WORLD TRADE
ORGANIZATIONG/C/W/423
1 October 2002
(02-5251)
Council for Trade in Goods Original:  English
TRADE FACILITATION : GATT ARTICLE V
Communication from the Republic of Korea
The following communication, dated 30 September 2002, has been received from the
Permanent Mission of Korea.
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I. Introduction
1. As the volume of long-range international trade has drastically increased, transit traffic has
become an issue of great importance in the discussion on trade facilitation.. However, discussions
with exporters and importers of various countries have revealed that customs procedures for transit
traffic function as a major trade barrier. Traders face various difficulties, particularly in the form ofdifferent customs policies and procedures, excessive procedural requirements, including redundant
documentation and inspection and imposing an undue financial burden.
2. Article V of the GA TT sets out basic principles regarding transit traffic, but it does not
provide detailed guidelines for applying these principles in practice. Furthermore, it does not give due
consideration to the different risk levels involved in transit traffic, in particular, between transit with
and without transshipment.
3. The Republic of Korea is of the view that improving the implementation of Article V of the
GATT is a vital component of trade facilitation. This submission presents Korea’s views on the
implementation of Article V and some suggestions fo r its improvement to better reflect the current
global trading environment. Korea notes that the suggestions contained in this submission are closelylinked to or derived from the proposals relating to Article VIII of the GA TT. Korea reserves the right
to amend or supplement the suggestions outlined here at a later stage.
II.  Implementation of Article V of the GATT
4. Article V of the GA TT promotes the principl es of non-discrimination and the freedom to use
the most convenient route for goods in transit between the originating and the destination countries.
Article V also prohibits any unnecessary delays or restrictions and unreasonable charges against
traffic in transit.
5. However, there are not yet concrete guidelines on how the principles stipulated in Article V ,
in particular the prohibition of unnecessary restrictions and charges, should be applied. In this light,
discussions on Article V should focus on developing a common understanding on how the principles
set out therein should be applied in practice.
6. Goods in transit are not intended for commercial consumption in the transit country.
Therefore, Korea is of the view that goods in transit should not be subject to excessive documentaryG/C/W/423
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requirements, unreasonably high fees or charges for services, or excessive physical inspections. In this
regard, Members should provide for simplified customs procedures and seek ways for increased
cooperation among themselves to facilitate transit traffic.
7. Members should also consider the need to provide technical assistance and capacity building
measures to developing country Members in order for them to build the necessary infrastructure and
service facilities, and integrate various regulations in order to facilitate the transit of goods.
III. Suggestions for Improving the Implementation of Article V
A. Cooperation
8. If goods in transit pass through a number of sovereign territories before reaching the final
destination, they usually pass through different systems of customs procedures for each territory.
Different requirements as well as repeated procedures for each territory place great burden on traders
in terms of documentation, costs and time involved in repeated physical inspections.
9. A mechanism to institutionalize cooperation  among the Members’ customs authorities
could be considered. It would deal with the coordination of transit policies and the sharing of
information on goods in transit among WTO Members.
10. Harmonization of transit policies  among WTO Members can facilitate transit traffic to a
considerable degree because traders need comply with only one set of customs requirements.
Efficiency can be increased since there would no longer be a need for the traders to comply with a
number of different customs requirements, which causes delay and increases cost.
11. Sharing of information  among the customs authorities of WTO Members whose territory
goods pass through can relieve traders of the burden of providing the same information to different
customs offices or going through repetitive procedures and thus be instrumental in reducing
paperwork and costs for traders.
B. Simplification
12. Apart from the measures proposed for the improvement of Article VIII of the GA TT, a further
simplification of customs procedures for goods in transit should be instituted.  Documentary
requirements and physical inspection for transit traffic should be further simplified in due
consideration that transit traffic usually poses lower risks than final destination goods. “Authorization
of a consignor” can be one method of simplifying customs requirements for goods in transit and
setting appropriate risk-based customs procedures.
C. Standardization
13. Documentation data sets should be standardized internationally while reflecting risk elements
in terms of transit.  The uniformity of data sets can improve risk management, and can also facilitatethe use of electronic systems for customs procedures.
D. Transparency
14. Notification by members of any changes of fees and charges for transit traffic would be
helpful. Fees and charges for transit traffic themse lves would still be subject to the discretion of each
WTO Member.  Notification measures can serve to facilitate closer coordination among Members,
and enhance transparency of customs procedures. The measures can also help traders by increasing
predictability.G/C/W/423
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E. Differentiation of Transshipment and Non-Transshipment
15. Some goods remain in the same mode of transportation when passing through customs
territories.  Others, though, may be transshipped to other modes of transportation during the process
of transit.  Article V of the GATT does not currently make a distinction between these two cases.Article V , paragraph 1 states:
Goods (including baggage), and also vessels and other means of transport, shall be
deemed to be in transit across the territory of a contracting party when the passage across
such territory, with or without trans-shipment, warehousing, breaking bulk, or change in
the mode of transport, is only a portion of a complete journey beginning and terminating
beyond the frontier of the contracting party across whose territory the traffic passes.
16. However, it may be useful to have different requirements for goods in transit without
transshipment than for goods in transit with transshipment. In the case of maritime countries, if goods
in transit do not involve transshipment into different means of transportation within the Member
country, a simple goods declaration and fairly simple set of service fees may be sufficient for transitprocedures since there is only a minimal risk that the goods may be released into the transit country,
and the services that the transit country authorities provides will be relatively small.
17. On the other hand, for goods in transit which involve transshipment within the transit country,
there may be a need for additional inspection and security measures to prevent the smuggling ofgoods in transit into the transit country as well as other illegal activities during the process of
transshipment. It seems reasonable for the transit countries to require a minimal amount of additional
paperwork and service fees.
18. In the case of landlocked countries, transit traffic, which may or may not involve trans-
shipment, may cross many borders.  Given the higher risk of the illegal release of transit goods, it may
be necessary for these landlocked countries to implement more sophisticated risk management
procedures compared to maritime countries that do not necessarily require border-crossing transits.
19. Therefore, it may be useful to discuss the different requirements in each of these
circumstances, and devise appropriate customs measures for each of these cases in order to minimize
the burdens on the traders engaged in transit traffi c, while still maintaining a reasonable degree of
safety and order for the countries that these goods pass through.
IV .  Technical Assistance and Capacity Building
20. Korea believes that proper technical assistance and capacity building measures should be
provided to support the developing country Members to implement some of the above-mentioned
suggestions.  To facilitate transit traffic, technical assistance should be expanded to support
developing countries in their efforts to integrate their regulations, modernize infrastructure and service
facilities for transit (such as road, rail, airport and waterway facilities), and automate their transit
systems.
21. Technical assistance can be provided through various means such as workshops, training
programs, or direct financial assistance to install electronic data systems.  Such technical assistance
can substantially improve the capacity of developing countries to expedite the processing of goods in
transit.
22. Best practices or a model transit system, which developing countries can easily introduce,
should be developed. Longer implementation periods according to the features of the system can be
considered as special and differential treatment.G/C/W/423
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23. In order to provide appropriate technical assistance, an understanding of developing
countries’ needs and cap abilities in terms of transi t measures are also essential.  Therefore, developing
countries should take steps to determine in which areas they most need technical assistance.
V .  Conclusion
24. There is also a great scope for further discussion and building of understanding on various
topics in the context of GATT Article V.  In particular, the discussion on issues such as
standardization and simplification might cover some institutional arrangements to move forward in
the longer term, since the matters are of a technical nature and require periodic review to
accommodate the changing realities. Existing interna tional agreements or studies such as the Kyoto
Convention and the ASEAN Framework Agreement on the Facilitation of Goods in Transit can be
good starting points for future discussion.
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