. The proponent clarified that the proposal was aimed at including two presently prohibited
methods of valuing imports for customs purposes as allowed methods under Article 7 of the
Agreement.  The first, (presently item (c) in Article 7) was the domestic market price in the exporting
country, (not in the importing country);  and the second (presently item (e) in Article 7) was the price
of the goods for export to a country other than the country of importation.  He noted that these priceswere presently used in other Agreements such as the Anti-Dumping Agreement and clarified that
Article 7 and these two additional proposed methods would only be used as a last resort when theG/VAL/W/97
Page 49
other methods could not be used.  One Member voiced support for the proposal, indicating that it
could facilitate the work of customs administrations in establishing the customs value for new and
innovative products, in the event that the other methods under the Agreement could not be used.
15. A number of questions were raised by Members regarding the necessity of changing a long-
standing provision of the Agreement which prohibited the use of these two price methods underArticle 7 of the Agreement.  It was considered that the negotiating history as to why these methods
were prohibited might be an important element to examine.
16. Several Members asked how the information ne cessary to determine the two proposed price
methods would be obtained. In the event that a wholesale catalogue price or a shopping center price
were used, there was concern that these were not reliable prices, could inflate customs values, and
often were only starting points for downward price negotiation by buyers.  Some Members suggested
that in the domestic market of the exporting countries, the price could be considerably higher becauseof overhead costs, advertisement, promotion and other costs that were incurred on the domestic
market.  In addition, it might be necessary to examine exporter's financial books to ascertain these
additional costs.  This could be problematic and the end result could be the use of high, fictitious
customs values.  Regarding the export value to a third country, it was asked which third country
would be chosen - would it be the highest pr iced country or the lowest.  Would customs
administrations shop for the best price among th ird countries and how would they determine which
best reflected the transaction value.  Furtherm ore, how would the information necessary to make
"appropriate adjustments" be obtained?  The proponent noted that explanations for establishing the
proposed prices already existed in these other Agreements so he did not see the difficulty in obtaining
them for use in this context.  Further, he clarified that the prices could not be used directly butadjustments would have to be made, for example with respect to FOB or CIF basis, for different
quantities, etc.  These were all existing adjustments under the Agreement.
17. A few Members questioned the wisdom of making reference to one Agreement in the context
of discussing another and the risk of mixing c oncepts.  It was pointed out that under the Anti-
Dumping Agreement, the objective was determination of price discrimination which warranted
examination of the domestic price in the exporting country to compare it with the export price to the
importing country or a third country.  Under the Customs Valuation Agreement, the objective was
determination of the value of the transaction between the exporter and the importer.  These two
objectives were completely different and therefore the price concepts could not be compared.  The
proponent explained that the proposal was not designed to bring concepts of other Agreements into
the Valuation Agreement and reference to the Anti- Dumping Agreement was simply incidental.  His
delegation was committed to the transaction value and if that failed, to the following methods in the
Agreement.  If all failed and the customs administration arrived at Article 7, it wished to be able to
use the two prices proposed which were presently prohibited.
18. Another Member reminded delegations of the importance of the interpretative notes to
Article 7 which stressed the importance of using previously determined values and that, under
Article 7, they should be used with reasonable flexibility in their application.  Also, the Agreement
itself clarified that such flexibility could be possible within the provisions of Article 7 and it was
unnecessary to look further.
Summary
19. Some Members supported the proposals and their objectives.  However, of those who spoke
on the proposals, the majority acknowledged the genuine difficulties faced in addressing fraud and the
problems experienced by the proponent of the tirets.  That said, they failed to be convinced that thetirets themselves were appropriate solutions.  Indeed, some of these Members had themselves
experienced the same problems but had dealt with them by using existing mechanisms and
instruments while remaining within the parameters of the Agreement.G/VAL/W/97
Page 50
C. REPORT OF THE CHAIRMAN OF THE COMMITTEE ON CUSTOMS VALUATION TO THE
CHAIRMAN OF THE GENERAL COUNCIL (WT/GC/49)
REPORT OF THE CHAIRMAN OF THE COMMITTEE ON CUSTOMS VAULATION
TO THE CHAIRMAN OF THE GENERAL COUNCIL
The following communication, dated 14 September 2001, has been received by the Chairman
of the General Council from the Chairman of the Committee on Customs Valuation.
_______________
With reference to your letter of 2 August 2001, in which you refer the implementation matter
contained in tiret 56 of document JOB(01)/112 to me for consultations and suggestions of an
appropriate course of action, I attach the report of these consultations.
Given the lack of consensus, I am only able to provide a factual summary of my
consultations.  Nevertheless, I believe it presents an accurate picture of the present situation with
respect to tiret 56 and I hope that it will assist you in your further work on implementation issues.
_______________
Report of the Chairman of the Committee on Customs Valuation
1. Following the Special Session of the General Council on 15 December 2000, to which the
Chairman of the Committee on Customs Valuation reported the outcome of the Committee's
consideration of the first three Indian proposals (G/VAL/36), the Chairman of the General Council
held an informal consultation on 10 April 2001 in which the initial three proposals plus three
additional proposals were discussed.  Further clarification was provided by the Indian representative
on the proposals, and additional questions were asked.  Nevertheless, the consultations proved
inconclusive and further consideration of the matters was necessary.
2. Following their subsequent consultations,  the Chairman of the General Council and Director-
General circulated on 13 July 2001, on their own responsibility, a paper identifying elements on
which they saw the possibility of early agreement and proposing that certain issues be referred to
subsidiary bodies for consideration (JOB(01)/112).  Following the numbering of tirets used in a paper
presented by Uruguay, Argentina, Morocco, New Zealand, Norway, Switzerland, and Thailand, tiret56 (dealing with former tiret 1 of G/VAL/ 36), dealing with customs valuation, read:
'"The General Council should direct the Committee on Customs Valuation to continue its
work on addressing the issues and needs specifically identified by Members relating to
ensuring proper implementation of the Agreement and, in particular, those concerns related tofraud.   In this regard, the General Council directs the Committee  to undertake a study, and
provide a report, which shall include the identification of practical methods available, and
appropriate technical assistance required, to address such concerns.  The study should, inter
alia, evaluate the possible use in addressing fraud of mechanisms such as multilateral or
bilateral cooperation arrangements , the Marrakesh Decision on the issue, and the applicationof relevant WCO or other international instruments."G/VAL/W/97
Page 51
Enhanced technical assistance:  text in front of Valuation Committee should be rapidly agreed
and referred to in a package of early implementation decisions of the General Council.'
3. At an informal meeting of the General Council on 30-31 July 2001, Members agreed that
certain outstanding implementation-related issues, as contained in JOB(01)/112, should be referred to
the relevant WTO bodies or to their Chairpersons for consideration and reporting back.  With respectto customs valuation, Members agreed to the following terms of referral:
"That the Chairman of the General Council request the Chair of the Committee on Customs
Valuation to hold consultations on the basis of the report contained in document G/VAL/36
with the aim of suggesting to the Chairman of  the General Council an appropriate course of
action by 15 September."
4. On 6 August 2001, I circulated a fax summarizing the previous discussion in the Committee
on the proposal (tiret 1 of G/VAL/36), and asking for comments and suggestions on appropriate
solutions in order to assist in preparing my repor t.  Five responses were received from Colombia,
Hong Kong, China, Japan, Thailand and Singapore which were circulated to all Members.
5. Subsequently, I convened an informal meeting of the Committee on 10 September 2001 at
which I presented four possible solutions that had been made at different points in time with respect to
this implementation issue.  These possible solutions are as follows:
- India's proposal (tiret 1 of G/VAL/36)
"A multilateral solution that enables customs administrations of importing countries to seek
and obtain information on export values in a time-bound manner, in doubtful cases, shall be
included in the Agreement."
- Chair/DG Text (tiret 56 of JOB(01)/112)
"The General Council should direct the Committee on Customs Valuation to continue its
work on addressing the issues and needs specifically identified by Members relating to
ensuring proper implementation of the Agreement and, in particular, those concerns related to
fraud.   In this regard, the General Council directs the Committee  to undertake a study, and
provide a report, which shall include the identification of practical methods available, and
appropriate technical assistance required, to address such concerns.  The study should, inter
alia, evaluate the possible use in addressing fraud of mechanisms such as multilateral or
bilateral cooperation arrangements , the Marrakesh Decision on the issue, and the application
of relevant WCO or other international instruments."
- Alternative text by LMG
"Further to paragraph 2 of the 1994 Decision Regarding Cases Where Customs
Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value,
Members agree that when the customs administration of an importing country had reasonable
doubts about the truth or accuracy of the declared value the customs administration of the
exporting country shall, if requested, promptly provide information on the export value
declared by the exporter."
- Pettigrew text
"Ministers agree that, when the customs administration of an importing Member has
reasonable grounds to doubt the accuracy of the value declared, it may seek assistance from
the customs administration of an exporting Member as to the value of the good imported.  Inthat case, the exporting Member shall, in accordance with its domestic laws and regulations,
offer cooperation and assistance in the investigation of any fraud."G/VAL/W/97
Page 52
6. At this meeting, India clarified that its position incorporated both its proposal as well as the
paragraph labelled "Alternative text by LMG". Two Members had sympathy for the Indian position.
All Members acknowledged that the problem of fr aud was a real one.  However, the majority of
Members which spoke and provided written comments considered that a practical solution to the
problem was needed.  They supported the Chair/DG text above because it would allow for furtherstudy of the problem with the aim of finding such a practical solution.  Some of these Members added
that they would wish to see some additional clarifications with respect to the work the Committee
would carry out, the time-frame, and the deliverables. but could accept the Chair/DG text as a
practical solution.  One Member said that the Chai r/DG text did not contain all the necessary elements
as contained in the LMG text.  It was agreed that I would carry out further consultations on the matter
to develop an alternative text.
7. Following this meeting, two Members, India and Norway, each made a proposal designed to
bridge the gap and find a consensus on the matter.  Circulated to all Members in a fax dated 13
September, they were discussed at an informal meeting on 14 September and are reproduced below:
Indian Proposal
"Further to the 1994 Decision Regarding Cases Where Customs Administrations
Have Reasons to Doubt the Truth of Accuracy of the Declared Value,  Members agreed that,
if, after receiving further information, or in the absence of a response, from the
importer provided for in paragraph 1, the customs administration of an importing country still
has reasonable doubts about the truth or accuracy of the declared value, the customsadministration of the importing country may also request the customs administration of the
exporting country to provide information on the export value declared by the exporter.  The
customs administration of the exporting country shall promptly provide this information, if
available.
The customs authorities of the exporting country are not required to verify the
accuracy of the export value declared by the expo rter for this purpose.  This information shall
also be treated as strictly confidential by the authorities concerned in accordance with the
requirements of Article 10 of the Agreement on Implementation of Article VII of the GATT
1994.  This information shall be used by the authorities concerned solely for verifying the
truth or accuracy of the value declared by the importer. "
Norwegian Proposal
"Recognizing the legitimate concerns expressed by the customs administrations of
several/certain importing Members on the accuracy of the value declared, the Committee on
Customs Valuation should be directed to identify practical means available to address such
concerns.  This should i.a. include identification of means by which assistance could besought from exporting Members, appropriate technical assistance required, as well as an
evaluation of mechanisms such as multilateral or bilateral cooperation arrangements, the
Marrakesh Decisions on the issue and the application of relevant WCO or other international
instruments.  A report, including recommendations, should be submitted to the General
Council by the end of 2002 at the latest."
8. Several Members appreciated the Indian proposal because it went beyond the LMG text to
address concerns previously mentioned by these Members.  They therefore supported this proposal.
A few Members noted that more time was needed to study the proposals and their implications.
However, many other Members reiterated concerns previously stated and did not consider that the
Indian proposal resolved these technical issues and questions. Such issues included verification of theexport values, confidentiality of information subjec t to legal procedures, changes to the burden of
proof as presently provided for in the Agreement, and the fact that many Members' national
legislations would not permit divulging such information.  They re-emphasized that what was neededG/VAL/W/97
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was a practical solution.  Those who supported the Indian proposal noted their belief that the second
paragraph of the Indian proposal satisfactorily addressed these concerns.  It would provide an
immediate solution to the pressing problem of fraud which did not require further analysis in the
Committee.  Two Members noted that the very fact that the discussions kept returning to technical
aspects indicated that further technical examination of the matter was necessary.
9. The many Members who spoke in support of the Chair/DG text also stated that they were
prepared to accept the Norwegian proposal as an appropriate course of action to be suggested by the
Chairman of the Committee to the General Council Chair.  This proposal recognised the legitimacy of
the proponents' concerns, would allow for identification of practical solutions and for
recommendations, and provided a time-frame for the submission of the report.  However, the
supporters of the Indian proposal noted that the Indian proposal had positive elements to addressconcerns, including the issue of confidentiality and verification of data.  They considered that what
was now needed was the political will to accept a Decision on the matter.
10. All acknowledged the genuine difficulties in addressing fraud.  Therefore, there is a
recognition of the problem.  Nevertheless, significant differences remain on the appropriate solutionbetween the supporters of the 13 September Indian proposal and the many other Members which
support the Chair/DG text or the variation of it provided in the Norwegian proposal. Therefore, I am
not in a position to report that my consultations have led to a consensus or to suggest a course of
appropriate action on the matter referred to me by the Chairman of the General Council.
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