WORLD TRADE
ORGANIZATIONTN/AG/S/9
30 September 2002
(02-5140)
Committee on Agriculture
Special Session
TARIFF QUOTA ADMINISTRATION:  AUCTIONING
Background Note by the Secretariat1
Introduction1. As requested in the course of the in-depth work of the Special Sessions of the Committee on
Agriculture on tariff quota administration (G/ AG/NG/10, paragraph 5, refers), the present note
examines, in general terms, the question of the status under WTO rules of auctioning tariff quota
import licences by governmental authorities, and outlines elements of possible disciplines regarding
this method of administration.
General
2. As indicated in the most recent version of the Secretariat analytical background note "Tariff
Quota Administration Methods and Tariff Quota Fill", "Auctioning" (defined as:  "Importers' shares
are allocated, or licences are issued, largely on the basis of an auctioning or competitive bid system")
does not figure prominently as a principal method of tariff quota administration, nor at first sight are
overall average fill rates particularly impressive (TN/AG/S/6, dated 22 March 2002, refers).  The
background note TN/AG/S/6 is based on MA:1 and MA:2 notifications, with Members concernedhaving had (and continuing to have) the opportunity to comment on the manner in which their
individual tariff quotas are classified.
3. The main comparative tables on administration methods (Table 3), on simple average fill
rates (Table 5) and on average fill rates for tariff quotas with constant versus increasing quantities
(Table 6) are reproduced in Annex A  hereto.  The number of tariff quotas allocated through
auctioning as the principal administration method increased from 40 to 60 over the period 1995 to
1999 but declined thereafter to 52.  Over this period the total number of tariff quotas covered in the
Table 3 analysis went up from 1,259 in 1995 to 1,377 in 2001.  In addition, there are a limited number
of cases where auctioning is used, or may be used, in conjunction with other tariff quota
administration methods.
4. Over the period 1995 to 2000 the auctioning method recorded the lowest simple average fill
rate in each year (except 1997), with an overall unweighted average fill rate of 36 per cent (see
Table 5).  The relatively low average fill rate for auctioned tariff quotas reflects the fact, amongst
others, that while there are a number of auctioned tariff quotas for which fill rates are close to 100 per
cent, there are many more for which fill rates are erratic and/or are well below the indicated 41 per
                                                     
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice
to the positions of Members or to their rights or obligations under the WTO.  Moreover, the summary on rule
aspects (see paragraph 10 below) does not necessarily reflect the views of the Legal Affairs Division.TN/AG/S/9
Page 2
cent average fill rate for this method of administration (Annex B , "Average Fill Rates by
Administering Member").  As indicated in Table 6, (Annex A), fill rates for the auctioning method in
the case of tariff quotas with constant quantities (mainly "current access" tariff quotas) were, on the
whole, significantly higher (58 per cent versus 29 per cent) than in the case of tariff quotas with
increasing quantities (presumably mainly "minimum access" tariff quotas).
Points and Issues Raised
5. In the course of the Committee on Agriculture's regular review of MA:1 (Tariff Quota
Administration) and MA:2 (Tariff Quota Fill) notifications, as well as in informal Special Sessions
and consultations on this subject, various reservations have been expressed regarding the consistency
with WTO rules of using auctioning and competitiv e bidding as methods for determining to whom the
rights to import products under low-rate tariff quotas are to be attributed.  The main arguments in thisregard are essentially threefold.  Firstly, it is argued that the charge or premium which an importer is
required to pay at auction in order to acquire the right to access a low-rate tariff quota constitutes a
breach of the obligations of the importing Member under Article II:1(b) of the GATT with respect to
the bound in-quota tariff rate for the product in ques tion, or with respect to Article II:1(b) obligations
concerning "other duties and charges".  Secondly, it is argued that the auctioning of access to tariffquotas is contrary to the obligations of the importing Member under the provisions of Article VIII of
the GATT relating to "fees, charges, formalities and requirements imposed by governmental
authorities in connection with importation".  The third argument is that the auctioning of access to
tariff quotas, as well as being highly disruptive of established and valuable commercial marketing
relationships between importers and exporters, can adversely affect the competitive relationshipbetween tariff quota products and like domestic products, thus resulting in less favourable treatment
within the meaning of Article III:4 of the GATT.
6. Proponents of auctioning argue that, since WTO rules do not contain provisions specifically
regulating the internal allocation of access to tariff quotas among importers, Members administering
such quotas are, subject to such general WTO provisions as may be applicable, free to select whatevermethod of internally allocating access to tariff quotas among importers they consider appropriate.  In
this regard, it is considered that the premium or ch arge paid at auction does not fall within the general
rules relating to border measures.  Instead, it is considered that auctioning is a purely internal matter
which is governed, if at all, by the provisions of Article III of the GATT and that, provided there is no
discrimination between external sources of supply of tariff quota products, auctioning is a legitimate,
efficient and equitable method of allocating access to low-rate (high-rent) tariff quotas.  It is pointed
out as well that a major advantage of tariff quota auctioning is that the associated payments constitutea substantial inducement to higher tariff quota fill rates.
7. Proponents of tariff quota auctioning also ar gue, from an economic point of view, that
auctioning is neutral with respect to, or does not increase, economic rents associated with high
out-of-quota/low in-quota tariff concessions, and accordingly that using auctioning to allocate access
to tariff quotas internally, neither restricts access nor does it affect the price which the exporterreceives (namely the world price, at least for that part of agricultural trade comprising bulk and some
semi-processed commodities for which quoted world market prices exist).  On this line of reasoning
comparison is made with the arguably similar situation which occurs, in terms of redistribution of
economic rents, where conventionally allocated tariff quota licences are transferable/tradeable
internally among commercial importers.  On the other hand, it is also pointed out that economic rentsassociated with tariff quotas are retained rather  than re-distributed where access to tariff quota
licences are sold at auction by governmental bodies and that, in any event, what might otherwise be a
rational economic activity on the part of private licence holders (namely rent seeking) cannot
constitute a justification for interventions by governments which are, or may be, inconsistent with the
obligations which they have undertaken as WTO Member s, especially with regard to tariff bindings.TN/AG/S/9
Page 3
Rules Aspects
8. As requested, the Agriculture and Commodities Division has reviewed, in general terms, the
rules aspects of tariff quota auctioning.  For this purpose, the following GATT Articles were
examined, namely:  (i) Article I:1 (General MFN Treatment;  (ii) Article II:1(b), second sentence("other duties and charges on or in connection with importation" of products subject to tariff
concessions), including the Uruguay Round Understa nding on the Interpretation of Article II:1(b);
(iii) Article II:2(c) (which provides for an exception in the case of fees and charges commensurate
with the cost of services rendered in respect of  bound items);  (iv) Article VIII:1(a) (which imposes
additional obligations concerning all fees and charges in respect of both bound and unbound items);
and (v) Paragraphs 2 and 4 of Article III (on national treatment).  In addition, Article 4.2 of the
Agreement on Agriculture (the agriculture-specific prohibition on certain import measures),Article 3.2 of the Agreement on Import Licensing Pro cedures (relating to general non-trade distorting
requirements in the case of non-automatic licensing) and certain other provisions were also considered
in this general context.  (Relevant parts of  these provisions are reproduced in Annex A.)
9. As the WTO Secretariat has no authority to interpret provisions of the WTO Agreements, the
following general summary of the Division's analysis  cannot be regarded definitive in any way and, as
indicated at the outset, this Background Note is without prejudice to Members' rights and obligations
under the WTO.  Whether some of the provisions covered in this summary are capable of being
applicable in conjunction with others, or only in the alternative, is not a matter which is addressed as
such.
10. Unless otherwise indicated, references to "Article" in the following summary relate to
GATT 1994 or 1947 as appropriate:
(a) The MFN provisions of Article I:1 would require a tariff quota auctioning system to
be operated in a way that does not result in discrimination as between like products of
different origin with respect to the broad range of matters covered by that Article.
For example, if an auctioning system were to result in discrimination in respect oflike products of different origin in terms of the incidence of the auction charge, or if
some like products from within a tariff quota covering a number of such products
were to be excluded from the auction, then questions could be raised under the
provisions of Article I:1.
(b) Under the provisions of Article II:1(b), which protect the value of concessions that
have been negotiated by Members with their respective trading partners, there are
distinct ceilings on "ordinary customs duties" (Article II:1(b), first sentence) and on"all other duties and charges of any kind imposed on or in connection with
importation" (Article II:1(b), second sentence).  The charge which a prospective
importer is obliged to pay, through a governmental auctioning system, in order to
obtain a tariff quota import licence has been examined under the second sentence of
Article II:1(b) (see also sub-paragraph (d) below).  A key issue under Article II:1(b),second sentence, would be whether the auction charge, which is incurred prior to
importation, can be considered to be a charge of any kind imposed " in connection
with importation ".  Since the governmental auction system requires the payment of
a charge in order to obtain a tariff quota licence, and since that same licence is an
indispensable condition for subsequent importation under the tariff quota, it could besaid that the necessary connection, or proximity, between the charge and importationTN/AG/S/9
Page 4
exists.  The object and purpose of the Article II:1(b) in preserving the value of tariff
concessions would also be relevant in this regard.2
(c) Assuming, arguendo , that the tariff quota auction charge is imposed "in connection
with importation", the charge would nevertheless only be inconsistent with the ceiling
established under the second sentence of Article II:1(b) if:  (i) the "nature and level"of the charge had not been recorded in the Schedule of the Member concerned
pursuant to the Uruguay Round Understanding on the Interpretation of Article II:1(b)
of the GATT 1994;  and (ii) if the charge  is not "commensurate with the cost of
services rendered" by governmental agencies in making available tariff quota licences
to the individual importers.
3  No auctioning charges were recorded pursuant to this
Understanding in Part I – Section I of WTO Schedules ("Agricultural Products") and,
in terms of the Understanding, the possibil ity of doing so now would appear, for most
practical purposes, to be foreclosed.  On the basis that the main service rendered
under tariff quota auctioning is the issuance of licences, it could be a little difficult to
see how the resulting costs to the impor ter, which vary in amount according to
bidders' expectations regarding future price relationships and from product to product,
could be reconciled with the requirement under the Article II:2(c) exception thatcharges for such services should be "co mmensurate with the cost of the services
rendered".
(d) In the alternative and notwithstanding the foregoing general analysis concerning the
second sentence of Article II:1(b), it is to some extent a moot point whether auction
charges, which might otherwise be perceived as being inconsistent with this secondsentence, could nevertheless be accommodated within the ceiling of the in-quota
tariff binding on "ordinary customs duties" under the first sentence of Article II:1(b).
In other words, where the level of the in-quota tariff binding allows for such action,
the in-quota tariff could be adjusted (wai ved, in whole or in part) by the importing
Member so as to regularise the auctioning charge within the overall level of the tariffbinding.  As a practical matter the scope for such adjustments could well be limited,
particularly where the auction premium absorbs most of the quota rent and the bound
in-quota tariff is relatively low.
(e) Whereas Article II:1(b), in conjunction with the related Uruguay Round
Understanding, establishes permissible limits on the level or amount of other duties
and charges that may be imposed on or in connection the importation of products that
are subject to tariff concessions, Article VIII:1(a) establishes additional obligationswhich are applicable to both bound and unbound items.  The provisions of
Article VIII extend to "fees, charges, formalities and requirements" imposed by
                                                     
2 It may be noted:  (i) that the expression "charges of any kind" in Article II:1(b) has been understood
to be all-inclusive (see:  BISD 3/S, p. 209, at para. 7);  (ii) that GATT Article VIII, which also deals with
"charges … on or in connection with importation", and may thus be regarded as contextually relevant, extends
to charges relating to import licensing;  (iii) that char ges associated with bonding requirements, incurred prior to
importation, have been treated as being "imposed - in connection with importation" for the purposes of thesecond sentence of Article II:1(b) (see: EEC – Minimum Import Prices , BISD 25S/68, at paras. 4.6 and 4.15;
and also, US – Certain EC Products , WT/DS165/AB/R, at para. 100);  and (iv) that the "policy purpose" of
tariff quota auctioning (e.g. non-discrimination in the allocation of tariff quota licences domestically) is not
relevant in determining whether a measure is an internal or a border measure (see:  Argentina – Bovine Hides ,
WT/DS155/R, at para. 11.144).
3 US – Customs User Fees , BISD, 35S/245, adopted 2 February 1988:  " … the ordinary meaning of the
term 'cost of services rendered' would be the cost of  those services rendered to the individual importer in
question.  That meaning was also in keeping with general practice when 'services' are charged for, which is to
charge the same fee for the same service rendered." (at para. 80)TN/AG/S/9
Page 5
governmental authorities in connection with importation, including those relating to
import licensing.  Accordingly, the substantive obligations of Article VIII:1(a) would,
in principle, be applicable not only to auction charges associated with obtaining a
tariff quota licence but also, depending on the facts of a particular case, to any
formalities or requirements associated with the auctioning system itself.  Specifically,the Article VIII:1(a) obligations additional to the "cost of services rendered" standard,
which is common to both Articles II and VIII, are twofold.  These are that charges
shall not represent:  (i) an indirect protection to domestic products;  or (ii) a taxation
of imports for fiscal purposes.  In the case of bound items these additional
Article VIII:1(a) obligations also serve to preserve the value of tariff concessions.
(f) In line with the general reasoning in the GATT Panel report on US – Customs User
Fees  (supra , footnote  3), it could well be that charges that exceed the cost of the
services rendered and are used to finance other, unrelated, governmental activities
may be capable of being described as possibly falling within the scope what
constitutes "taxation of imports for fiscal purposes" in terms of Article VIII:1(a).
(g) There is little if any guidance to be had on the Article VIII:1(a) obligation relating to
"indirect protection to domestic products".  As a practical matter, it could be said thatany protection represented by tariff quota auctioning charges beyond that permitted
under Article II:1(b) is "indirect" and adversely affects the competitive relationship
that would otherwise prevai l between imported and domestic products.  Since tariff
quota auctioning automatically raises the "effective" entry price of tariff quota
imports, domestic products could be said to be indirectly protected by governmentalaction from having to compete with tariff quota products except within a much
narrower price range than would otherwise be the case.  The auctioning system could
also result in indirect protection to domestic products where a post-auction increase in
the world market price of a tariff quota product, in conjunction with the per unit
auction charge, makes imports relatively less competitive (or even non-competitive)compared to the situation that would prevail where other administration methods,
such as first-come first-served, are employed.  This can occur where the domestic
market is effectively insulated from any world price transmission.  This situation is
probably not untypical of many of the markets in which access is governed by tariff
quotas in conjunction with very high or prohibitive out-of-quota tariffs.  Tariff quota
auctioning can also afford indirect protection to domestic products by disrupting
established commercial relationships, including rent-sharing and  market-promotionarrangements,  between external suppliers and their domestic counterparts,
particularly in the case of  "current access" tariff quotas.  The scope for competitively
marketing new products, including products exported by developing countries, could
also be affected.  Another possible form of indirect protection would be where the
proceeds from tariff quota auctioning are channelled, directly or indirectly, todomestic producers of competing products.  The nature of any indirect protection to
domestic products would, therefore, depend on the particular facts in a concrete case,
including the extent to which a particular import market is insulated from world
market price movements.
(h) The Article III national treatment provisions oblige Members to provide equality of
competitive conditions for imported products in relation to domestic products.
Without these level playing field provisions, the competitive advantages enjoyed by
imported products, bound or unbound, in terms of price and other competitive
attributes could easily be thwarted through discriminatory and protective internal
taxes, charges and regulatory measures.  In the Article III context at least two aspectsof tariff quota auctioning could be relevant:  (i) the auction charge itself in terms ofTN/AG/S/9
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Article III:2, which in relevant part provides that products once imported shall not be
subject, directly or indirectly, to internal charges of any kind in excess of those
applied, directly or indirectly, to like domestic products;  and (ii) the requirement
with respect to the auctioning of tariff quota licences as such, in terms of Article III:4,
which provides in relevant part that imported products shall be accorded treatment noless favourable than that accorded to like domestic products in respect of all laws,
regulations and requirements affecting their internal sale, offering for sale purchase,
transportation distribution or use.
(i) With respect to Article III:2, a key or threshold question would be whether the
auction premium can be treated as a charge to which a tariff quota product becomes
"subject", even indirectly, after it has entered the customs territory of the importingmember.
4  On the face of it, there would appear to be no discriminatory charge, actual
or potential, direct or indirect, to which tariff quota products, as imported products,
could be said to become subject or liable to by virtue of the prior governmental
auction.  Rather it would seem that it is tariff quota licences which are subject to the
auctioning charge, with the amount of the charge reflecting anticipated relationshipsbetween internal and external market prices of the tariff quota products concerned.
Tariff quota products, as imported products, may be "affected" by these prior
auctioning charges but that is another matter altogether.
(j) Whether the auctioning of tariff quota licences by governmental authorities can be
regarded as being within the scope of Article III:4 would depend on an examination
of:  (i) whether imported tariff quota products and domestic products are "like
products";  (ii) whether the measure, participation in auctions in order to acquire tariff
quota licences, is a "requirement";  (iii) whether this requirement "affects" the internal
sale, offering for sale, purchase, transportation, distribution or use of imported tariffquota products;  and (iv)  whether such products are thereby afforded "less favourable
treatment" than the treatment accorded to like domestic products.
5  The governmental
auctioning requirement, under which a successful participant is compelled for all
practical purposes to pay an amount corresponding to the quota rent in order to
acquire a tariff quota licence, could be said "to go far beyond the mere import licence
requirements needed to administer the tariff quota".6  Whether imported tariff quota
products would thereby be accorded "less favourable treatment" would involve anexamination of whether, on the facts of a particular case, tariff quota auctioning
modifies the conditions of competition in the relevant market to the detriment of
imported tariff quota products and, in this regard, some of the considerations outlined
in sub-paragraph (g) above could possibly be relevant.
                                                     
4 With regard to Article III:2 generally, see Appellate Body Report in Japan – Alcoholic Beverages II ,
(DSR 1996:I, 97).
5 In this general connection the following points may be noted:  (i) that the term "like products" applies
to products that are in a competitive relationship in the marketplace for the purposes of Article III:4 (seeEC - Asbestos , WT/DS135/AB/R, paras. 99-100);  (ii) that with regard to "requirement", Article III:4 applies not
only to mandatory measures but also to conditions which an enterprise accepts in order to receive an advantage,
including in cases where the advantage is in the form of  a benefit with respect to the conditions of importation
of a product (see Canada – Autos , WT/DS139/R, WT/DS142/R, para. 10.73, and India – Automotive Sector ,
WT/DS146/R, WT/DS175/R(ii), paras 7.18 7 – 198 );  and (iii) with regard to the otherwise relatively broad
scope of the term "affecting", that it is not any "requirements" which are covered by Article III:4, but only thosewhich "affect" the specific transactions, activities and uses relating to products in the marketplace (see US - FSC
(Article 21.5 – EC) , WT/DS108/AB/RW, para. 208).)
6 EC – Bananas III , WT/DS27/AB/R, para. 211.TN/AG/S/9
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(k) Article 4.2 of the Agreement on Agriculture prohibits certain import measures,
including those listed in the footnote to that provision, as well as measures that are
similar thereto.  A question that could arise in connection with this provision of the
Agreement on Agriculture is whether a tariff quota auctioning system could be
regarded as a measure "similar" to one of those specifically mentioned in thefootnote, such as a variable levy.  An argument, in the case of similarity with a
variable levy, would be that tariff quota auctioning can operate systematically to raise
the effective entry price of tariff quota imports to, or close to, either the equivalent of
the out-of-quota tariff-paid price (in the case of world price transmission), or to the
level of the internal market price (in the case of a market in which there is little if any
world price transmission).  The recently circulated Appellate Body report in Chile –
Price Band System would suggest that for a measure, such as the variable charge
associated with a tariff quota auctioning system, to be considered as similar to a
variable levy, the auctioning system, in its specific factual configuration, would have
to share sufficient features with a variable import levy so as to resemble such a
measure, or to "be of the same nature or kind".  The relevant features of a variable
levy which a charge associated with a tariff quota auctioning system would have toshare sufficiently may be summarised, briefly, as follows:  (i) that the variable levy or
charge is assessed upon importation;  (ii) that the measure itself – as a mechanism -
must impose the variability of the charge (variability would be inherent in a measure
if the measure incorporates a scheme or formula that causes and ensures that levies
change automatically and continuously);  and (iii) that, additionally, there is a lack oftransparency and a lack of predictability in the level of charges that will result from
such a measure (these being features that are liable to restrict the volume of imports
and also contribute to distorting the prices of imports by impeding the transmission of
international prices to the domestic market).
7  Consideration of whether a particular
tariff quota auctioning system shares sufficient of these features of a variable levywould involve an empirical approach.
8
(l) Article 3.2 of the Agreement on Import Licensing Procedures provides that
"non-automatic" licensing (where approval of applications for licences is not granted
in all cases) shall not have trade-restrictive or -distortive effects on imports additional
to those caused by the imposition of the restriction.  Were the auctioning of tariff
quota licences to be considered to cons titute "non-automatic licensing" for the
purposes of Article 3.2 of the Import Licensing Agreement (and no view is being
expressed on this point), then some of the considerations outlined in sub-paragraph
(g) above could be relevant in this context as well.
(m) The foregoing summary analysis is to a certain extent selective.  It focuses mainly on
WTO/GATT provisions which have been to the forefront of the discussions andconsultations on this subject.  Other provisions are or may also be relevant.  For
example, auctioning of tariff quotas by state trading enterprises could possibly give
rise to questions, with respect to the leve l of the resulting mark-up relative to the
bound duty paid price, under GATT Article II:4.  Other relevant provisions not
included in this analysis would includ e GATT Article XXIII:I(b) (Non-violation
nullification and impairment), as well as those of the General Agreement on Trade in
Services.
                                                     
7 WT/DS207/AB/R, dated 23 September 2002, (yet to be adopted) paras. 227, 232-234 and 239.
8 Ibid., para. 226.TN/AG/S/9
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Elements of Possible Disciplines on Tariff Quota Auctioning
11. In response to the request made in this regard, Annex D to this Background Note, sets out
suggested elements of possible disciplines on tariff quota auctioning and related conditions for
consideration as appropriate.TN/AG/S/9
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ANNEX A
Tariff Quota Administration and Tariff Quota Fill
(TN/AG/S/6):  Selected Tables
Table 3: Tariff quotas by principal administration method, 1995-2001
Number of tariff quotas
1995 1996 1997 1998 1999 2000 2001
Applied tariffs 654 642 673 665 656 639 631
First-come, first-served 101 103 147 147 146 153 153
Licences on demand 290 299 302 298 310 297 324
Auctioning 41 39 59 59 59 52 52
Historical importers 68 82 88 97 97 119 100
Imports undertaken by state trading enterprises 22 22 20 19 20 20 21
Producer groups or associations 8877798
Other 1 2 1 377798
Mixed allocation methods 54 55 58 59 60 60 60
Non-specified 9 1 066 1 47 2 0
Total number of applicable tariff quotas 1259 1273 1367 1364 1376 1365 1377
Table 5: Tariff quotas - simple average fill rates by principal administration method,
1995-2000
Simple average fill rates (%) Number of tariff quotas included Principal administration
method 1995 1996 1997 1998 1999 2000 1995 1996 1997 1998 1999 2000
Applied tariffs 71 65 65 70 70 68 489 489 525 502 383 310
First-come, first-served 56 61 47 51 64 60 87 95 144 144 76 51
Licences on demand 58 57 54 54 51 51 266 289 277 273 251 236
Auctioning 26 32 51 34 23 32 39 36 55 43 35 11
Historical importers 91 77 73 69 63 58 62 79 84 93 60 66
Imports by state trading
enterprises81 83 90 91 71 72 22 22 20 19 8 8
Producer groups/associations 74 53 85 78 86 83 8 8 7 7 4 6
O t h e r 5 66 19 39 19 99 51 01 1 5 5 4 6
Mixed allocation methods 74 83 84 84 73 44 44 45 43 43 23 5
Non-specified 100 44 57 44 41 86 1 7 6 5 5 1
Overall 66 63 62 63 62 60 1028 1081 1166 1134 849 700TN/AG/S/9
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Table 6: Constant vs. increasing tariff quotas - Simple average fill rates by principal
administration method, 1995-2000
Simple average fill (%)
Constant quantities Increasing quantitiesPrincipal administration
method
1995 1996 1997 1998 1999 2000 1995 1996 1997 1998 1999 2000
Applied tariffs 73 66 67 71 69 67 64 58 56 68 74 70
First-come, first-served 67 70 49 54 70 67 37 42 40 45 53 48
Licences on demand 69 65 66 66 63 59 47 49 43 41 40 42
Auctioning 46 93 85 46 15 65 22 22 46 32 24 28
Historical importers 96 84 84 74 68 68 85 68 58 62 56 45
Imports by state trading
enterprises100 100 99 100 100 100 76 79 88 88 61 63
Producer groups/associations 74 53 85 78 86 83
Other 100 80 100 100 100 100 27 50 84 77 99 91
Mixed allocation methods 74 84 80 82 65 73 74 82 87 86 78 1
Non-specified 100 51 57 44 41 86 -
Simple average fill rate 73 68 66 68 67 65 55 54 53 55 51 51
Number of tariff quotas included 650 680 750 744 556 449 378 401 416 390 293 251TN/AG/S/9
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ANNEX B
Tariff Quota Auctioning by Member
Average Fill Rates by Administering Member
A = Number of tariff quotas auctioned
B = Average fill rates
1995 1996 1997 1998 1999 2000 2001
ABABABABABABAB
Costa Rica 8 14 8 5 8 5 8 15 8 13 8 n.a. 8 n.a.
Ecuador 8 13 8 0
El Salvador - - 1 n.a. 1 n.a.
I c e l a n d 1 22 51 23 41 23 91 24 01 24 11 24 21 2 n . a .
Korea 7 69 6 61 6 61 4 33 4 52 4 34 4 n.a.
N o r w a y 1 1 61 12 11 11 31 14 31 13 21 13 21 1 n . a .
Panama 18 89 12 n.a. 12 46 12 n.a. 12 n.a.
Switzerland 2 50 2 98 4 99 4 97 4 98 4 99 4 99
Thailand 1 0
T o t a l 4 12 63 93 25 95 15 93 45 93 45 24 35 2 ( 9 9 )
Source:  TN/AG/S/6:  Tables B.1 to B.6 and Tables B.19 to B.24.TN/AG/S/9
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ANNEX C
Extracts from Relevant WTO Provisions1
GATT Article I:1
"1. With respect to customs duties and charges of any kind imposed on or in
connection with importation or exportation or imposed on the international transfer
of payments for imports or exports, and with respect to the method of levying such
duties and charges, and with respect to all rules and formalities in connection with
importation and exportation, and with respect to all matters referred to in paragraphs2 and 4 of Article III,* any advantage, favour, privilege or immunity granted by any
Member to any product originating in or destined for any other country shall be
accorded immediately and unconditionally to the like product originating in or
destined for the territories of all other Members."
GATT Article II:1(a) and (b)
"1.(b) The products described in Part I of the Schedule relating to any Member,
which are the products of territories of other Members, shall, on their importationinto the territory to which the Schedule re lates, and subject to the terms, conditions
or qualifications set forth in that Schedule, be exempt from ordinary customs duties
in excess of those set forth and provided therein.  Such products shall also be
exempt from all other duties or charges of any kind imposed on or in
connection with the importation in excess of those imposed on the date of this
Agreement or those directly and mandatorily required to be imposed thereafter
by legislation in force in the importing territory on that date ."  (emphasis added)
Understanding on the Interpretati on of Article II:1(b) of the Ge neral Agreement on Tariffs and
Trade 1994
"Members hereby agree  as follows:
"1. In order to ensure transparency of the legal rights and obligations deriving
from paragraph 1(b) of Article II, the nature and level of any "other duties or
charges" levied on bound tariff items, as referred to in that provision, shall berecorded in the Schedules of concessions annexed to GATT 1994 against the tariff
item to which they apply.  It is understood that such recording does not change the
legal character of "other duties or charges".
"2. The date as of which "other duties or charges" are bound, for the purposes of
Article II, shall be 15 April 1994.  "Other duties or charges" shall therefore be
recorded in the Schedules at the levels applying on this date.  At each subsequent
renegotiation of a concession or negotiation of a new concession the applicable date
for the tariff item in question shall become the date of the incorporation of the new
concession in the appropriate Schedule.  However, the date of the instrument bywhich a concession on any particular tariff item was first incorporated into
                                                     
1 Ad Notes omitted.TN/AG/S/9
Page 13
GATT 1947 or GATT 1994 shall also continue to be recorded in column 6 of the
Loose-Leaf Schedules.
"3. "Other duties or charges" shall be recorded in respect of all tariff bindings.
"4. Where a tariff item has previously been the subject of a concession, the level
of "other duties or charges" recorded in the appropriate Schedule shall not be higher
than the level obtaining at the time of the first incorporation of the concession in that
Schedule.  It will be open to any Member to challenge the existence of an "other duty
or charge", on the ground that no such "other duty or charge" existed at the time of
the original binding of the item in question, as well as the consistency of the
recorded level of any "other duty or charge" with the previously bound level, for aperiod of three years after the date of entry into force of the WTO Agreement or
three years after the date of deposit with the Director-General of the WTO of the
instrument incorporating the Schedule in question into GATT 1994, if that is a later
date.
"5. The recording of "other duties or charges" in the Schedules is without
prejudice to their consistency with rights and obligations under GATT 1994 other
than those affected by paragraph 4.  All Members retain the right to challenge, at any
time, the consistency of any "other dut y or charge" with such obligations.
"6. For the purposes of this Understanding, the provisions of Articles XXII and
XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement
Understanding shall apply.
"7. "Other duties or charges" omitted from a Schedule at the time of deposit of
the instrument incorporating the Schedule in question into GATT 1994 with, until
the date of entry into force of the WTO Agreement, the Director-General to the
CONTRACTING PARTIES to GATT 1947 or, th ereafter, with the Director-General
of the WTO, shall not subsequently be added to it and any "other duty or charge"
recorded at a level lower than that prevailing on the applicable date shall not be
restored to that level unless such additions or changes are made within six months of
the date of deposit of the  instrument.
"8. The decision in paragraph 2 regarding the date applicable to each concession
for the purposes of paragraph 1(b) of Article II of GATT 1994 supersedes the
decision regarding the applicable date taken on 26 March 1980 (BISD 27S/24)."
GATT Article II:2(c)
"2. Nothing in this Article shall prevent any Member from imposing at any time
on the importation of any product: ..... (c) fees or other charges commensurate with
the cost of services rendered."
GATT Article II:4
"4. If any Member establishes, maintains or authorizes, formally or in effect, a
monopoly of the importation of any product described in the appropriate Schedule
annexed to this Agreement, such monopoly shall not, except as provided for in that
Schedule or as otherwise agreed between the parties which initially negotiated the
concession, operate so as to afford protection on the average in excess of the amountTN/AG/S/9
Page 14
of protection provided for in that Schedule. The provisions of this paragraph shall
not limit the use by Members of any form of assistance to domestic producers
permitted by other provisions of this Agreement.*"
GATT Article III:1, 2 and 4
"1. The Members recognize that internal taxes and other internal charges, and
laws, regulations and requirements affecting the internal sale, offering for sale,
purchase, transportation, distribution or use of products, and internal quantitative
regulations requiring the mixture, processing or use of products in specified amounts
or proportions, should not be applied to imported or domestic products so as toafford protection to domestic production.*
"2. The products of the territory of any Member imported into the territory of
any other Member shall not be subject, directly or indirectly, to internal taxes or
other internal charges of any kind in excess of those applied, directly or indirectly, tolike domestic products. Moreover, no Member shall otherwise apply internal taxes or
other internal charges to imported or domestic products in a manner contrary to the
principles set forth in paragraph 1.*
"4. The products of the territory of any Member imported into the territory of
any other Member shall be accorded treatment no less favourable than that accorded
to like products of national origin in respect of all laws, regulations and requirements
affecting their internal sale, offering for sale, purchase, transportation, distribution or
use. The provisions of this paragraph shall not prevent the application of differential
internal transportation charges which are based exclusively on the economicoperation of the means of transport and not on the nationality of the product."
GATT Article VIII:1(a) and 4
"1.(a) All fees and charges of whatever character (other than import and export
duties and other than taxes within the purview of Article III) imposed by Memberson or in connection with importation or exportation shall be limited in amount to the
approximate cost of services rendered and shall not represent an indirect protection
to domestic products or a taxation of imports or exports for fiscal purposes.
"4. The provisions of this Article shall extend to fees, charges, formalities and
requirements imposed by governmental authorities in connection with importation
and exportation, including those relating to:
(a) consular transactions, such as consular invoices and certificates;
(b) quantitative restrictions;(c) licensing;
(d) exchange control;
(e) statistical services;
(f) documents, documentation and certification;
(g) analysis and inspection; and(h) quarantine, sanitation and fumigation."TN/AG/S/9
Page 15
Agreement on Agriculture:  Article 4.2
"Members shall not maintain, resort to, or revert to any measures of the kind which
have been required to be converted into ordinary customs duties1, except as
otherwise provided for in Article 5 and Annex 5.
1 These measures include quantitative import restrictions, variable import levies,
minimum import prices, discretionary import licensing, non-tariff measures
maintained through state-trading enterprise s, voluntary export restraints, and similar
border measures other than ordinary custom s duties, whether or not the measures are
maintained under country-specific deroga tions from the provisions of GATT 1947, but
not measures maintained under balance-of-p ayments provisions or under other general,
non-agriculture-specific provisions of GAT T 1994 or of the other Multilateral Trade
Agreements in Annex 1A to the WTO Agreement."
Agreement on Import Licensing Procedures:  Article 3.2
"2. Non-automatic licensing shall not have trade-restrictive or -distortive effects
on imports additional to those caused by the imposition of the restriction.
Non-automatic licensing procedures shall correspond in scope and duration to the
measure they are used to implement, and shall be no more administratively
burdensome than absolutely necessary to administer the measure."TN/AG/S/9
Page 16
ANNEX D
Tariff Quota Auctioning
Possible Disciplines
The elements of possible disciplines outlined below address how the efficiency of auctioning
might be combined with principles of transparency and predictability in order to ensure that the access
opportunities represented by a tariff quota commitments are effectively made available from the
beginning of the year to which the commitment relates.  These suggested elements are by no means
exhaustive of the possibilities in this regard and are intended to be without prejudice to the positionsof Members on what, if any, disciplines might be developed on tariff quota auctioning:
(a) Methods of auctioning
(E.g. whether all methods of competitive bidding should be employable, or whether public,
open and transparent bidding methods, including equi valent electronic methods, would be obligatory.)
(b) Supervision and transparency of auctions
(E.g. tariff quota auctions to be conducted and supervised by an appropriate non-
governmental independent person or body.  An in dependent auctioneer's functions would include
publication (including via a dedicated internet website) of information concerning auctions to be held(such as, advance public notice of details of each auction with respect to date, time and place of the
auction, registration of bidders, conditions of payment, details of tariff quotas to be auctioned) and
prompt publication of the results of each auction with respect to charges paid and quantities
transacted, including commercial addresses of successful bidders.)
(c) Auction participants
(E.g. participation in auctions to be open to:  commercial importers;  domestic users at any
stage of the commercialisation of the tariff quot a products concerned, including end-users;  and
representatives or agents of foreign suppliers of the products concerned.)
(d) Frequency and timing of auctions
(E.g. principle annual auction to be held not less than [three] months before the opening of the
calendar or other "year" to which the tariff quota commitment relates.  Tariff quotas forfeited under
paragraph (g) below to be re-auctioned promptly, at ad hoc auctions or at the next principal auction.
Pluri-annual auctions to be an option, with the standard procedures being applicable mutatis
mutandis .)
(e) Auctionable tariff quotas
(E.g. all scheduled tariff quotas, except tariff quotas not previously subject to auctioning in
respect of which average (1999-2001) notified fill rates (MA:2) were in excess of, say, [70] per cent.)TN/AG/S/9
Page 17
(f) Product coverage of tariff quota licences
(E.g. tariff quota licences to be valid for the importation of all or any of the products covered
by a particular tariff quota commitment at the option of the successful bidder.)
(E.g. single-product tariff quotas may be auctioned in lots but of minimum commercial size.)
(g) General provisions regarding auctioned tariff quota licences
(E.g. tariff quota licences to be made available following conclusion of an auction and to be
valid for importation from the first day of the year concerned;  no domestic purchasing or seasonal
marketing requirements to be imposed which would prevent any person or body to which a tariff
quota licence has been awarded at auction from utilis ing fully the total quantity or value concerned;
tariff quota licences which remain unused or substantially under-utilised by a certain date and forwhich no firm contract for delivery within the year concerned can be demonstrated, to be
re-auctioned, subject to exceptions as appropriate ( force majeure ).)
(h) Special and differential treatment
(E.g. Members shall respond promptly to specific requests by developing country Members
for information regarding the auction process or for assistance in establishing or facilitating contacts
between exporters in developing countries and importers, including end users, of tariff quota products
subject to auctioning of particular export interest to developing countries.)
(i) Financial Aspects
(E.g. financial costs associated with independent auctioneers, publication and transparency
requirements, and of services provided in assisting developing countries and their exporters, to be a
first charge on revenues derived from tariff quota auctions.  Revenues in excess of such costs not to be
transferred, directly or indirectly, to producers of tariff quota products, nor to be used for other
protective purposes.)
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