RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
10 March 1999
(99-0949)
Council for Trade in Goods Original:  English
TRADE FACILITATION1
Trade Facilitation in relation to existing WTO Agreements
Communication from the European Communities
I. INTRODUCTION
In previous submissions to the Council for Trade in Goods, the European Community has
proposed developing a set of WTO rules to simplify trade procedures.  The Community believes that a
WTO initiative is the best means to provide both high level political impetus and the overall trade
policy framework needed if we are to introduce gl obally, simplified procedures suited to today’s
international trade.
As we heard from the business community at the March 1998 trade facilitation symposium,
considerable simplification of procedures could also be achieved in some existing WTO Agreements.
This should be our starting point.  Some of the Community’s specific proposals2 on trade facilitation,
as well as proposals by other delegations may i ndeed apply to such WTO Agreements concerned with
border crossing procedures.  This is especially true of the Agreements on Import LicensingProcedures, Technical Barriers to Trade, SPS, Rules of Origin, and PSI. In particular, proposals on:
- reduction and Harmonization of Data and Documentation for import and export;
- modernising customs administration and methods;
- reducing separate interventions by different agencies: the "one stop" or "single window"
approach; and
- automating import, export and customs procedures, including by use of EDI.
would logically apply to these Agreements, or can only  achieve their aims fully if they do apply.  One
of the aims of this submission is to set out this.
A second aim of this submission is to identify the scope in some existing Agreements for
further procedural or substantive improvements which would also be trade facilitating.
Finally, a framework of WTO rules on the simplification of trade procedures would have
broader implications for certain Agreements: it would make the PSI Agreement less necessary, and
the TRIPS Agreement function better.  A legal framework to simplify procedures for goods tradewould naturally improve the supply of trade in services, essentially transport and distribution services,
thus generating indirect positive effects on the operation of the GATS.  It would also strengthen the
                                                     
1 For dissemination-related technical reasons, this communication could not be issued under the
symbols of the relevant subsidiary bodies of the  Goods Council.  It is addressed to the Council for Trade inGoods, the Council of Trade in  Services and the TRIPS Council as well as to those subsidiary bodies of the
CTG which were invited to make a contribution to the Council's work on trade facilitation, i.e. the Committees
on Customs Valuation, Import Licensing, Rules of Origin, Sanitary and Phytosanitary Measures, TechnicalBarriers to Trade, and the Working Party on Preshipment Inspections.
2 "Assessment of the Scope for WTO Rules in the Field of Import, Export Procedures" – submission to
the Council for Trade in Goods G/C/W/122 dated 22 September 1998.G/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
Page 2
case to rationalise the existing resource intensive committee structure of the WTO.  These issues are
discussed below.
The Council for Trade in Goods' work programme on trade facilitation calls for contributions
from different sub-groups and committees of the WTO.  In line with this, many of the proposals inthis submission have already been made by the EC in formal or informal meetings of the different
Committees for each Agreement.  The Community will make a separate submission on the
development aspect of trade facilitation, elaborating on points made in the Committee on Trade and
Development.
There follows a brief analysis of what WTO rules to simplify trade procedures would imply
for existing Agreements.
II. THE AGREEMENT ON IMPORT LICENSING PROCEDURES
The Agreement on Import Licensing Procedures exists to ensure that no additional procedural
obstacles are created in administering import licensing policies.  Its purpose is avoidance of
unnecessary barriers rather than trade facilitation per se .  However the existing Agreement does not
provide for computerised or EDI-based procedures, does not ensure minimal or harmonised data or
documentation requirements, nor cooperation between different regulatory agencies.  Import licensing
procedures could however be improved by making them part of an integrated set of simplified
procedures, notably in the following ways:
(i) data requirements should be the minimum necessary for effective controls, should be based
on international standards, be aligned to data required for other control purposes, and be
based as far as possible on commercially available information;
(ii) licences should be processed in a way that does not require  applications or submission of
data to multiple agencies, i.e. the principle of a "single window": the agency processing theapplication should carry out any coordination with other agencies.  This implies amending
Article 1.6 of the Agreement which can require traders to apply to up to three agencies for a
single licence;
(iii) modern customs controls based on pre-arrival processing of data, post-import reconciliation,
risk assessment, etc. should logically apply to controls of licensing documentation, and be
administered by one and the same agency, normally the customs (principle of concentrating
official controls in the hands of one agency); and
(iv) licensing operations should be progressively automated, in order to increase speed and
efficiency of processing, and to improve controls and reduce errors inherent in manual, paper
based processes.  Traders should have the option to use electronic means to apply for and
receive licences.
Adoption of the above innovations, as a component of WTO rules to simplify trade
procedures, would bring identifiable benefits for traders, through reduced costs and delays, and
improve control capabilities of governments using import licensing, at lower cost.  The EC would
welcome further exploration of these ideas.
III. THE AGREEMENT ON PRESHIPMENT INSPECTION
There is an international consensus that PSI is no substitute in the longer term for a properly
functioning customs service.  Although the advantages of PSI as an interim measure, and the benefits
it can deliver for user countries are recognised, so also are its disadvantages.  PSI services are
expensive and may create delays for exporters and importers, have all too often not led to expectedG/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
Page 3
improvements in tax collection, are unable to perform the integrated services expected of a
functioning customs administration (e.g. statistical collection, multi-agency coordination), do not
always apply modern customs procedures, based on use of information technology, including EDI,
and have not as a rule facilitated the root-and-branch customs reform which is a virtual pre-requisite
of their phasing out.  The WCO, UN-ECE (which has prepared a recent recommendation on thissubject) and the World Bank have all at various times drawn attention to such shortcomings.
The ultimate goal, as recognised by the WCO, the UN-ECE
3 and others, is the replacement of
PSI by efficient customs administration.  The European Community believes that to achieve this aim a
comprehensive long term plan is needed, which could be supported by the WTO in the framework of
an agreement on the simplification of trade procedures.  It proposes the following:
(a) establishment of such an agreement on simplification of trade procedures including data
reduction and harmonisation, automation, and introduction of modern customs techniques
based on the provisions of the WCO Kyoto Convention (see introduction, paragraph 2 above,
and footnote 1).  Adoption of such multilaterally agreed measures will make it easier for users
of PSI to move away from it, having established clear alternatives routed in modern customsprocedures that will increase efficiency, use resources better, improve control and revenue
collection, and help trade flows;
(b) an implementation plan for each PSI user country to move away from PSI arrangements.
This may involve discussions with the different international agencies with a role to play,
notably the WCO, the World Bank, UNCTAD and in some cases other specialised UNagencies and organisations such as the ICC.  The assumption is that a coordinated approach
covering the totality of a customs reform package is essential to achieve genuine reform, to
mobilise resources and public and private donors, and to ensure high level political
commitment on the part of the user country to reform both customs and ensure integration of
other control agencies.  As noted elsewhere in this submission, the EC will be making moredetailed proposals on this aspect of development cooperation; and
(c) in the interim, improvement where necessary to the functioning and use made of existing PSI
services to ensure a seamless transition to the multilaterally agreed rules. This would include:
progressive replacement of individual consignment inspection by selective inspection based
on risk assessment methods;  introduction of systems of ex post reconciliation of data held by
the importing country with PSI-generated data;  introduction of a voluntary PSI
Agreement/Contract; ensuring that PSI companies’ operations are progressively automatedand standardised, and that information is provided to user countries to allow pre-arrival
processing of imports and better coordination of information with other agencies; and
introduction of valuation methods based on the WTO Customs Valuation Agreement within
agreed or negotiated deadlines.
IV. AGREEMENTS ON RULES OF ORIGIN AND CUSTOMS VALUATION
The Agreement on Rules of Origin is focused on establishing disciplines and providing for a
harmonisation process in relation to the substance of non-preferential rules of origin i.e. on origin
criteria.  This exercise, once completed, is intended to simplify and facilitate trade.  The EC is among
those WTO Members supporting a stocktaking exercise later this year to assess how far the results
achieved in the harmonisation will genuinely be trade facilitating. We attach the highest importance tosuch a result.
                                                     
3 UN-ECE CEFACT Recommendation on Preshipment Inspections, which proposes that PSI should be
considered as a short term measure, be removed after fi ve years at the outside, and in the meantime the WTO
agreement be adhered to.G/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
Page 4
The Agreement however says relatively little on the questions of origin procedures and
documentation requirements, and we need to see if here too improvements can be made.  This is for
two reasons.  First, to avoid that the benefits of harmonisation are reduced due to the lack of common
disciplines e.g. as regards: documentation requirements, procedures for obtaining and submitting
proofs of origin and origin verification.
Secondly, origin verification is an integral part of customs administration. If WTO rules are to
be developed to harmonise, simplify and automate customs procedures and trade data, then those rules
should apply to origin documentation and control.  Otherwise the benefits of simplified procedures
may be lessened by unharmonized documentation, manual and paper-based processing of origin.
This objective could be aided by the progressive introduction to the origin field of a number
of basic principles for trade facilitation already proposed by the EC in its submission of
September 1998 (G/C/W/122).  The EC considers that we could, in the future, explore whether proofs
of origin could inter alia :
- be based on a harmonised documentation format ;
- be available in the exporting country from the same agency which is responsible for all other
aspects of the export operation and submitted in the importing country to the same agency
which is responsible for all other aspects of the import operation – in accordance with the
"single window" principle;
- be machine readable and thus subject to EDI-based communication between exporter,
importer and responsible government agencies;
- be subject to simplified procedures for authorised traders;
- be verified through audit and risk assessment techniques, rather than transaction based
controls.
Measures along the above lines would speed up the transfer of essential trade information and
increase transparency for traders.  For customs it would form an essential part of its centralised
control and management function vis-à-vis other go vernment agencies.  There would be scope, once
the WTO harmonisation exercise is more advanced, for exploring, perhaps in conjunction with the
WCO, how to develop further these areas.
As regards the Agreement on Customs Valuation, here there is probably less scope for
innovation in the field of trade facilitation.  The Agreement essentially establishes disciplines on the
basis on which valuation for customs purposes are carried out.  We can observe, however, that
introduction of trade facilitation rules of the kind proposed by the EC would obviously improve the
capacity of WTO Members to apply the Agreement properly:
- pre-arrival processing of electronically transferred data from traders to customs
administrations reduces error levels, speeds up processing of declarations, and frees customs
resources to apply correctly the provisions of the Agreement.  This could be a major benefit
for those WTO Members who are now preparing to apply the Agreement in full for the first
time.
- modern customs techniques of risk assessment, auditing and rapid release facilities for
authorised traders similarly enables customs to concentrate expertise and resources on
targeting higher risk consignments and thus reduce fraud carried out by undervaluation or
misclassification of goods.
V. AGREEMENTS ON TECHNICAL BARRIERS TO TRADE AND ON SPS
The work programme on trade facilitation under the Council for Trade in Goods invites
Members to identify the relevance of simplified trade procedures to existing WTO Agreements,
including the TBT Agreement.  In this section the EC makes some proposals to (a) develop further theG/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
Page 5
trade facilitation aspects of the TBT Agreement, and (b) link the TBT Agreement to proposals made
in the Council for Trade in Goods  to modernise and simplify import and customs procedures. The
proposals apply, mutatis mutandis , to the SPS Agreement also.
Trade Facilitation Aspects of the TBT Agreement & the Recent Review
Although an objective of the TBT Agreement is to  facilitate trade flows, the traditional focus
of the Agreement has been on ensuring that st andards, technical regulations and conformity
assessment procedures do not become unnecessary or disguised trade barriers.
More recently however, in the course of reviewing the Agreement, the EC and other Members
have indicated interest in developing further its trade facilitation dimension in a more pro-active way.Specifically, the EC considers that the TBT Committee should increase its role in stimulating
recourse to International Standardisation and to recognition of equivalence of existing standards
when international harmonisation of standards does not proceed rapidly enough.  It should actively
support de-regulation and good regulatory practice , e.g. by resort to suppliers’ declaration of
conformity when a third party assessment is not absolutely necessary.  Further development of theAgreement in these directions will simplify matters  for traders, by increasing predictability and
transparency of procedures and by reducing costs and delays in accessing markets.
Simplification of Procedures
In addition to the above, certain proposals to simplify trade procedures made by the EC and
other delegations in the CTG could also apply to measures taken under the TBT Agreement:
(a) Electronic means of administrating TBT Procedures
The trade and development benefits of automation and use of EDI in import, export and
customs administration have been described above.  To maximise benefits of automation, however, it
should, ultimately, be introduced across all aspects of the trade/government interface, including the
regulatory interface, and not just customs.  If this does not happen then the gains expected from e.g.
computerised procedures for customs processing and goods release can be reduced if consignment-
based, physical and paper-based procedures continue to govern other forms of administrative
intervention.
As far as TBT-related issues are concerned, the ultimate aim should be for Members to enable
traders to access electronically information on standards and regulatory requirements, and to use EDI
means in the regulatory/conformity assessment proce ss.  Information transmitted to customs and other
agencies electronically and in advance of goods arriving should include necessary data on product
compliance.  This will speed up the regulatory process, increase transparency, and enable fasterrelease upon import of goods subject to regulatory requirements.
The EC has proposed that in a possible future agreement on simplified trade procedures, use
of electronic means could progressively be introduced within Members’ administrations,  including
those agencies involved in regulatory matters. Such a provision would apply inter alia  to procedures
carried out pursuant to the TBT Agreement.
(b) Concentration of official controls in the hands of one government agency
Lack of coordination of different agencies concerned with import and export, and the
resulting requirement to subject cargoes to multiple checks at different times and places, has beencited by traders as a major concern.  In view of the multiplication of regulatory controls worldwide,
some rationalisation of procedural aspects of such controls is essential to improve trade flows, whileG/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
Page 6
IT-based means of information exchange between traders and government and between government
agencies makes it more feasible.
The EC has in two broad areas suggested measures to streamline official controls by different
agencies, including agencies whose operations fall under the TBT Agreement.  First, the principle thatsubmission of data or other information requirements either at export or import be one time only and
to a single agency (normally customs or a trade department), which will then ensure onward
transmission of data to other relevant agencies, and interagency coordination thereafter.  EDI is
obviously an important element in the functioning of such arrangements.
Second, related provisions to ensure, notably at import, that goods entering a country are
subject only to a single (if at all) intervention, normally by customs on behalf of other agencies.  Inother words, administrations would ensure, over time, a level of coordination and delegation of
controls to customs to enable all verifications (e.g. health and safety data and certification, sanction
controls, IPR verification, import licence checks, export subsidy verification) to be done once only
and in one place.  The aim should be to set a norm of such integration, subject of course to exceptions
where customs may not be qualified to carry out specific expert functions.  Clearly, agencies
operating health, safety and environmental checks on goods entering the ports would be part of such
coordinated procedures.
The benefits of working towards such systems are manifold.  Trade and transport interests
benefit in terms of reduced delay and cost from a one stop procedure that fits to their commercialrhythms and needs, and allows them to organise their compliance and cooperation much more
efficiently, while the use of a single interface with the administration makes it easier for traders to
align their computer networks with the receiving agency.  Administrations benefit through the optimal
use of their resources and personnel, and through improving control levels and results.
To conclude, the EC sees several areas where simplified trade procedures could be relevant to
the TBT Agreement and if applied would reduce costs and delays for traders while maintaining and
evening improving controls and compliance.  Th e same set of proposals would also apply, mutatis
mutandis , to the SPS Agreement.  The EC believes these issues could be explored further in a new
trade round, as part of a broader initiative on trade facilitation or within the TBT Agreement proper.
VI. AGREEMENT ON TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY
RIGHTS
Much of the discussion on trade facilitation in the Council for Trade in Goods has been on
customs issues, notably on the scope for rules to modernise and improve customs rules and
procedures to facilitate legitimate border-crossing trade.  The Community, among others, has
proposed that any future WTO rules should incl ude commitments to introduce modern customs
procedures such as pre-arrival processing of data and documentation, risk assessment techniques as
opposed to inspection of individual consignments, rapid, "green channel" release of goods of
authorised traders with a known compliance record , automated transfer of data from importers to
customs administrations and so on.
The TRIPS dimension
In the TRIPS field customs reform is relevant. Modern, simplified procedures based on risk
assessment and profiling not only facilitate legitimate trade but also permit improvements in control
and compliance levels. The WTO March Symposium heard several examples from developed anddeveloping countries of how simplifying and modernising customs procedures both benefited bona
fide traders and improved border control and enforcement, allowing customs administrations to
increase collection of import taxes. The World Customs Organisation, in its own Customs Reform andG/C/W/136, G/L/299,
S/C/W/101, IP/C/W/131
Page 7
Modernisation programme, recognises the positive relationship between trade facilitation, trader
compliance and improved controls, including controls on goods subject to IPRs.
A recurrent concern of some WTO Members in the TRIPS Council has been over how to
ensure compliance with the border enforcement provisions of the TRIPS Agreement against a
background of static or dwindling resources, and ev er-increasing trade flows. Introduction of modern,
trade facilitating customs techniques - such as those introduced by several Latin American countries
recently – enables customs to focus resources on increasing detection levels of prohibited or restricted
goods (e.g. IPR-infringing goods), ensure better compliance with regulations and hence fewer
offences, and improve the cost-efficiency of customs administrations. Experience demonstrates that
any additional resources needed for training and reorganisation of customs can be recouped quite
rapidly through higher rates of revenue/duty collection, and efficiency gains.
The Community therefore considers that successful implementation of the border
enforcement provisions and Article 69 ("International Cooperation") of the TRIPS Agreement can
only be enhanced through measures to simplify and modernise customs procedures and to activate
international cooperation within an overall framework  of trade facilitation. This strengthens in our
view the already good case for developing, within th e WTO, appropriate trade facilitation rules which
would create the much needed momentum for customs modernisation and reform.
VII. INSTITUTIONAL QUESTIONS
As can be seen from the foregoing, provisions  in many existing WTO Agreements are closely
related and will become even more closely linked under any future WTO initiative or agreement on
trade facilitation.  The Agreements on Import Licensing, Rules of Origin, Customs Valuation and PSI
constitute in particular a cluster of disciplines governing specific aspects of import control. At present
they are considered as discrete and separate instruments rather than integral parts of an overall control
process.  A future agreement on trade facilitation could help ensure that each Agreement operates aspart of a coherent process, subject to harmonised documents, procedures and standards.
The EC sees merit, within an overall initiative on trade facilitation, in ensuring that separate
Committees currently managing these four Agreements, work more closely together.  At the very least
we should ensure they meet back to back with each other, to enhance coherence and synergy between
them, particularly if in future broader rules on simplified procedures apply.  Such an arrangement
would also respond to a real concern of developing countries who lack resources to participate in anever growing number of WTO groups and committees.  Bringing the Committees closer together
would use up less time and allow the participation of capital-based experts, thus freeing resources of
Geneva-based missions.
__________