RESTRICTEDWORLD TRADE
ORGANIZATIONG/VAL/M/31
31 October 2002
(02-6009)
Committee on Customs Valuation
MINUTES OF THE MEETING OF 30 SEPTEMBER – 1 OCTOBER 2002
Chairman:  Mr. Raimundas Karoblis (Lithuania)
The agenda proposed for the meeting, circulated in WTO/AIR/1897 was adopted as follows:
Table of Contents
I. PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION
(WT/MIN(01)/DEC/1): IMPLEM ENTATION-RELATED  ISSUES...................................1
II. TECHNICAL ASSIST ANCE ................................................................................................29
III. OTHER BUSINESS............................................................................................................. ...29
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I. PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION
(WT/MIN(01)/DEC/1): IMPLEMENTATION-RELATED ISSUES
1.1 The Chairman noted that the Committee had held an informal discussion on this agenda item
at this meeting.  He suggested that the statements  made at the informal meeting be recorded in the
minutes of this formal meeting.
1.2 The Committee so agreed.  The following statements were made at the informal meeting of
the Committee on 30 September and 1 October 2002.
1.3 The Chairman recalled that the Committee had held extensive discussions at four prior
meetings on this agenda item.  These meetings were on 26 February, 27 March, 7 May, and 3 July;  the
reports of these meetings were contained in doc uments G/VAL/M/25, 26, 28, a nd 30 and Corr.1.  At the
last meeting, the Committee agreed to continue the substantive discussions on the tirets and on
paragraph 8.3 at this meeting.  It also agreed that, in light of the discussion at the present meeting, it
would agree on the structure of work until December, keeping in mind that an issue paper was an option
to consider.  He would return to these que stions at the conclusions of the discussion.
1.4 He drew Members' attention to India's recent submission (G/VAL/W/101) containing its
responses to the questions posed by delegations at  previous meetings (G/VAL/W/98 and Adds. 1-5).
Members had the opportunity to pose follow-up questi ons on these responses, but none were received by
the Secretariat.  A further Indian contributi on on paragraph 8.3 was circulated (G/VAL/W/102).
- Paragraph 8.3 of document WT/MIN/(01)/17:
1.5 The Chairman invited comments on the Indian submission in G/VAL/W/102 as well as on
paragraph 8.3 in general.
1.6 The representative of India recalled the Committee's mandate on this matter.  In light of the
time pressures, her delegation had made this submission.  The format was based to a large extent onG/VAL/M/31
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the WCO Data Model.  The capital-based expert explained that paragraph 8.3 underlined the
importance of cooperation among customs administrations in the prevention of customs fraud.  The
main area of customs fraud, arising out of the ap plication of the Agreement on Customs Valuation
(hereafter, the Agreement) was the deliberate undervaluation of imported goods.  This problem was
recognized even at the time of the Agreement's negotiation.  There were provisions (Article 17) built
into the Agreement allowing customs administratio ns to satisfy themselves as to the truth and
accuracy of declarations.  However, over the years, the experience showed that these provisions were
ineffective and valuation fraud was continuing.  Customs administrations were not able to take action
against such malpractice, even in cases where it was known that fraud had been committed due to the
lack of evidence.
1.7 The Ministerial Decision on Cases Where Customs Have Reasons to Doubt the Truth and
Accuracy of the Declared Value was adopted to deal with such cases.   However, it proved of little
help, as evidence was needed to establish fraud in judicial proceedings.  The Doha Decision in
paragraph 8.3 was a welcome step to deal with undervaluation.  The Decision mandated that in cases
where the importing customs administration had reasons to doubt the truth or accuracy of the import
declarations, the exporting country shall extend cooperation and assistance including exchange of
information on export value upon request by the importing Member.  This was subject to theconfidentiality clause under Article 10 of the Agreement and the national laws and procedures of the
exporting country.  This Decision needed to be put into practice and its efficacy tested.  This could not
be done unless the modalities were agreed upon.  In this context India submitted a paper on the format
and procedure for the exchange of information, contained in the Annex to the paper. His delegation
requested the Committee to give careful consideratio n to the paper.  Part A of the format was for
information on the goods, to be provided by the requesting customs administration (the details came
from the WCO Data Model); part B dealt with the details sought from the requesting administration
(mainly the export value);  and part C dealt with the response from the exporting country.  The
information in part B would be made only on a selective basis and only in those cases where valuation
fraud was reasonably suspected;  the number of such cases would be very limited.
1.8 His Government respected that the Decision in paragraph 8.3 stipulated that the information
provided was to be treated as confidential under Article 10 of the Agreement.  However, it presumed
that the information could be disclosed in judicial proceedings as indicated in Article 10 of the
Agreement.  However, the format presented indicated that the requesting administration shouldprovide the purpose and that the requested administration may grant specific permission to produce
the information in judicial proceedings.  His Government hoped that this would be acceptable.
Another aspect was safeguard measures to ensure that the information would not be denied in the
name of national laws and procedures.  Furnishing the information should not be a matter of routine
and Members claiming this exemption should explain how to obtain the necessary information under
their national laws and procedures.  While not indicating a specific time-limit, his delegation also
suggested a time frame in which to provide the in formation.  He requested the Committee to consider
a reasonable time frame so that the requesting information could be assured of a response.  Direct
contact between administrations was suggested to facilitate the exchange of information.  His
delegation had also suggested relying upon the technical expertise of the WCO Technical Committee
before finalizing the format and procedure.  A monitoring mechanism was suggested by means of an
annual report to the Committee to ensure that the procedure was working satisfactorily.
1.9 The representative of Brazil stated that his delegation considered the Indian submission a
constructive proposal on which to begin the discussion under the mandate in paragraph 8.3.  He
understood that the submission built upon the Decision by providing a concrete format through which
the Decision could be operationalized.  His authorities considered that the establishment of a focalpoint in customs administrations would be very usef ul in solving problems and had even forwarded an
Internet address for this purpose.  There was a specific unit within the Brazilian customs
administration that was prepared to take on this task.  His delegation also thought it would be useful
for each Member to elaborate a self-assessment guid e to assist other Members in obtaining alreadyG/VAL/M/31
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available information through the Internet.  The Brazilian customs administration had an Internet site
containing up-to-date information and an evaluation of legally recognized enterprises.  This could also
be a useful mechanism for the information exchange process.  His delegation was willing to move
forward on the Indian proposal taking into account the parameters of paragraph 8.3.  Finally, his
delegation considered that the annual monitoring report would be useful but would need more time to
evaluate each specific element in the Annex.
1.10 The representative of Hong-Kong, China a ttached importance to the implementation of
paragraph 8.3 and recognized the concerns of some Me mbers on the accuracy of the declared value.  His
delegation welcomed importing Members to seek particular information on a consignment through an
exchange of information under the scope of mutual  administrative assistance when it had reason to
doubt the truth or accuracy of a declared value.  His delegation was, however, concerned by the Indian
submission, which would oblige exporting Members to  provide information as a matter of routine.
Members should fully respect the provisions under paragraph 8.3 relating to domestic laws and
procedures.  Information in Hong Kong, China was subject to legal constraints and should only be used
for specific purposes.  Provision of information to customs administrations of importing Members, if the
information was to be used as evidence, would re quire legal approval under the domestic law.  His
delegation would, therefore, find it difficult to agr ee on paragraphs 3.4 and 3.5 of the Indian submission
and paragraphs 2 and 3 of Part C of the Annex.  He asked India to elaborate more on the conditions
under which the proposed exchange of  information would be triggered.
1.11 The representative of the United States stated  that her delegation had a number of questions to
pose to the Indian delegation.  For example, her delegation believed that one of the most important
elements to recall in the context of identifying a nd assessing practical means to address the concerns,
was that no action should be inconsistent with domestic  laws and procedures.  The format presented was
useful.  However, her delegation was concerned that some of the elements might present difficulties for
US domestic laws and procedures.  This work wa s not a negotiation where domestic ratification would
be necessary.  Therefore, it was necessary to iden tify and assess practical means without frustrating the
existing domestic laws and procedures.  In this cont ext, the Committee could work on ways to assist the
process and the Indian submission, enhanced  by the statement by Brazil, was useful.
1.12 She explained that in the US, the customs ad ministration as well as the Commerce Department
was involved in this matter.  Th erefore, consultation on the most expeditious way to facilitate the
exchange of information had to be discussed w ith these two bodies.  Her delegation also sought
clarification from India on the purpose of seeking the information.  While situations of fraud were
mentioned, her delegation would like clarificati on on how many times such information would be
sought or whether the request would only be made in light of judicial proceedings or in the course of
investigations.  Confidentiality was an important el ement particularly with respect to export values.
Export values differed from country to country and he r delegation's experience showed that examination
on a case-by-case basis was a more successful approach to deal with confidentiality requirements.  Sheadded that some of the elements in the Annex risked  running afoul of US domes tic laws and procedures.
Her delegation would study this matter further.  Al so, her delegation sought a better understanding on
what was envisaged concerning safeguards and a m onitoring mechanism.    There appeared to be
sufficient safeguards and she asked if a monitoring m echanism have to be negotiated?  Perhaps the basic
idea was to ensure that implementation of th e paragraph was proceeding in a useful manner.
1.13 Her delegation welcomed the WCO examining the proposal.  In fact, she noted that her
delegation was considering the idea of asking the WCO to carry out this work.  This might be a practical
solution since it dealt with domestic customs author ities and the matter was related to enforcement and
domestic processes.  WCO was the organization that was engaged in these issues and could take over alarge part of the mandate in paragraph 8.3.
1.14 The representative of Singapore said that her delegation shared the concerns raised by
Hong Kong, China and the concern by the United St ates on the consistency of any action with domesticG/VAL/M/31
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laws and procedures.  Member c ountries would have to each decide whether they could provide
cooperation, if any, within the ambit of paragraph 8.3.  Singapore had domestic laws restricting
disclosure of information.  Her delegation was assu red by India's statement that information would be
sought only in specific instances of fraud and not ro utinely.  On the format, her delegation questioned
whether the many details would create an onerous requi rement that was not trade facilitating.  Would it
be necessary to collect information on all the detail s?  The Brazilian suggestion to put information on an
Internet address appeared to be more trade facilitatin g.  Her delegation had some reservations about the
suggested monitoring mechanism, although it wished to further reflect on this point.
1.15 The representative of the European Communities recalled the mandate in paragraph 8.3 which
tasked the Committee with identifying and assessing  practical means to address concerns about the
accuracy of declared values.  His delegation was s till studying the Indian proposal.  The exchange of
information subject to the Doha Decision was pred ated by bilateral arrangements for exchange of
information among administrations.  These should  be built upon because many of them already
contained mechanisms, models and formats for this purpose.  The details in the proposal merited further
consideration, but should the Committee be working at this level of technical detail?  The Committee
had to be mindful of the work already done in this  field by the WCO, among others, such as the WCO
Data Model and the on-going work on the G7 Data Model.  The Committee should reflect on whether it
would need to ask for help or delega te some of this work to the WCO.
1.16 He added that procedures were necessary but would have to take into account domestic laws
and procedures as well as the wishes and desires of the parties involved.  His delegation had found that it
was difficult to find two countries with exactly the same requirements regarding the elements to
comprise an agreement.  The idea of a monitori ng mechanism was a good one in that it would be
necessary to have an idea as to the extent of coop eration.  Was there enough;  did it meet the needs of
administrations;  could it be improved, etc.?  The Indian suggestion to give this role to the WTO
Committee merited further consideration.  He considered that preparation of a format such as was in the
Annex to the proposal would involve much trial and error and further consideration..
1.17 The representative of Switzerland noted that her delegation was still examining the Indian
proposal.  Her delegation recognized the concerns of some Members regarding the accuracy of
information and was prepared to assist the Co mmittee in fulfilling its mandate under paragraph 8.3.
However, she shared some of the concerns rais ed by other Members on the impact of the Indian
proposal on domestic laws and procedures.  Confidenti ality was an issue to be watched.  Her delegation
also sought clarification on the reasons why the in formation was needed and on how many times India
was planning to seek such information.  Her dele gation shared the concerns raised on the possibile
routine requesting of the information, and would pr ovide its views on the monitoring mechanism later.
1.18 The representative of Japan stated that his de legation was still examining the proposal so his
comments were preliminary.  The Committee's work had to respect the mandate in paragraph 8.3 related
to domestic laws and procedures.  This was important for confidentiality constraints as well as for
resource implications.  While welcoming the proposal's  approach, he considered that discussion of the
format and procedures for exchange of informati on should not alter what wa s agreed at Doha.  On
paragraph 3 of the format, he highlighted two poi nts – the time frame and confidentiality.  On the
former, his delegation considered that the reques ting Member should have some idea of the resource
constraints of the Member receiving the request.  Fo r example, if India provided the import declaration
number used in Japan, his authorities would have no problem finding the consignment.  However, other
details in the Annex would require a lot of resources.
1.19 His delegation had certain domestic legal constraints on releasing information as well as on its
use for judicial proceedings.  His customs authorities were not part of the judicial branch and therefore
could not be involved in judicial proceedings.  Another framework was necessary for providing
evidence which would be used for a judicial proceedin g;  requests for use of the information as evidence
would have to be made through the proper channels.  Regarding paragraph 6 of the Indian proposal, hisG/VAL/M/31
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delegation welcomed WCO involvement in reviewing the proposal.  It had expertise in the area of
enforcement as well as on trade facilitation, which was also an element to be considered here.  He asked
India to provide more information on the intention behind the monitoring mechanism.
1.20 The representative of Canada said that his delegation was still reflecting on the Indian
submission.  The Decision in para graph 8.3 should be viewed in the context of the prevention of
customs fraud and   how best the Committee should addre ss these types of issues.  It was also useful to
keep in mind the discussions taking place in the WCO Technical Comm ittee on Customs Valuation,
which informed the issues before the WTO Committee.  It was reasonable to consider the US
suggestion that the Technical Committee might be in a better position to address some of these issues.
While the Indian paper was a step forward in the Committee's work on paragraph 8.3, his delegation
thought there may be additional ways to address the concerns at issue.  One possibility was to
examine the techniques or processes used by cu stoms administrations in conducting valuation
reviews.  His Government had experience with post-clearance assessment and he understood that the
WCO was in the process of developing a self-assessment guide containing a check-list of the
measures to be taken to ensure that customs had examined all possibilities before requesting
information from another party.  Another possibility  existed in guidelines on the development and use
of a valuation database as a risk assessment tool in cases of suspected fraud. Such instruments orguidelines would help customs administrations to address these concrete problems. Another
possibility was building on the existing arrangements/programs of technical assistance and capacity
building to help countries address their specific enforcement problems.  A fourth possibility could be
to further develop the network of bilateral arrangem ents for exchange of information with key import
and export countries. Requirements, such as confidentiality, differed among countries and bilateralarrangements could address these specificities.  A fifth proposal could be to prioritise the
reform/modernisation of customs administration to ta ke into account the evolution of techniques and
best practices.  Programs to promote compliance, to allow for more effective post-release verification
processes, risk management processes were important elements to ensure the effective dissemination
of customs valuation processes and procedures.  Paragraph 8.3 made reference to cases of fraud butthere were other concerns related to assessing the accuracy of the value that might not involve fraud
but a lack of familiarity with the procedures.  In these cases better dissemination of policies and
procedures could help to resolve the problems.  He concluded that the Committee should reflect on
whether it was best for the WTO or the WCO Committee to address these questions.  Reviewing the
material emanating from the WCO after their most re cent meetings, it was clear that their work was
based on the Decision in paragraph 8.3.
1.21 The representative of Colombia considered the Indian proposal useful in structuring the
Committee's work on paragraph 8.3.  Her delegation favoured a mechanism to better control and
monitor the type of fraud mentioned in the paragraph.  She had not received responses from her
customs authorities yet.  However, it was important to analyse the compatibility of the various
elements contained in India's proposal with the internal requirements of each Member.  Finally, sheasked India to take into consideration her delegation's concerns regarding a possible deadline for
responding to requests for information.  These related to additional burden of work, which would fall
upon its customs authorities, and the potential consequences of not meeting the set deadline.
1.22 The representative of Australia stated that her delegation was concerned that India's proposal
went beyond the mandate in the Doha Declaration. The proposal stated that it was imperative that
Members find a workable solution to address exchange of information concerns, and suggested
specific measures regarding a format for such exchanges including the establishment of a monitoring
mechanism. The proposal concluded by seeking suggestions from Members on measures for
operationalizing its proposals.  The Doha Declaration directed the Committee on Customs Valuationto identify and assess practical means to address concerns regarding the accuracy of declared values
including the exchange of information on export values. The Committee was not tasked to find
workable solutions or to address cooperation and assistance between customs administrations
including formats and procedures for customs operations. The proposal assumed a need to strengthenG/VAL/M/31
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cooperation between customs organisations.  Her de legation considered that India's proposal did not
take into account existing international customs prac tices where mechanisms to facilitate exchange of
information and cooperation, including on issues of fraud, already existed.
1.23 Australia used the mechanism for the exchange of valuation information for requests from
customs administration for assistance with investigating importations contained in the 1993 CustomsCooperation Council Recommendation.  This required customs administrations to provide assistance
to other members when a customs offence was suspected.  Australia found this mechanism, used only
in situations where the importing country had good ground to suspect fraud and conducted or was
conducting an investigation, to be efficient.  The mechanism was not used as a regular tool to verify
valuations but only as a last resort when a country of importation needed extra information.  Under
this mechanism, the importing country had to provide reasons for its action and the proposed use of
the information to be provided.  Given the existen ce of this mechanism and noting that the Agreement
was concerned with valuation methods and not managing fraud, her delegation did not see the value in
adding new provisions to the Agreement or in strengthening cooperation between customs
administration in the prevention of fraud.
1.24 The representative of the Philippines noted that customs fraud was a problem for her
Government.  If it was not possible to solve the problem internally, perhaps it would also seek a
multilateral solution.  Her authorities contacted the parties involved in the transaction to obtain ideas
or information on the specific transaction.  It also used its bilateral contacts, which it considered might
be the better route then a multilateral solution.  It also sought the assistance of international
organisation like the WCO.   Perhaps India did not achieve the progress achieved by the Philippineson this matter and was bringing this issue to the multilateral level as a last resort.  Her Government
was examining paragraph 8.3 as an exporter also and was concerned with the implications of having
to reply to routine requests for information.  In the event that the Philippines would have to seek this
information as a last resort, the proposal envisaged by India might be useful and her delegation was
examining its details for consistency with national laws and regulations.
1.25 The representative of Korea said that his delegation was examining the Indian proposal.
While the exchange of information was important to prevent customs fraud, procedures should not
give rise to additional burdens or obligations.  His delegation shared such concerns raised by many
delegations and needed more time to examine the elements contained in India's proposal.
1.26 The representative of India appreciated the constructive comments received.  On the question
of the nature of fraud and why this exchange of information was needed, as well as whether the
requests would be a routine matter, he noted that his first intervention clarified that his delegation did
not envisage a routine request for information. Such requests would be limited to cases where the
customs administration had reasons to suspect that fraud had been committed.  He considered that a
wider appreciation of the problem of fraud was needed.  His administration had conducted somestudies that indicated that, while in the normal course of trade, import and export data should be
comparable between two trading countries, for some countries imports accounted only for 40-50% of
the exports in terms of value.  While in some cases, the difference was caused by an overvaluation of
export data, in others it was undervaluation of imports, or a combination of both.  The price difference
between the export value and under-declared import value was often settled through unauthorisedchannels, leading to money laundering and the financing of terrorism.  Valuation fraud was not
limited to a few countries, or even India alone, but was a worldwide problem.  Members needed to
appreciate the wider ramifications of this problem.  A mechanism for exchanging information was
needed so that valuation fraud could be effectiv ely dealt with through gathering information on the
export value.  The Agreement defined the transaction value as the price paid or payable for the goodsto the country of importation from the country of export.  There could be a basis for comparing these
values when there was reasonable suspicion of fraud.  The case may be before a court of law, which
would not admit the information merely from the cu stoms department for lack of concrete evidence.
His authority was successfully defending cases with the help of information obtained from someG/VAL/M/31
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Members through bilateral agreements.  But because bilateral agreements could not be established
with all trading partners, his delegation was proposing a multilateral arrangement.
1.27 His delegation had no intention to go beyond the mandate in paragraph 8.3.  It was seeking a
format for the exchange of information on export values.  Certain information in the Annex was
required from the requesting country and certain information from the requested country.  This latterinformation was contained in part B of the Annex and was mainly the export value information.  On
the confidentiality issues, he had difficulty appreciating that a declared export value could be so
sensitive and would be difficult to reveal in a judicial proceeding.  He drew parallels with the
discussions on transparency in the trade facilitation discussions.  In the WCO, data elements on
import-export documentation, that would include export values, were being developed which may
become the standard for all countries.  In addition, Article 10 of the Agreement was clear on what was
meant by confidentiality of information.  The administrations receiving the information were boundby the confidentiality clause except to the extent necessary for judicial proceedings.  Therefore, his
delegation's proposal was within the parameters of Article 10.
1.28 He agreed with the suggestion that the format might be refered to the WCO Technical
Committee.  However, this did not mean that the whole issue should be handled by the WCO.  The
experience with the instruments developed by the WCO, while they were useful, showed that few
countries adopted them and they were often only non-binding recommendations.  The bilateral
arrangements based on the WCO model were also useful but not comprehensive.  They did not cover
cases where more than one country was involved in the transaction.  He added that the WCO draft
self-assessment guide indicated that a requesting administration should undertake several basicprocedures before making a request.  India was also prepared to provide this information to any
requesting country so his delegation was not against an administration ensuring that the required
information was not available in the country of importation.   The only problem was the non-binding
nature of this instrument.  He suggested the guid ance of the WCO be used in the formalizing of a
WTO instrument as a follow-up instrument of the Doha Decision in paragraph 8.3.
1.29 He added that the monitoring mechanism would be an annual report designed to ensure
transparency and timliness in the information exch ange.  While the developments mentioned in the
WCO were going in the right direction, his delegation was particularly interested in the exchange of
export values in cases where it was needed to deter fraud.
1.30 The representative of the United States noted that the mandate in paragraph 8.3 was for the
entire Committee and not just for India.  Its proposal was helpful and her authorities were still
examining it.  She noted that some of the informa tion sought in the Annex would face problems with
domestic laws and procedures.  Her delegation would pose further questions on the proposal to better
understand its intention.  One issue, which her delegation had been raising over the past two years,
related to confidentiality and the potential clash with domestic laws on this issue.  This was alsorelevant when discussing whether or not a WCO instrument could be made binding; the provisions
would have to be consistent with domestic laws and procedures.  Even Article 10 of the Agreement
spoke about information being provided if a country was willing to do so.  It was important not to go
beyond the terms of Article 10 and of the Doha Declaration.  It would be necessary to address
practical means to facilitate customs' work rather  than turn to binding commitments, which would go
beyond the mandate.  Cooperation agreements existed because they could be made consistent with the
particulars of different regimes.  A multilateral agreement was not always the solution because if the
substance of what was being addressed did not lend itself to such a solution, it would not work. While
trying to address India's concerns, it was important not to create problems elsewhere.
1.31 The representative of Brazil hoped that the concern and understanding regarding resource
constraints from some Members would also be forthcoming in negotiations in other bodies where
commitments and obligations were being sought from developing countries.  He was concerned that
the present discussions were harkening back to the pre-Doha debate.  While appreciative of theG/VAL/M/31
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concerns related to confidentiality and domestic legislation, he thought that these had already been
addressed by Ministers in Doha in laying out the parameters.  Ministers required the Committee to
continue to work on practical means to give effect to their Decision.  The Indian proposal represented
a practical starting-point to address the ultimate goal of facilitating exchange of information between
customs administrations in cases of fraud.  Some delegations were of the view that a bilateral
approach would be more convenient.  His delegation was not sure that it would be possible orefficient to have 143 separate procedures for dealing with the matter.  A core format was necessary to
guide customs administrations in how to deal with each other when necessary.  He agreed with using
the expertise of the WCO but the mandate from Ministers was to this Committee to find a response to
that mandate.  The work of the WCO did not appear to be fundamentally different or incompatible
with India's proposal.  He added that his delegation considered the idea of a monitoring mechanism
useful.  It could serve as a constraint to excessive demands or routine use of the information exchange
mechanism. The Decision represented a sort of best endeavour and his administration wouldcooperate to the extent that it was able according to its domestic legislation.
1.32 The representative of the European Communities found it difficult to envisage creating a
mechanism to implement the Doha Decision which had been the subject of a lot of debate. The work
now should be a consideration of practical means to address concerns about the accuracy of thecustoms value.  Canada presented a pertinent list from which the Committee could start.  Addressing
the concerns would require going to heart of the problem which was an on-going issue being
addressed in a variety of ways.  It was important for customs administrations to work together,
whether through a bilateral arrangements or in a wider context.  Some elements, like data formats,
may become multilateral and all work need not be done in the WTO Committee.  The Committeewould have to think about what could be usefully done by the WCO.  India was correct in saying that
the WCO could not do everything, but it clearly had competence in this area.
1.33 The representative of the United States stated that her concerns were not necessarily related to
capacity constraints, but to substantive issues rega rding the exchange of information and the type of
information to be requested. The different requirements of Members could be better accommodated in
bilateral arrangements rather than a multilateral approach.  Brazil's idea for a guide was useful.  Her
delegation would consider it as long as it did not violate domestic laws and procedures.
1.34 The representative of India asked when his delegation would receive the further questions
from the United States?1.35 The representative of the United States said that she was extracting portions of questions
received from her capital, some of which might have already been answered.  Her delegation might
have some questions for Canada as well given their last intervention.  She noted that the Committee's
mandate also included the mandate for the WCO Technical Committee.  One question was seeking a
better idea of how many arrangements India had with other countries.  She asked if India could fullyexplain the existing legal parameters in providing information to importing countries.  Did the
procedures India already applied differ from agreement to agreement?  Would any of India's
suggestions create an impact on its ability to comply  with its proposal as an exporting country?  Since
export values were not verified in most countries, what was India's assessment of their reliability?
1.36 The representative of India responded that his Government had bilateral agreements with 8
countries and some others were under discussion.  Some were working well and others not so well.
These arrangements were used for obtaining information on the export values in cases of suspected
import fraud. In some cases, the import value was 10 to 20 per cent of the export value and the
suspicions had proved valid.  In a few cases, India was asked not to use the information as evidence inany judicial proceeding.  However, even under Article 10 of the Agreement, it was possible to
disclose that information in judicial proceedings.  The main purpose of seeking this information was
for evidence in judicial proceedings.  He added that his Government was prepared to provide similar
information to other exporting countries.  Finally, he said that, by definition, the transaction value wasG/VAL/M/31
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equal to the price paid or payable for export to the country of importation so it should be the same for
both the exporter and the importer.  The idea was not to use the information as a substitute value.  If
the export value was different from the declared value then, according to the Agreement, the
transaction value would be rejected and the subseq uent method used.  The question of whether the
exporting country verified the export value was not of concern because his administration was looking
for information on the actual declared price at the exporting country.  Finally, he noted that hisdelegation had already responded to the majority of questions from the United States.
1.37 The representative of the United States stated that contemplating the sharing of export values
among customs adminstrations through a framework of binding rules, when there was no international
definition of export values, was a concern to her delegation.  She added that her delegation would
seek to draw from the Indian proposal as well as other interventions in its work under this mandate.
1.38 The representative of India said that his delegation agreed that export values were not covered
by the Agreement.  However, the definition of transaction value in the Agreement was the price paid
or payable for the goods when sold for export to the country of importation.  Therefore, the price
when sold for export should be same price as the one declared in the country of import, unless the
importer chose to mislead customs and declare a different price.  Otherwise, the two pricesshould beexactly the same.  However, this did not preclude the possibility of adjustments for national taxes or
incentives, etc.  This did not mean that his delegation planned to substitute that price when it was
different from the declared value.  It would be used only for purposes of checking the declared value
in suspected cases of fraud.  If there was a considerable difference in values, then the export value
could be used as evidence for rejecting the declared value.  The goods would then be valued under the
subsequent methods.
1.39 The representative of the United States noted that this completed her delegation's questions on
the Indian proposal.  She added, however, that the transaction value would also include the
adjustments in Article 8.  However, the Indian pr oposal was a useful start to the discussions under
paragraph 8.3 and her delegation looked forward to seeing all Members' contributions in the report to
the General Council on this matter.
1.40 The representative of the European Communities noted that there were a number of elements
which had been presented which could be viewed as creating a framework for structuring the further
work under paragraph 8.3.  He added that the WCO could have a role in this work and the Committee
could look towards identifying this further.
1.41 The Committee took note of the statements made.  It was agreed to come back to this issue at
the next meeting.
- Tirets from paragraph 7 of Document Job(01)/152/Rev.1
- Tiret 57
1.42 The Chairman drew Members' attention to the submission by India (G/VAL/W/101),
containing the responses to the questions posed by several Members contained in the document series
G/VAL/W/98 and Adds. 1-5.  He asked for any general comments from Members.
1.43 The representative of India recalled that the Agreement recognised the importance of the
provisions of Article VII of GATT 1994 and the need to elaborate rules for their uniform and
predictable application.  The Agreement also recognised the need for a fair, uniform and neutralsystem for the valuation of goods for customs purpose s. In pursuance of this and in keeping with its
long experience in implementation of the Agreement, India submitted proposals to further clarify
these provisions and prevent their abuse.  His delegation appreciated the concerns expressed by others
and viewed the question and answer process as cons tructive.  His delegation had attempted to answerG/VAL/M/31
Page 10
almost all the questions and hoped that the written responses provided would have clarified doubts.
His delegation had been attempting to elaborate and clarify the reasons behind these issues since pre-
Seattle (almost since 1998).  The detailed minutes of the Committee meetings attest to this.  He urged
Members to move the process forward in a constructive and cooperative manner in order to meet the
overall timeframe mandated for the resolution of the implementation issues.  He recalled that at the
last meeting, certain procedures were elaborated whereby follow-up questions were to be forwarded
to his delegation by 9 September.  He confirmed that his delegation had not received any follow-up
questions although it was still prepared to answer any that may arise.
1.44 The representative of the European Communities considered the question and answer exercise
related to the implementation issues useful, adding that the information provided was rather complete.
He was mindful of the basic reasons behind the Indian proposals, but did not believe that the
proposals would solve these problems.  For example, with respect to tiret 57, it was a question offinding the facts, assessing the nature of the transa ction, and making sure that all of the information
declared was accurate.  Article 8.1(b)(iv) did not by itself create any mechanism particularly
favourable to fraud.  The proposed change would create a fundamental change in the valuation
approach because it would tax the services produced in the country of import, which went against all
the principles of valuation. This certainly would not be useful for developing countries because it
would take a certain sector of economic activity that could be a rather high value activity and convert
it into a part of the tax base for imported goods.  This would be hard to defend in economic terms.
Because this provision represented a complex commercial transaction, it could give rise to problems
in valuation, which should not automatically be la belled as a major fraud activity.  However, the
carrying out of services in a country of import must remain subject to special recognition withinArticle 8.  It remained difficult to see how the proposed changes would benefit anybody.
1.45 The representative of the United States considered that any follow-up questions that might
arise could be subject to discussion in a special meeting of the Committee, if necessary.  Her
delegation considered that tiret 57 would amount to double taxation. Furthermore her delegation wasconcerned that the proposal would require an amendment to Article 8.1(b)(4).  Her delegation did not
share India's view that there was no rational reason for the split between domestic and foreign assists
in this provision.  The provision contained an incentive for procuring these services in the country of
importation; customs duties should be applied to foreign goods that are imported, not domestic goods.
1.46 The representative of Japan noted that in the WTO, goods and services were treated
differently.   His delegation did not see how the proposal would work to prevent fraud, which would
exist anyway and was not related to the Agreement.  Fraud would exist regardless of the system used.
There were many tools available to tackle fraud in the WCO and in other international organizations.
Customs administrations needed to increase their capacity to deal with fraud when it arose.
1.47 The representative of Canada appreciated the Indian responses although was hoping for more
detail.  While they provided some clarification of the reasons behind the proposals, his delegation still
did not understand how they would prevent the circ umvention of the rules by fraudulent importers.
The problem was one of enforcement of customs regulations and procedures and his delegation
remained unconvinced that modifications of the Agreement were necessary to achieve that.  The
Agreement provided the framework of rules for determining value and did not prevent Members fromimplementing policies to ensure the enforcement of the rules.  His authorities failed to see anything in
the Agreement that prevented countries from effectively enforcing their regulations and procedures. In
that regard, his delegation continued to believe that there were alternative ways to address these issues
without affect the negotiated balance of rights and obligations in the Agreement.
1.48 The representative of Brazil stated that his delegation continued to be favorable to the thrust
of tiret 57, not for reasons of enforcement, but out of concern that the present provisions were
asymmetric.  There seemed to be an inherent recognition in Article 8.1(b)(iv) that supply of these
services free or at reduced cost would have an im pact on the final value of the good.  The asymmetryG/VAL/M/31
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arose from the fact that if the buyer procured the services in a third country and supplied them free or
at reduced cost to the manufacturer they would be added to the value of the good.  If they were
procured domestically and then supplied to the manufacturer, they could not be added to the value of
the good.  However the impact of the supply and the service in both cases was the same.  His
delegation was concerned that the present provisions in Article 8.1.b.4 created a loophole or
asymmetry of treatment according to the origin for the same services being provided.
1.49 The representative of India explained that tiret 57 arose from his customs administration's
experience in the application of the Agreement.  The provision was asymmetric, which Brazil had
noted.  The services foreseen in Article 8.1(b)(iv) supplied by the buyer and developed in the country
of importation required special treatment different from the other provisions in Article 8.1.  He added
that the negotiating history did not shed light on why this provision was so worded.  While some had
mentioned that there was an intention to provide an economic incentive, his delegation believed thatsuch an incentive should be left to the discretion of the administration.  Any special derogation in the
Agreement was not appropriate.  Tiret 57 was proposed because this provision was giving rise to
artificial splitting of values which could have severe economic implications in the importing country.
1.50 On the issue of double taxation, i.e. that the same item would have been subject to tax in the
importing country and then again as a final product upon importation, his delegation did not believe
that the Agreement was the appropriate instrument to deal with tariff matters. The Agreement was not
aimed at providing any particular incentive or tari ff benefit to the importer.  The decision to create
any such economic incentive should be made by the national administration, which, if so decided,
could provide a specific exemption for the development of these domestic industries. If a country didnot want to provide this incentive, it would not be forced to do so.  He added that this provision was
subject to different interpretation among Members.  His delegation believed that this particular benefit
was available to only the importer in the country of importation.  If another person in the importing
country carried out the services, it would be included in the custom value.  However, some other
Members understood this provision to mean that the value of services provided by anyone in thecountry of importation would not be added to the customs value.  This was a problem of differing
interpretations that could lead to confusion and problems in valuation.
1.51 The representative of Japan noted the difference in interpretation mentioned by India.  He did
not wish to enter into this technical discussion but considered that the Committee could come back to
it at a later stage.  He said that there was merit in the current provisions, which allowed Japanese
importers to exempt in-house engineering costs, often provided by the importer itself.
1.52 The representative of Canada flagged another concern with tiret 57 related to uniformity.  If
the Indian proposal were accepted, would it not create a kind of mis-alignment with Article 6 of the
Agreement, which contained the provisions for the computed value method?  The latter included the
value of the items in Article 8.1(b)(iv) but only to the extent that these elements were charged to theproducer. It seemed to his delegation that mis-alig ning the methods would directly contradict that
fundamental principle at the core of the Agreement, namely uniformity, irrespective of the valuation
method used.  Other tirets may create similar problems whereby addressing the legitimate concern
raised by India may create a domino effect regarding other fundamental principles of the Agreement.
1.53 The representative of Brazil would reflect on the Canadian question.  With regard to the
concern about double-taxation, he considered that the present provisions already created such a
problem.  If the importer procured the services from a third party within the country of importation,
then he/she would be pay internal taxes on these services.  If the importer subsequently provided the
services to the producer in a country of export free of charge or at a discount, the services would notbe incorporated into the valuation.  If, however, the services were procured from a third country, then
taxes would be paid there and again when provided free-of-charge to the producer.  Members should
reflect on whether they wished to endorse the use of measures to stimulate local content.G/VAL/M/31
Page 12
1.54 The representative of India did not see any conflict with tiret 57 and Article 6 of the
Agreement.  The latter was equal to the cost of imports including manufacturing costs as well as
manufacturing profit.  All elements involved in the production should be included in the computed
value.  The other elements in Article 8.1 were included;  his delegation's proposal sought to eliminate
any disparity among the elements in Article 8.1.  He agreed with Brazil that double-taxation already
existed in the present provisions.  If the reason for the present provisions were to create an incentive
for domestic industry, such an incentive should be left to the discretion of each country.
1.55 The representative of Canada clarified that the note to Article 6.3 of the Agreement stated that
the computed valuation method shall include all of the elements specified in Article 8.1(b).  However,
the value of the elements specified in sub-paragraph (iv), undertaken in the country of importation,
shall be included only to the extent that such elements were charged to the producer.  Therefore, the
proposal in tiret 57, if implemented, would affect the principle of uniformity or neutrality between the
various methods of valuation.  His delegation believed that the intent of the negotiators was to ensure
that there was no distortion in the use of the various valuation methods in the Agreement.  He
wondered if the proponents of tiret 57 had considered this.
1.56 The representative of India agreed that there could be a problem with respect to Article 6.
However, he considered that this problem existed because of the existing asymmetry of Article 8.1(b).
His delegation’s proposal to eliminate the special distinction in sub-paragraph (iv) should eliminate
any conflict with Article 6.  Paragraph (iv) would be aligned with the other paragraphs in Article 8.1
and the asymmetry would disappear.  This would al so simplify matters for customs administrations.
He added that the particular provision in the note to Article 6 would have to be then corrected.
1.57 The representative of the United States noted the circularity of the discussion.  She did not
understand why India was seeking to double-tax its own engineering and design works that might be
later included in the imported product.  The only reason for doing this would be to increase the source
of customs revenue.  She asked India if this was the case.  She also asked Brazil to clarify its viewsince the negotiating history showed that Brazil had originally proposed excluding from the
transaction value the cost of such domestically-sourced services.
1.58 The representative of the European Communities noted that the asymmetry in the Article
must have been put there by the negotiators for a reason;  eliminating it simply for the sake of
achieving symmetry was not sufficient.  He added that  it would difficult to imagine changing a rule or
a provision so that it would result in taxing goods  or service produced in the country of import.  He
added a technical point on the question of taxation.  As India pointed out, elements produced in the
country of importation which were added to the customs value at re-importation would be taxed
unless administrations allowed a duty relief on the re-import of goods which had been previously
exported.  He added that most administrations did so.  However, such a customs provision could not
be introduced for the services in Article 8.1(b)(iv). This would have to be kept in mind when speakingabout each country creating its own exception to provide an incentive.  With respect to the difference
of interpretation cited earlier, he considered that the WCO Technical Committee was the ideal place
to examine this question.  A request could be made to that body to consider this question now or at a
later date, but separately from the immediate implementation work.  On the enforcement problem,
customs could do many things to avoid being duped.  This also was something that the TechnicalCommittee could consider again independently from the WTO discussions.
1.59 The representative of Brazil, in response to the US point, acknowledged that paragraph 16 of
the Secretariat document on the negotiating history of the Agreement (G/VAL/W/95) contained the
specific reference to Brazil’s proposal to exclude from the transaction value the cost of engineering,development, artwork, design work, plans and sketch es relating to imported goods.  He explained that
this was a broad proposal that had been adopted in a specific fashion.  This exemption could only be
provided if the services were provided free of cost or at reduced cost by the buyer from within its own
country. The problem was one of asymmetry in that the same service depending on its origin receivedG/VAL/M/31
Page 13
different treatment under the provisions of 8.1(b)(iv).  He noted the EC point that customs duty should
not be applied to services.  But in many situations, duty was applied to the services input to the
production of the good.  If the services were procured and yet charged to the producer in the exporting
country, then these could be added to the dutiable value and this would amount to applying customs
duties to a services component of the good.  His delegation had difficulty with different treatment of
the same transaction depending on the origin of the services supplied.
1.60 The representative of India supported the views expressed by Brazil regarding the taxation of
services.  Services input were a component in the cost of production.  Services, when procured from
the importing country and added to the value, illustrated that the import of services could be taxed.
India did not intend to double tax imports as a rule and, indeed, when something was supplied to the
foreign buyer from the importing country then the internal taxes were relieved.  When the taxes were
relieved, the component became part of the imported goods and added to the cost not the tax base.When it was re-imported, it was assessed as any other imported good.  Once it was exported from the
country, it became like any foreign good.  Therefore, double-taxation was not a problem.
1.61 The representative of the United States noted her previous question.  In the context of her
extensive work on trade and investment issues, she was puzzled with this proposal when viewed next
to certain other special treatment being sought for products originating from developing countries.
1.62 The representative of India did not consider its proposal a special provision for developing
countries or for India alone.  India was asking for a correction to be made to a provision of the
Agreement and not for an additional derogation for developing countries.
1.63 The representative of the United States asked if India was interested in receiving extra
revenue from this proposal because that is what it seemed, and this was why governments might make
the association with development or developing countries.
1.64 The representative of India stated that this proposal should not be interpreted as a revenue
measure.  It was an attempt to ensure the same treatment for all inputs coupled with an attempt to
alleviate the problem India had with identifying this particular input claim by importers.  This
provision provided an incentive to certain importers to under-invoice by claiming this benefits and
customs could not detect it.  In the specific case cited by his administration, the fraud was detectedbecause the importer came to customs with a second invoice claiming that part of the value was
engineering and development services developed in India.  The concern was that there could be
unnoticed cases where a large amount would be taken as the cost of such services in the country of
importation.  If, by chance, the customs administration were able to find this fraud, then it would need
evidence to establish it.  India wished to avoid this situation.
1.65 The representative of the United States still had concerns about what India was seeking to
address with the proposal.  The arguments related to asymmetry and to double-taxation did not merit
eliminating a provision of the Agreement that co uld be deemed a special benefit for developing
countries.  Also, the need to better enforce laws did not justify changing provisions of the Agreement.
1.66 The representative of Brazil did not consider this provision a special and differential treatment
provision.  It was not directed particularly at developing countries.   The problem for his delegation
was the misalignment between paragraph (i)-(iii) on one hand, and paragraph (iv) on the other;  his
delegation did not understand why there was asymmetrical treatment of the services according to their
origin. This was the only thing his delegation was seeking to adjust because it seemed that the same
problems would arise by the provision of these services free of cost from a third country as from thecountry of importation. The consequence would be exactly the same.
1.67 The representative of the United States asked how was the issue Brazil raised an
implementation issue per se  with respect to the Agreement?  Maybe the Agreement should have beenG/VAL/M/31
Page 14
negotiated differently but, taking it as it was, she could not agree to changing it because some
delegations did not like it on the justification that it was an implementation issue.  If a government
had enforcement difficulties, perhaps this angle could be addressed rather than implementation.
- Tiret 58
1.68 The representative of Japan had some fundamental difficulties accepting this tiret.  While
appreciative of the Indian responses, he requested a response to question 12.  He noted that the
Agreement was established to balance customs administrations' wishes to conduct proper enforcement
with the interests of exporters for fair customs valuation procedures.  Putting more weight on either
side would alter considerably this balance.  His delegation was concerned that the Indian proposals
would put the exporter's interests in danger.  In addition, the proposals would fundamentally change
the current Agreement because the proposed measures were presently prohibited.  In the discussionsof Paragraph 8.3 of the Doha Declaration, India sa id that it had difficulty finding export prices.
However, under this tiret, India said that the expo rt prices in a third country would be available
through various sources.  He added that the starting point for applying the two proposed methods were
quite different.  Considerable adjustment would be needed because perhaps the volume of the sales
would be different from the transaction in question.  Because there were no explanations for suchadjustments, the proposal could lead to arbitrary or fictitious values which were contrary to principles
and provisions of the Agreement.
1.69 The representative of Brazil noted that the proposal would seek to eliminate two of the
methods prohibited in Article 7 of the Agreement. The first was the price of goods on the domestic
market of the country of exportation.  His delegation had some difficulties with this method because it
could be seen as contradicting the Preamble of the Agreement, which stated that valuation procedures
should not be used to combat dumping.  The investigation of prices in the domestic market was
essentially a procedure in anti-dumping investigations.  The second proposed method was the price of
goods for export to a third country.  His delegation saw some merit in considering this proposalbecause major changes had taken place in the international trading environment since the negotiation
of the Agreement.  Specifically, the notable expansion of intra-firm trade had made up the bulk of the
growth of trade in the last years. Consideration could be given to such kinds of transactions under the
residual method of valuation.
1.70 The representative of the European Communities said that his delegation was convinced that
the proposals would move away from the principles, content and balance of the Agreement.
Valuation was about transactions and commercial reality where the buyer paid for goods in the
country of importation.  The hierarchy of the methods was based on a continuation of that concept,
except for the computed value.  The exclusions in Article 7 were designed to ensure that no parallel or
alternative system could be devised that would neutralise the strength and integrity of the valuation
system.  Under the proposal, if a customs administration was not satisfied with the importer’s declaredvalue and could not arrive at a customs value through any of the other methods, it would be
reasonable, fair and acceptable to search in any other country for a price for those goods.  This
proposal was so far removed from the principals of the Agreement, that it was difficult to see how it
could be a solution to any problem.  With the six methods available and the added flexibility in
Article 7, it was difficult to see why it would even be necessary to consider, even in extremesituations, valuation of goods on the basis of prices to another country.  He asked which country
would be used for this purpose?  This could create confusion because prices varied all the time.
Removing basic safeguards in the Agreement such as those in Article 7 would be a direct and severe
weakening of the Agreement, and would give incentive to seek import values in ways removed from
the provisions and principles of the Agreement.
1.71 The representative of Canada supported the statements by the EC and Japan.  Article 7 was
the valuation method of last recourse when it was not possible to determine the value of the imported
good under the previous provisions.  The prohibitions in Article 7 were to ensure that the residualG/VAL/M/31
Page 15
valuation method respected the general provisions and principles of the Agreement.  The proposal,
therefore, would introduce methods not aligned with the principles at the core of the Agreement.  The
changes suggested would affect the balance of rights and obligations important to the negotiators.
Any changes or suggestions for improving the Agreement should be based on the notion that the
transaction value involved the goods imported, and on due consultation with importers in the process
of determining the value.  All other valuation methods respected those principles and his delegationwould be extremely concerned to consider any ch anges to the residual valuation method that would
affect the application of those principles.
1.72 The representative of the United States supported the statement by the EC.  She added that a
review of the negotiating history revealed that  there were fundamental principles involved in
including Articles 7(c) and (e).  Among these were avoiding arbitrary and fictitious values, delays in
obtaining the relevant information to appraise merchandise and difficulties in verifying internationalvalues.  How did India expect to obtain reliable information on domestic prices in the exporting
country or prices for goods exported to a third country?  This was a follow-up question because her
delegation was not satisfied with the previous responses on this point.
1.73 The representative of India explained that the situations in which his authorities would resort
to these particular methods of valuation would be very rare and only after exhausting the six other
methods as well as the flexible approach under Article 7.  It was only then that customs would search
for the proposed information in order to help in de termining the value.   The domestic selling price in
the exporting country or the export price to a third country would need to be adjusted based on
differences in commercial and quantity levels as well as for the local selling expenses.  Depending onthe circumstances, a case-to-case examination of the adjustments would have to be made.  He noted
that an amendment would be necessary to delete the particular provisions in Article 7 otherwise the
proposal could not be implemented.  He respected the concern of some delegations that the proposal
may contradict the provision in the Preamble of the Agreement that stated that valuation should not be
used as recourse for dumping.  However, he stressed that these methods would be used only in veryspecial situations where no other method was possible.
1.74 Information would be obtained in consultation with the importer to maintain transparency.
Other sources could also be used, although it was difficult to say categorically at this stage what those
sources would be.  He stressed that this method would be used only as a last resort when all othermethods failed.  He agreed that the negotiating history showed that the particular provision on
domestic selling prices was incorporated at the request of developing countries.  However, this was 25
years ago and since that time there had been a lot of changes in trade patterns.  Many other
international customs agreements had been updated in line with changes in trade patterns so there was
a case for reviewing some of the difficult provisions of the Agreement on Customs Valuation.
- Tiret 59
1.75 The representative of Japan asked for some clarification on the nature of pilot consignments,
which was at the heart of the issue.  He understood India's problem to be pilot consignments that
passed the border at abnormally low prices which then became a sort of precedent for further customs
clearance for larger quantities of goods. His delegation was not certain about the kind of pilotconsignments India was talking about and asked for detailed examples.  Even if there were a problem
of small pilot consignments, his customs authorities would investigate it and fix the original value.
This would correct the subsequent values and allow for their easier handling.  The longer-term
solution for this problem would be enhancing the customs authority to deal with fraud cases.
1.76 The representative of Korea said that customs values, according to the principles of the
Agreement, should be based upon actual transaction value.  The Indian proposal was to amend the
Agreement so that where there was more then one transaction value, the highest value would beG/VAL/M/31
Page 16
chosen rather than the lowest.  It would be diffic ult, complicated and more time-consuming to find the
highest value.  This could impair the facilitation of the trade.
1.77 The representative of the United States, following the Indian response to a question of her
delegation, asked what international market information and other factors were referred to and what
information was currently at India’s disposal?  Wh y did India not currently use this information to
discover pilot transactions?  Again, her delegation did not see merit in amending the Articles 2 and 3
of the Agreement in the suggested way.  She supported the points made earlier by Japan and Korea.
1.78 The representative of India noted that his delegation had explained what it meant by pilot
consignments in detail during previous interventions as well as in the responses to the questions.  The
problems arose out of the operation of cartels that attempted to import a particular new product in the
market through a remote customs post that may not have up-to-date information with which to valueit.  Being a small consignment and depending upon the urgency, customs may accept the declared
value which would become a precedent for import consignments by the cartel.  He did not understand
the Japanese reference to barriers to pilot consig nments.  He added that strengthening enforcement
was necessary but could not be done in contravent ion of the provisions of the Agreement, which
would be the case if artificial barriers were put on subsequent consignments.  Unless customs couldprove that a particular consignment had been deliberately under-valued and had the evidence to prove
it, it would be difficult to reject the declared value. Referring to Korea’s point that it would be
difficult to locate the highest value, he considered that it would be equally difficult to locate the
lowest value, as presently required under the Agr eement.  Hence, the proposal did not envisage any
additional burden. Many countries had developed data bases to help locate the values of individualtransactions.  On the US question, the problem with the pilot consignments was the cartels and that
customs may clear the import before it realized that it was a pilot consignment.  It would then be
difficult to act retroactively.  International market information could be obtained later from various
sources but the damage would have already been  done.  Flexibility was needed with respect to
Articles 2 and 3 to deal effectively with these deliberate cases of valuation fraud.
1.79 The representative of the United States asked why India did not currently use the international
market information that it had to discover pilot transactions?1.80 The representative of India said that the problem which the proposal was meant to address
occurred for products which were new in the market and for which his authorities did not have the
information readily at hand.  In addition, the goods were often presented at remote customs posts
where the information might not be available.  By the time the information was found, it was too late.
He added that, of course, if the information were available, customs would make use of it.
1.81 The representative of Japan stated that the explanation of a pilot consignment was not
sufficient for his delegation's purposes. His delegation wondered whether these pilot consignments
should be included in the price comparison.  If they were imported before the actual importation, they
could be disregarded;  only recent import examples could be used for comparing the prices.  What
was the situation the surrounding the pilot consignment?  Further, his authorities used a system of
post-audit through which fraud would normally be found and a correction made if the fraud were
affecting subsequent imports.  All the imports benefitting from the wrongdoing would then becorrected.  This was a more long-term solution for this type of fraud.
1.82 The representative of India did not agree with the Japanese reading of the Agreement which
stipulated that the lowest of the values of importations made at or about the same time should be used.
He was surprised to see that the Japanese administration was ignoring these pilot transactions indetermining value under the second and third methods.  He agreed that  post-audit could be useful to
address this problem but it was impossible to do an audit for every transaction.  Often, fly-by-night
operators, who would then disappear and resurface at another address, carried out this type of activity.
It was often difficult to locate them for the post-audit.  If an established importer with a regular placeG/VAL/M/31
Page 17
of business was at issue, then a post-audit could be done.  The problem was that these were not
normal transactions, were often part of a cartel, and could not be detected by post-audit or
enforcement mechanisms.
1.83 The representative of the United States sought further clarification on why post-audit results
could not be used.  On the issue of international market information, she considered that India's
response to Japan's question earlier undercut its response to a question she had posed earlier.  If India
was talking about situations of new products where customs could not get the information fast
enough, why did India say in response to her question that subsequent consignments could be
subjected to detailed scrutiny based on international market information. This inconsistency showed
the difficulties inherent in India's explanations.
1.84 The representative of Japan, in reaction to the Indian comments, clarified that there were
possibilities for not considering the values of sm all pilot consignments given the exact situation
surrounding the consignment.  His delegation believed that the Articles of the Agreement stipulated
that identical or similar goods should be exported at/or about the same time as the goods being
imported.  He concluded that his authorities wanted to see more details on examples of pilot
consignments to increase its understanding.
1.85 The representative of India explained that post-audit could be used if the particular importer
responsible for the pilot consignment was known.  The problem was that the cartels often gave
addresses and names to a customs officer in a remote post.  This import would then become a
precedent.  Customs would not be able to examine the details of the transaction at a later stagebecause of the non-availability of the information and the difficulty tracing the importer.   This would
make a post-audit impossible, particularly when the value or quantity of the transaction was small.
Post-audit was normally done on a selective basis when the enquiries revealed that there was some
manipulation of accounts and illegal payments in respect of transactions.  It was not done on a routine
basis.  On the question of international pricing information, he explained that the information may beavailable at a later stage but, by the time customs realised it, the consignment would have gone
through and there was no mechanism to review it.  He agreed with Japan that comparisons had to be
done "at or about the same time" as the actual import.  However, the problem was once the pilot
consignment had cleared customs, the next co nsignment would appear quite soon afterwards.
1.86 The representative of Canada remained puzzled as to how best to address India's concern and
whether the solution proposed in tiret 59 was appropriate.  His delegation considered the problem one
of enforcement.  The question was how to deal with fraud given the specificity of the problems faced
by India with the cartels, the remote customs posts, and lack of resources.  His delegation recognised
those concerns.  It considered that US and Japanese interventions on the use of post-audit merited
further consideration.  The implementation of post-audit may represent a challenge but, in line with
some of the ideas he had submitted earlier, this was likely to be a way to address the problem that
would not affect the balance of rights and obligations negotiated in the Agreement.  Tiret 59 may help
address the Indian problem, but may create problems elsewhere.  What were the implications of this
proposal on the principle of consultation to determine a value when Article 1 was rejected?  What
would happen to the principles in Articles 2 and 3 whereby identical goods that were exported at or
about the same time would have to be compared?  He  also asked what would happen to the principle
of uniformity?  Principles at the core of the Agreement may be affected by the implementation of this
proposal.  His delegation was trying to establish the consequences of the proposal.  Given that
enforcement or prevention of fraud would best address the legitimate problem faced by India,  was the
solution proposed proportionate to the problem to be resolved?
- Tiret 60
1.87 The representative of the European Communities noted that buying commissions, i.e.
payments made by the buyer to a person representing him/her in the purchase, had been exemptedG/VAL/M/31
Page 18
from the value because it was effectively for an activity that the buyer would normally do him/herself.
If the buyer was not able or had some problem finding suppliers or locating production centers, he/she
would perhaps make use of an agent who would do the work.  This activity had nothing to do with the
import transaction but was a different service which was why it was not included in the customs
value.  It was difficult for his delegation to find justification for adjusting the provisions of the
Agreement on this matter.  In its replies, India responded that if the buying commission was added tothe price actually paid or payable for the imported goods, it would place all importers on the same
footing and erase discrimination.  His delegation understood the inverse – it was the buyer using an
agent who would be discriminated against if this service were taxed.  The specific example presented
by India referring to a situation where the commission could be deducted from the price of the goods
was an important technical point.  His authorities never experienced the situation where customs
actually deducted elements from the invoice value or from the price of the goods.  Perhaps there was a
way of addressing this problem independently rather than changing the rules, which would be a bigstep.  Buying commissions were economically impor tant because many buyers could not travel and
relied on agents in the exporting country to deliver this important service. If that became taxable, it
would create an economic disincentive.
1.88 The representative of Japan supported the EC statement.  His delegation was not convinced
that the proposal would solve the problem faced by Indian customs administration.  Buying activities
were different from importation of the goods and the Agreement ensured that the cost related to
buying activities should not be included in the value for customs purposes.  If buying commissions
were included in the customs value, it would also be  necessary to include all the costs related to the
pricing of the goods in the exporting country.  For example, if an importer imported goods from India
for the first time, perhaps he/she could go to India to see the goods, factories and the exporters.  The
travelling cost to India would be born by th e importer and would not be a buying commission and,
therefore, not included in the customs value.  Con tinuing the example, perhaps the second time when
pricing the order to India, the importer might use a lo cal agent to price the order.  The payment to this
local agent would be a buying commission.  Currently this would not be included in the customs value
but India was proposing it to be included.  Continui ng the example, if the transaction went well, the
importer might establish a permanent office in New Delhi, which would require payment of salaries to
the local representative.  Again, under the current Agreement these costs should not be included in thecustoms value but under the proposal they would be.  This example illustrated the fundamental
difficulties his delegation had with accepting this proposal.
1.89 The representative of the United States supported the statements by Japan and the EC that
covered the concerns of her delegation.1.90 The representative of Korea also supported the statements by the EC, Japan and the US.  The
selling costs had to be distinguished from the costs born by the importer.1.91 The representative of India emphasized that the proposal was born out of practical
considerations.  His authorities had difficulties distinguishing the buying commissions from other
sources of commissions.  Sometimes, a buying agent might also act as a selling agent and the limits
were difficult to discern.  The agent may be receiving commissions from the importer as well as from
the exporter and acting as a buying agent as well as a selling agent.  Another problem related to this
was the re-invoicing or artificial splitting of the actual prices in the name of the buying commission.He agreed with the EC that Article 8 did not contain elements to be deducted from the invoice.
However, he was concerned about cases where the buying commission might already be paid through
a reduced invoice price.  Again, this was the type of practical problem for which enforcement should
be strengthened.  His authorities had tried to do so, but the problems persisted.  His delegation had a
long experience with application of the Agreement and had built a well-structured administration to
implement the Agreement with computerized operat ions in all areas except small remote customs
posts.  However, valuation problems persisted which meant there were real problems.G/VAL/M/31
Page 19
1.92 It could be argued that buying commissions were not an amount paid directly to the seller so
they did not add to the cost or value.  But the fact that the buying commission was also an amount
spent by the buyer, as a cost of importation had to be appreciated.  It would be logical to include all
commissions associated with the good in the value so that there would be no practical problems.  On
the Japanese example, he was not sure that all the various stages presented in the example would beconsidered as buying commissions.  The costs associated with establishing a local office in the
country abroad would be a different matter and he would need more information to comment further
on the example.  The real problem was fraud perpet uated in the name of buying commissions because
the Agreement provided a special dispensation for buying commissions whereas all other
commissions were to be included in the price.  If this was changed according to the proposal,
devaluation would be easier to spot and customs valuation and clearance would be facilitated.
1.93 The representative of the United States stressed that the value was to be the price actually
paid or payable.  If the proposal was accepted, customs could add any cost related to the importation
of goods, whether paid to the seller or not, into the transaction value.  This would mean that all
salaries paid to the importers' employees, phone calls, over head, etc., if related to procuring and
arranging for the importation, would be added to the price actually paid or payable.  This againbrought up the element of enforcement against fraud.  With all the various fraudulent activities cited
by India, she wondered if other WTO Agreements were effected by such clandestine acts.  Would this
give Members the impetus to start changing provisions of the Agreement or should the focus be on
technical cooperation to boost enforcement and capabilities?   She could not agree to change the
Agreement for the reasons cited.  This proposal w ould discriminate against those buyers that needed
to rely on the services of agents and would create a disincentive to trade at all.  She added that it
might be useful to look at what other countries  were doing for enforcement without causing damage
to legitimate provisions such as those related to buying commissions.
1.94 The representative of Brazil said that his delegation held the view that a legitimate buying
commission should not be included in the value because it was an expense incurred by the buyer and
was not really an essential part of the acquisition of the good.  On the other hand, his delegation
appreciated the problem of defining buying commission and noted that perhaps the Agreement was
vague in that respect.  His Government had adopted an internal regulation which guided customs
officials on how to treat commissions.  The various elements necessary to presume that a commissionwas, in fact, a buying commission were clearly spelled out.  Where there was insufficient evidence to
determine the relationship between the buyer and the agent, the regulations said that in such cases
customs could conclude non-existence of a relationship between the buyer and the agent.
1.95 The representative of Japan said that his previous example was meant to illustrate the
difficulty in determining the elements to be added or not to the customs value if the Indian proposal
was accepted.
1.96 The representative of India clarified that it was not his delegation's intention to create an
endless list of additions to the customs value, as the US and Japan indicated, nor to expand the scope
of additions.  It was to make a small correction to Article 8.1 to include buying commissions that
would not contradict the principle of the transaction value.  Article 8 adjustments, if not alreadyincluded, were to be made to the price determined under Article 1.  He did not see where in the
Agreement it was said that the adjustments had to directly benefit the seller.  For example, the cost of
packing, whether labour or materials, was an item to be added.  It could be that the packing was not
done directly by the seller.  In that case, the seller may not receive the benefit but someone else might.
Nevertheless, these costs would be added to the transaction value.  He did not agree that everypayment should directly benefit the seller.  His delegation's concerns were not with the principles of
the Agreement but with the practical aspect of determining buying commissions.  He took note of the
statement by Brazil explaining the internal guidelines governing the determination of commissions.G/VAL/M/31
Page 20
However, India's proposal was designed to provide a solution to its problems of dealing with buying
commissions and was not proposing an expa nsion in the coverage of Article 8.1
1.97 The representative of the United States wond ered what India's specific reaction could be to
Brazil's intervention on this question.
1.98 The representative of India noted that his Government also had similar guidelines and
instructions on how to deal with buying commission s and how to ascertain if a particular element was
a buying commission or not. However if the Customs disallowed buying commissions by an
administrative order based on such guidelines, the Indian importer would not accept it but would take
customs to court to argue that the buying commissi on existed and that the importer had a right to the
benefit.  That was why his Government could not extend its regulations as far as in Brazil.
1.99 The representative of the United States considered that the proposal was a drastic solution to
the problem of enforcement of domestic regulations.  There were legitimate buying commissions that,
under the proposal, would pay a price.  The proposal was illogical and punitive to say the least.  There
were better ways to deal with the problem and her delegation strongly urged India to consider them.
It did not make sense to amend legitimate provisions of Agreements because some Members hadenforcement problems.
- Tiret 61
1.100 The representative of Brazil noted his delegation's partial support for this tiret.  He drew
Members' attention to Explanatory Note 4.1 of the WCO that emphasized a detailed analysis of the
contract between the parties to determine if a relationship existed.  His delegation was concerned that
it was not always possible for customs to have access to the contract.  Therefore, some leeway was
necessary so that customs could presume a relationship when these documents were not available.
1.101 The representative of India stated that the related provision of the Agreement, Article 15.5, in
particular the last phrase of that Article, had been a problem since the negotiation of the WTO
Agreement.   The compromise was paragraph 5 of Annex III that mandated studying the problem if
necessary.  No such studies had been carried out since that time.  Nevertheless, his delegation had
difficulty with these specific types of transactions which was the rationale behind the proposal.  OnBrazil's intervention, his delegation was flexible and would consider this proposal.
1.102 The representative of the European Communities said that the type of commercial
transactions referred to under Article 15.5 were not special and were simply a particular type of
commercial contract.  There was a difference between this type of commercial contract and the
relationship envisaged in Article 15.4, which were quite intimate associations.  Transactions of sole
agents' etc. were only under a special form of a distribution contract that involved some territorialexclusivity.  Even Article 1 noted that geographical restrictions should not be seen as a reason to
reject the transaction value.  Over the years, th ere had not been demand nor any evidence to carry out
any kind of studies as foreseen in paragraph 5 of Annex III.  The WCO Technical Committee did
some work on the subject but, generally, there had been little problems in this area.  If all sole agents,
etc. were deemed to be related, the treatment of these transactions would be transformed and theseoperators would be subject to new formalities and requirements that would be difficult to justify.
1.103 He added that it was necessary to determine that there was no control over the buyer (the sole
agent, etc.).  If obligations were then impos ed on the sole agent to prove that there was no
relationship, it would create a burden of proof that would be impossible to meet.  It was impossible to
prove a negative – this type of process was generally avoided in customs and tax laws.  There was a
difference between such an obligation to prove non- relationship and a reasonable approach of asking
the sole agent, etc. to explain the trading circuit and circumstances surrounding the transaction.  The
Agreement, itself, stated that these types of contract would not presume an outright relationship.  HisG/VAL/M/31
Page 21
delegation had concerns about changing this status and preferred to maintain the present Agreement
which, in fact, did not grant any special status to these commercial associations.
1.104 The representative of Brazil clarified that his proposal did not imply an automatic burden of
proof on the sole agent, etc. to show non-relationship.  Only in certain instances, if there were a
suspected relationship, documentation would be requested.  It was often easy for importers not toprovide documentation because there could be no automatic presumption of relationship.  Therefore,
his proposal was aimed at situations where customs required documentary evidence (i.e. a copy of the
contract between the seller and the agent) and the importer failed to provide it.  In these cases,
customs would be allowed to presume a relationship.  This would put pressure on the importer to
provide the necessary documentation.
1.105 The representative of Japan said that the Brazilian proposal might be useful.  He added that
the situations described by Brazil might be resolved by the provisions of the Ministerial Decision
Regarding Cases Where Customs Has Reasons to Doubt  the Truth or Accuracy of the Declared Value.
The first paragraph contained procedures to question the declared value including requesting
explanations and documents from the importer.  If the information was not forthcoming, then the
Decision mandated customs to reject the transaction value and move to the second method.  Hisdelegation shared the view of the EC as to why th is category of buyers should be singled out and
punished by imposing special requirements.  The current provisions in Article 15.4 illustrated the type
of relationship intended under the Agreement, i.e. where profits would be shared between the buyer
and the seller.  This concept should be maintained.  It was possible that this category of buyers would
benefit from the most advantageous discounts, but this was justified by the fact that these buyers oftenhad to take care of maintenance and repair and other after-sales services as well as to establish brand
names.  However, these were normal commercial activ ities.  It would also be difficult to determine
which buyers were sole agents, etc.  It would depend to a great extent on the terms of the contracts.
Better enforcement of the provisions of the Agr eement was the long-term solution to India's problem.
1.106 The representative of the United States considered that the Agreement provided enough
material to cover India's concerns in Articles 15.5, 15.4, and 17, as well as the Ministerial Decision
mentioned by Japan.  She asked India if there were any circumstances that it could imagine where a
sole agent, etc. would not be related?
1.107  The representative of India stated that his delegation had outlined the particular problems that
it was having with these types of commercial transactions.  It centered mainly around analyzing the
association in order to determine whether a relationship existed and whether there was an effect on the
price.  This type of transaction had also given rise to fraud problems.  The problem was that once an
analysis was carried out, it was valid until new facts were brought to light.  Thus, all measures were
necessary to establish that the sole agent, etc. was not related and that any relationship did not affect
the price.  Customs would need documentation and evidence.  However, if the sole agent were related,it would not be in the agent's interest to s how such documentation and evidence.  This was
particularly the case for relationships under Article 15.4(e)-(g) that dealt with control.  This was the
rationale for the proposal to assume automatic relationship for these types of commercial transactions.
However, his delegation would try to be flexible and give further consideration to the Brazilian
proposal.
1.108 The representative of the United States, noting the Indian flexibility towards the Brazilian
proposal, asked Brazil if Article 17 of the Agreement captured part, if not all, of it proposal?  She
clarified her understanding of the proposal – if customs were not satisfied with the documentation
submitted by the importer or with a lack of documentation submitted following a request forinformation, a relationship would be deemed to exist.
1.109 The representative of Brazil explained that when documentation was not forthcoming,
customs was at a standstill and could not establish the nature of the association between the importerG/VAL/M/31
Page 22
and the seller nor whether or not it fell under the provisions of Article 15.4.  If Article 17 covered this
concern, it would be sufficient.  However, he did not believe that Article 17 was clear on that point.
1.110 The representative of the European Communities said that for any trader, including sole
agents, etc., customs had to start with determination of the value under Article 1 of the Agreement.
This included the provision to look to Article 15 to determine if the parties to the transition were
related.  Article 1 did not say that customs could assume a relationship unless proven otherwise.  It
did not say that the importer had to prove a non-re lationship.  This would be an impossible burden and
did not exist under any other customs or tax law of which he was aware.  Article 15.4 contained
several situations that were more difficult to dete rmine than others.  However, this work was within
the normal competence of a customs administration.  As in other areas of customs, the facts were
there and customs had to work to uncover them.
1.111 The representative of Brazil clarified that under his proposal there was no intention to give
any new powers to customs administrations.  He considered that the type of contract between a sole
agent, etc. and a seller was distinct from other relationships in the normal course of trade.  The fact
that there was a separate paragraph in Article 15 to deal with these importers showed this.  His
proposal did not seek to change the presumption th at the contractual association between these two
operators would not automatically be deemed as related.  He agreed that it was relatively
straightforward to determine the nature of the contract, but to do so, a copy of the contract had to be
made available.  His delegation proposed that if the contract was not provided than customs should be
allowed to say that a relationship existed.
1.112 The representative of Egypt asked what would prevent fraudulent importers from presenting a
factitious contract to hide the relationship?  Would the Brazilian proposal really solve a potential
problem of fraud?
1.113 The representative of Canada was concerned with the undesired consequences of
implementing the proposal.  His delegation agreed w ith the EC and the US that there were certain
safeguards within the Agreement that provided flex ibility to customs to examine the accuracy of the
information presented by the importer.  It did not limit itself to the accuracy of the declared value but
also to any statement by the importer.  If India and other countries faced certain problems that would
warrant more tools for customs than those under Article 17, than any solutions devised should becircumscribed to the specific type of concern.  What should be done for a buyer and seller who were
related but whose relationship did not effect the price?  The relationship could have all the features of
two independent traders.  How would the proposal deal with these traders?  It seemed unfair to punish
these traders whose relationship did not affect the transaction value.  Alternatives to the Indian
proposal should be sought and the Brazilian proposal could be envisaged as a Decision or
Understanding circumscribed to the problem faced by India.
1.114 The representative of the United States appreciated the flexibility of the Indian delegation.
Her delegation continued to believe that there were alternatives to addressing the problems raised by
India.  Further examination was needed among different customs authorities, perhaps in the WCO, to
determine how they had addressed this problem.  This harkened back to her suggestion that related to
all of the tirets – the more appropriate way to address the problems was through increased technicalassistance to build up capabilities to enforce the existing rules.  The answer was not to amend the
Agreement, which would have repercussions elsewhere.
1.115 The representative of India considered that Egypt had raised a valid question – what would
happen when the contract was fictitious or customs had reasons to doubt the truth or accuracy of the
contract?  He noted that this was, in fact, what was happening in his country in addition to customs
not being able to obtain the necessary information to make determinations.  This was particularly the
case for relationships under Article 15.4(e) – (g), which required a lot of information and
examination.  He proposed modifying the Brazilian proposal to include, not only the contract, but alsoG/VAL/M/31
Page 23
all information necessary to satisfy customs that the relationship did not exist.  If all necessary
information were not forthcoming, then a relationship could be assumed.  On the US suggestion to
increase technical assistance and capacity building, he noted that India had been applying the
Agreement for many years and had received extensive assistance in this area.  His delegation was not
convinced that any further assistance would be helpfu l.  It was looking for a practical solution to the
problem and continued to be flexible along the lines proposed by Brazil as modified by him above.His delegation would appreciate further consideration of this proposal.
1.116 The Committee took note of the statements made.
- Future work
1.117 The Chairman noted significant differences in the discussions of the two parts of the
Committee's implementation work.  On the tirets, the discussion had a follow-up nature and was
based on the question and answer exercise.  It was clear that the positions of Members had not
changed and it seemed that there was little flexibility in views at present, despite indications from
some Members to explore alternatives under tirets 60 and 61.  Therefore, the discussions had not been
fruitful and new approaches and ways were necessary to move on these issues.
1.118 Regarding paragraph 8.3, he commended Members on the positive attitude shown.  He
understood that Members appreciated India's submission and stressed the importance of cooperation
between customs authorities and the exchange of information.  A few Members proposed other,
alternative approaches to information exchange.  He understood that some alternatives would beprovided in writing concentrating on the bilatera l information exchange mechanisms and the use of
WCO inputs.  Also some Members expressed concerns and doubts regarding certain aspects of the
Indian submission related to the issue of confidentiality, use of information in judicial procedures,
doubts related to the possibility of the requests for information being made on a routine basis and
related to the monitoring mechanism, etc.  A fe w Members stressed that they needed more time to
examine the proposal received.  He agreed that further work was needed.  He drew Members'
attention to the alternatives mentioned as well as the Indian proposal, in order to find common
ground.  At the same time, he asked Members not to be rigid in their views but to seek a common
denominator in order to reach a common solution.
1.119 The Committee would have one, at most two, meetings before it was due to submit its resorts
to the General Council and to the Trade Negotiating Committee.  He noted that during the last
meeting, the Committee agreed to continue the substantive discussions and to decide at the present
meeting the procedure to be followed, keeping in mi nd that an issues paper was one of the options to
be considered.  On the other hand, during the last Committee meeting it was also noted that it would
be necessary to have a general discussion on the draft reports at this meeting.  It was suggested that
immediately thereafter, the Secretariat would prepare draft reports to be issued before the Novembermeeting.
1.120 In this light, he considered that energies would be best served by concentrating on the
substantive work as well as on preparation of the reports.  Having in mind time pressures, he was not
sure about the usefulness of an issue paper at this stage in our work.  However he wished to hearMembers' views on this as well as on how they envisaged the reports.  In the schedule of meetings
contained in document G/VAL/44, it was agreed to have an exchange of views on the reports at this
meeting.  Before doing so, however, he noted that, following some statements made at the last
meeting, he considered that preparation of these reports would progress simultaneously with the
Committee's substantive work.  By this he meant that the Secretariat could prepare drafts of thereports for the November meeting, while at the same time Members could continue to study the issues
in preparation for another round of substantive discussions at the November meeting.   Any additional
elements from this substantive work could then be a dded to the revisions of the reports following their
consideration
 at the November meeting.G/VAL/M/31
Page 24
1.121 The representative of the European Communities considered that the Committee had had
extensive discussions on the tirets and that this was the basis for a factual report which could be
prepared for the Committee's November meeting.   With respect to paragraph 8.3, he thought thatthere was still a considerable amount of work to be done through the November meeting.
1.122 The representative of the United States supported the view of the EC.  Considerable work had
been done on the tirets and her delegation had expressed some flexibility with respect to tiret 61
concerning the Brazilian suggestion.  From a purely factual perspective those elements could bereflected in the report.  She asked if there would be two meetings in November?
1.123 The Chairman proposed that the Secretariat would prepare the two reports for the November
meeting.
1.124 The representative of the European Communities noted a difference in the work accomplished
on the tirets and that which was only beginning on paragraph 8.3.  On the later, he believed that it was
premature to think about the report.
1.125 The representative of Canada asked if the intention was to prepare a report on paragraph 8.3
for the November meeting?
1.126 The Chairman stated that the draft report on  the tirets would be prepared for the November
meeting and it would be decided at that meeting how to proceed on paragraph 8.3.
1.127 The representative of India had no problem with the scheduling of the preparation of the
reports.  He asked it the report would signify fina lization of the discussion on the tirets or would they
be subject to further discussion in November?
1.128 The representative of the United States considered it important to have a factual report that
reflected the discussion.  This would include the flexibility shown under tiret 61.  As far as the other
tirets were concerned, her delegation considered the discussion exhausted.  She would workbilaterally with India on certain points and to seek some further clarification.  These consultations
would be in light of the points made in the discussion of tiret 61.
1.129 The representative of Brazil said that the Committee had a Ministerial mandate to address
these issues and, in paragraph 12(b) of the Declaration, to report to the TNC by the end of the year.
The work so far had been constructive; there was a greater appreciation of the proponents' concerns
and the ideas were somewhat clearer on how to move on a number of the tirets.  However, he did not
see any agreement in the Committee and to say that the work was concluded would be premature.
The Committee had a ministerial mandate and must reach a consensus on the way to report to the
TNC on the status of its work under this mandate.
1.130 The Chairman noted that there was no consensus on the tirets but that, nevertheless, a report
had to be submitted to the TNC.  Therefore, he could only see this report reflecting the various
positions of Members.
1.131 The representative of India stated that his delegation did not believe that the discussions on
the tirets had been concluded.  He also planned to have informal consultations with some delegations
and believed that the work could move forward.  He had no problem with the report reflecting the
positions and the statements made, subject to the understanding that the discussions would continue.
1.132 The representative of Canada supported the vi ews of the EC and the US that the substantive
discussions on the tirets should conclude with the report.  He was not certain further discussion wouldG/VAL/M/31
Page 25
change anything in the report which should be the focus of the next meeting.  On paragraph 8.3, his
delegation looked forward to the continuation of the work with a report to the General Council by
year-end.  A factual short report could be made on the tirets
1.133 The representative of the United States supported the comments made by Canada.  She added
that the consultations, which her delegation envisioned with India, would be with respect to India's
concerns related to tiret 6.1.  Her delegation viewed the solution to the problem more in line with
technical assistance because it was still not persuaded that the changes proposed were proportionate to
the problem and the damage that could result from the proposals.  There were other tools which couldhelp resolve the problems, such as the Ministerial Decision on Cases Regarding Truth and Accuracy,
and she wished to consult both India and Brazil on these alternatives.  She added that her delegation
could not accept the proposals in the tirets and believed that their disucssion was exhausted.  It would
not be fair to continue posing questions to India on these issues.  She had not heard any other
delegations express need for the proposals except, in certain cases, Brazil.  Therefore, her delegationdid not see any productivity in continuing the discussions.  The Committee was required to report to
the TNC by the end of 2002 with appropriate action.  It was well within the mandate to provide as
much of the facts as possible reflecting the intensive discussions.  The TNC would examine these
facts and take any appropriate action if necessary.
1.134 The representative of the Philippines also believed that the Committee had had substantive
discussions on the tirets.  If some Members considered that the discussion was exhausted but there
was not a consensus on this point, then these facts should be reported to the TNC and this would be
the limit as to how far the Committee could go.  The factual report should reflect the positive spirit
among Members and the difficulties expressed with the proposals.  It was not fair to burden India with
more questions.  Presenting possible solutions might be controversial so the report should be factual
and indicate that there was no consensus.  The TNC would have to find appropriate solutions.
1.135 The representative of Brazil stated that if this Committee were working in isolation, perhaps
some of the arguments just heard would have a bit more of consistency.  However, implementation
issues were being addressed in the same manner in all WTO bodies – a lot of discussion but an
overwhelming reluctance to do anything about the concerns.  In this respect, his delegation would notbe in a position to agree with any conclusion in the report that would say, "the Committee had
exhausted debate on this matter".  His delegation believed that specific problems had been brought to
the attention of the Committee but that these had not yet been adequately dealt with.  A solution that
satisfied all Members was not yet forthcoming.
1.136 The representative of Egypt supported the Brazilian statements.  He noted that the tirets were
mainly defended by India because India was one of the rare developing countries that was applying
the Agreement long enough to accumulate experience.  They were reflecting the problems they faced
in the tirets.  The majority of other developing countries, including Egypt, had only started to apply
the Agreement.  He believed that within the coming months, other countries would gather experienceand may face identical or similar problems as India.  It was premature to suggest that the discussion
was over because he was convinced that in the coming meetings, Egypt and other countries would
participate more actively in this debate.
1.137 The representative of the United States stated that her delegation could not agree to any
statement in the report that would say that the Committee had not engaged in extensive discussions on
the tirets. The Committee benefited from national experts, from a question and answer exercise and
in-depth analysis.  It was not appropriate to ignore the substance of the work the Committee had done
because of overriding political questions across the WTO.  Her delegation believed that India's
underlying problem was related to domestic enforcement and that there was much that could be done
through the WCO or through other expert resources that were available to help, not only India, but
other developing countries.  She did not believe that the implementation issues in this CommitteeG/VAL/M/31
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should be used as an example for other WTO bodi es.  There were wide divergences of views with
other implementation issues in the WTO as in th is Committee, and she failed to understand the logic
of some of the proposals.  More work on the tirets would only be repetitive in nature.  While it was
not necessary to have language in the report that would say that the discussions were exhausted, there
should also not be language to indicate that the discussions were preliminary either.
1.138 The representative of the European Communities supported the statements by the Philippines
and the US.  A line had to be drawn in the work;  w ould anything change if it continued?   It would be
difficult to find new issues that had not been examined in the previous work.  Customs' problems were
on-going depending on their development, training, etc.  The Committee was not addressing these
problems but the specific proposals.  It had done this work and now had to fulfil the mandate to report
on the work accomplished.
1.139 The representative of the Philippines, fo llowing the comments by Egypt, noted her
delegation's appreciation to India for raising these implementation issues.  She had requested
information from her customs authorities on these issues, and the response was that Philippine
customs had not gone as far as India had in terms of implementation.  Her customs authorities were
mainly occupied with making sure that the Agreement was being implemented correctly.  Mostcountries had not had the experience that India had had.  Her delegation believed that India's problems
were real and the Committee should continue to examine how it could help India as well as other
developing countries that would likely face these problems in the future.
1.140 The representative of Brazil agreed that the discussions in the Committee had provided an in-
depth examination of the issues.  It was sufficient to  look at the minutes of the meetings to understand
this.  However, they were not conclusive because the Committee had not reached a final
understanding on them and, in this sense, the mandate was still outstanding.  He noted that the
mandate said to address the concerns, not simply to discuss them, and this had not yet been
accomplished.  His delegation was searching for a concrete solution to each of the problems indicatedin the tirets, even alternative solutions as the case may be.  Therefore, the report could not indicate
that the work had been concluded.
1.141 The representative of Switzerland agreed that the report should be short and factual in nature.
There was not enough time to debate submitting a report with a consensus that the work had not been
concluded and should continue.  She also questioned whether any substance would change if the
discussions on the tirets continued.  Therefore, a factual report would be the best way of dealing with
the issues in the short time available.
1.142 The representative of the United States agreed with the view of Switzerland.  She noted that
her delegation was engaged in examining the problems  to determine where it could be helpful.  She
did not doubt the existence of India's problems but was not certain that the proposals contained the
proper remedies or even if the WTO was the proper forum in which to address them.  The answer to
enforcement problems, which was what her delegation believed were the source of the problems, was
not to change the WTO Agreements.  This could cause problems elsewhere.  Her delegation was
ready to proceed on this basis but maintained the view that the discussions were concluded.
1.143 The representative of India stated that he was surprised to hear from the US that, after all the
extensive discussions, the problems should be simply handed to the WCO to find a solution.  He did
not see what kind of solution the WCO could offer.  It provided technical assistance and had a number
of instruments, which, although sound, had not been able to solve the problems cited.  It was for this
reason that his delegation sought solutions in th e WTO, and suggested amendments to clarify and
elaborate the Agreement.  However, it was looking for solutions and, in fact for tiret 61, there had
been a suggestion.  His delegation would like to explore the possibility of other solutions for the
Committee.  Since no decisions had been taken and only positions expressed, the disucssion was not
conclusive and incomplete.  His delegation did not believe that the solutions laid at the WCO becauseG/VAL/M/31
Page 27
the problems were not simply related to enforcement.  As the Philippines and Egypt had mentioned,
his Government had long experience in the applic ation of the Agreement with adequate systems and
an infrastructure.  It had taken all the necessary formalities and procedures to strengthen enforcement
but the problems remained.  His delegation believed that the solution would have to be found by
continuing the discussions on these tirets until appropriate solutions were found.
1.144 The representative of Canada considered that there was a difference of views on the meaning
of the word "address."  Some Members wished the discussions to continue while some wished them to
be concluded.  Nevertheless, the report would have to be factual and represent the state of play in the
Committee and these two perspectives.  The report could be short and make reference to minutes,
documents, and submissions as well as indicate that productive discussions took place that allowed for
an exchange of views on the problems raised by the proponents of the proposals.  Other delegations
tried to understand these problems and, in some cases, proposed alternatives or other suggestions.  Itwas necessary to find a pragmatic way to fulfil the mandate in the time remaining.
1.145 The representative of the European Communities repeated his view that the Committee had
examined the issues as much as it could and that there was little more it could do.  It could be that the
Committee failed to address an underlying problem, but it had to be recognized that the WTO could
not solve every administrative problem of Members.  Investigative services, lawyers and other supportservices were there to do such work.  His delegation had said all that it had to say on the tirets and
considered that it was now the time to recall all that the Committee had done in the report.  Consensus
had not been reached and the report would have to state this fact.
1.146 The Chairman considered that the aim of the work was to find a consensus on appropriate
action that was to be reported to the Committee.  However, the Committee did not succeed in this task
and, therefore, should present a factual report on what it had done to the TNC.  It would not benecessary to specify in the report whether the discussions were exhausted or not.  It was also not
necessary to be explicit on whether we would have discussions in the November meeting.  He
suggested moving forward on the work on paragraph 8.3 as well discussing the report at the
November meeting.  The views of Members that the discussions were not concluded would be
carefully reflected in the minutes of this meeting.  He stressed the importance of continuingconsultations between India and other interested Members on paragraph 8.3 as well as some of the
other issues.  He suggested that concerned Members inform the Committee about the results of these
consultations at the appropriate time.
1.147 The Committee agreed to proceed in the manner outlined by the Chairman above.
1.148 The representative of the World Customs Organization made a statement introducing a WCO
contribution to the Committee's work related to paragraph 8.3.  This statement is reproduced in an
Annex to this report.
1.149 The Chairman thanked the WCO for their contribution.  He asked Members if they could
agree to circulate this formal contribution to the Committee's discussions on paragraph 8.3 as a WTO
Committee document?
1.150 The representative of the European Communities appreciated the views of the WCO, which
had expertise in customs issues.  He looked forward to studying further the contribution from the
WCO.  He asked the WCO to clarify if the contribution had been completed with the Technical
Committee itself.  He added that, without wishing to open the discussions on implementation-related
issues, the Committee may consider asking the Technical Committee to provide input on some points
at a later date.G/VAL/M/31
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1.151 The representative of India appreciated the voluntary work undertaken by the WCO to
develop guidelines on the exchange of information.  He would provide his specific input on the
guidelines to the Technical Committee.  The cont ribution was broadly in agreement with the Indian
proposal on paragraph 8.3 and was of course parallel work distinct from the mandate given by the
Doha Ministerial Decision to this Committee.  It was not a substitute for the Committee's work on the
subject.
1.152 The representative of the United States asked whether the views proposed were those of the
WCO membership or of the WCO Secretariat and if those views stating a proposed action reflected
consultations with the Technical Committee?  She wanted to continue to discuss in the Committee a
possible role for the WCO on the work related to paragraph 8.3.  She recalled that the mandate was to
identify and assess practical means.  This was rather broad and while including export values, it did
not mean focusing exclusively on them.
1.153 The representative of Japan suggested avoiding duplication in the work of international fora.
So far this had not been the case, but this should be kept in mind in the future discussions on this
matter.  While the WCO clearly had more expertise on the matter, it would be necessary to evolve
some ideas to connect these two independent bodies.
1.154 The representative of Egypt asked the WCO to what extent did it see the Indian proposal
complementary to its work or did it see any duplication or overlap?1.155 The representative of the WCO said that the contribution would be enriched by the comments
and inputs of the forthcoming meeting of the Technical Committee beginning on 21 October 2002.
He added that the Indian proposal would be considered among the number of proposals it would
receive during the course of the Technical Committee's work on this matter.  It would further the
thinking on the subject within the WCO.
1.156 The representative of the European Communities noted that his delegation was interested in
further inputs and outputs from the Technical Committee that would emanate from specific requests
from the WTO Committee.  This would be separate from what the WCO was pursuing on its own.
1.157 The representative of the United States asked if the views in the document circulated were
those of the WCO membership or of the WCO Secretariat.  Were the views proposed actions
emanating from consultation with the Technical Committee?
1.158 The representative of the WCO responded that the Secretariat of the WCO adopted a
pragmatic approach to gather and assess the needs of its members, which were applying the
Agreement, in particular, developing countries, with respect to the exchange of information.  This
resulted in the two meetings to which he had referred and to the preparation of the working paper he
had submitted to the Committee.  He stressed that it was a draft, which would be submitted to theTechnical Committee on Valuation for consideration.  Once the text was finalised it would be
submitted for approval to the Policy Commission of the WCO, which took all final decisions.
1.159 The representative of India said that his delegation did not see the need to circulate the WCO
as a formal Committee paper.  It was not a formal contribution to the Committee's work, it was only a
draft, and there were many instruments of the WC O to which Members could refer if they wanted to
learn more about the work of the WCO in this area.  He did not see the need for  another instrument to
be developed by the WCO to be circulated as an official paper for the Committee's work.
1.160 The representative of Brazil stated that his delegation had no problem with the contribution of
the WCO being circulated as an official document.  This seemed to be standard practice in other WTO
bodies, including for contributions from the WCO, wh ich had been circulated as official documents inG/VAL/M/31
Page 29
the discussions on trade facilitation.  The WCO contribution addressed an item before the Committee
and he failed to see how this contribution could be seen as anything but a means to assist the
Committee in its consideration pursuant to the ministerial mandate.  This said, he also reminded the
Committee that the WTO had embarked on an attempt to increase transparency of its work.  An
important decision was taken to reduce the number of restricted documents with the objective of
enhancing transparency of WTO’s work for the civil society.  In this light, it seemed that circulatingthis contribution as an official document could only promote the objective of transparency.
1.161 The representative of the United States appreciated the comments on transparency.  However,
this was a draft paper and not approved by the WCO nor even discussed in the Technical Committee.
If the paper still had to go through the WCO membership and the Technical Committee, why should
the WTO Committee circulate it as a formal document?  She even questioned whether it had a formal
status in the WCO.  Her delegation appreciated the work by the WCO Secretariat in trying to expedite
understanding of the issues and her delegation was not against the document, per se .  Her delegation
would examine it further to see how it could be incorporated into the Committee’s work to fulfil its
mandate.  Nevertheless, she repeated that as a draft paper, it needed the blessing and input from the
WCO membership.
1.162 The representative of the European Communities supported the US statement.
1.163 The representative of Brazil noted the lack of consensus to circulate the document.  He took
note of the Committee’s position with regard to contributions from the WCO.1.164 The Committee took note of the statements made.  It was agreed to reproduce the statement of
the WCO in full in the report of the meeting.
II. TECHNICAL ASSISTANCE
2.1 The Chairman recalled that the Committee at its meeting of 26 July 2002 adopted a draft
programme for the seminar on technical assistance.  It was circulated in document G/VAL/47.  The
seminar would be held, according to the programme, on 6-7 November 2002.  He updated Members
on the progress in the organization of the seminar.  The invitations had gone out to all Members andobservers as well as to relevant international organizations.  The Secretariat urged Members to
respond with the necessary information on the participants as soon as possible.  This information was
necessary in order to finalize the panels and lists of speakers well in advance of the seminar, as well
as to distribute in advance copies of the presentations.  Finally, he informed Members that funding
would be available for all developing country delegations which so required and requested it.
2.2 The Committee took note of the information.
III. OTHER BUSINESS
3.1 The Chairman informed Members that the date of the next meeting on implementation issues
would be 5 November 2002, with 4 November reserved for the Committee's regular work.  The
meeting would be immediately followed by the seminar on technical assistance on
6-7 November 2002.
3.2 The meeting was adjourned.G/VAL/M/31
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Annex
Statement of the representative of the World Customs Organization
I wish to thank the Chairman and all the distinguished members as well as the Secretariat of
WTO for the possibility given us to explain the work carried out by WCO as concerns the DohaDecision on exchange of customs value informa tion. The information document provided entitled,
"WCO Contribution Regarding the Doha Decision on Exchange of Customs Value Information,"
offers detailed coverage of the WCO's examination of this question. I recommend that you give it
your full attention. The issue of exchange of valuation information is not new to the WCO and it is
one of the most important issues facing members of the WCO. The challenge has been how to
improve the existing mechanisms;  the adoption of paragraph 8.3 of the Doha Decision gave further
impetuous to the WCO work done in this regard.
This matter has become even more important when the issue of a supply-chain security was
raised after the tragedies of September 11, as the access to pre-arrival information becomes
increasingly important in the area of security against terrorist attacks. Many WCO Members had
noted that the economic or budgetary security is another aspect of the supply-chain security. Theystress the need to enhance cooperation in information exchange based on the request from importing
countries. In addition the need to consider the possible inclusion of value to the pre-arrival
information was also pointed out.
In addressing the need for capacity-building, another priority area in the Doha Declaration,
they call attention to the fact that mutual administrative assistance in the area of exchange of customs
value information should be considered as part of WCO capacity building or technical assistance
efforts. The WCO wishes to be closely informed of the developments in the WTO;  it would be
appropriate for WCO to assist the WTO in addressing the matter.  The information exchange is of
great interest to many customs administrations around the world and is being discussed throughexisting cooperation efforts between the WCO and its Technical Committee where all Members of
the WTO and the EC actively participate.  In the long-run the WCO believes that the issues should
continue to be addressed through its on-going capacity building and technical assistance efforts in
coordination with the WTO.  Exchange of information is only part of the solution to effective
valuation control. Successful valuation control depends on a long term strategy to reform andmodernise customs administrations and exchange of valuation information should be developed as a
supplementary short term strategy.  In particular, customs administrations should rely on a control
mechanism using intelligence-based risk assessment and post-clearance auditing systems which are
fundamental to improving customs valuation control regimes.
The multilateral or bilateral basis for exchange of valuation information is under
consideration within the framework of WCO inst ruments and the development of a possible modern
multilateral convention on mutual administrative assistance. However, the WCO recognises that the
improvement or development of a binding multilatera l framework will take time and, therefore in the
short term, bilateral cooperation seems to be the most practical approach. In order to obtain views of
members on exchange of information, the WCO Secretariat hosted an informal meeting of selective
developed country administrators in Brussels on 3-4 June 2002.  A subsequent meeting of a selective
group of developing countries was held on 12-13 September in Pretoria, South Africa. In both
meetings of developed and developing countries it was pointed out that it will be necessary for a long
term solution to be found, identifying the capac ity building needs in this area. They also
recommended measures to strengthen exchange of valuation information on a multilateral, regional,
and bilateral basis including the involvement of the pr ivate sector.  In particular, they encouraged the
use of draft WCO guidelines for the exchange of customs valuation information.  A copy is attached
to the paper circulated.  They encouraged the development of guidelines on the use of a valuation
database as risk assessment tool. The draft guidelines had been drawn up as a practical solution in
order to facilitate the exchange of valuation information among administrations.  It contains a list ofG/VAL/M/31
Page 31
valuation verification actions to be taken by the importing customs administrations before requesting
information from the exporting customs administration, and a set of recommended procedures for the
exchange of valuation information. It should be noted however that the guidelines, including the
checklist, have no binding force on their own.
The guidelines on the use of a national valuation database as a risk assessment tool still need
to be further developed based on input to be provided by Members. As part of WCO efforts to
respond to the needs of developing countries with regard to the exchange of valuation information,the
guidelines are intended to cover the creation, maintenance and use of a national valuation database as
a risk assessment tool. So far the WCO Secretariat has developed a questionnaire on various aspects
of the development of a valuation database and has been seeking assistance from Members which
maintain a valuation database. The contribution which WCO will be giving will be completed by the
results of the forthcoming meeting of the Techni cal Committee on Customs Valuation, to be held in
October, and the WCO Symposium on Capacity Building in the WTO Customs Valuation Agreement,
to be held on 17-18 October in Brussels. Once the texts are finalised, the document will need to be
approved by the WCO Policy Commission in December 2002 and will then be presented to the WTO
via appropriate official channels.
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