WORLD TRADE
ORGANIZATIONG/C/W/422
30 September 2002
(02-5227)
Council for Trade in Goods Original:  English
WTO TRADE FACILITATION - STRENGTHENING WTO RULES ON
GATT ARTICLE V ON FREEDOM OF TRANSIT
Communication from the European Communities
The following communication, dated 30 September 2002, has been received from the
Permanent Mission of the European Communities.
_______________
1. Introduction
1. The WTO's work on Trade Facilitation in the last three years has established an important
body of evidence on the benefits of simplifying import and export procedures and on ensuring
transparency for trade regulations.
2. In the framework of  the DDA work on Trade facilitation, the EC have already submitted
papers on Article VIII and Article X of GATT. In this paper the EC address the third leg of the Doha
mandate on trade facilitation: GATT Article V on Freedom of Transit. It should be noted that, while it
is possible to consider Articles V, VIII and X independently, they are in fact closely interlinked.
Several of the measures proposed by the EC and other delegations to strengthen Article VIII and
Article X could also be extended to transit operations (since transit involves   a specific form of
customs treatment). For example, proposals made in the context of GATT Article VIII to useinternational standards, to simplify or minimise  trade documentation, or to clarify the scope and
incidence of permissible fees and charges
1, are also relevant to transit operations and procedures.
3. Other proposals made already in the context of the discussions on GATT Articles VIII and X
are also likely to have a “knock on effect” that could improve conditions for transit. This would be thecase, for example, of proposals to improve transparency of customs regulations, to provide for regular
consultation with interested parties on customs operations
2, to use information technology as far as
possible in the application of customs procedures, or to introduce systems of risk assessment in order
to improve controls over  consignments passing international frontiers. Proposals to improve the
quality and quantity of trade related technical assistance are also obviously relevant to transit, in caseswhere Members lack adequate domestic infrastructure.
4. Coherence with the provisions of GATT Articles VIII and X, and the various proposals
already made to clarify or improve them, should ther efore be kept in mind when addressing Article V.
                                                     
1 As proposed in the EC's submission on GATT Article VIII, ref: G/C/W/394 of12 July 2002.
2 As proposed in the EC's submission on GATT Article X ref: G/C/W/363 of 12 April 2002.G/C/W/422
Page 2
2. The importance of transit as an element in trade facilitation
5. Discussions held in the WTO Trade Facilitation Symposium in 1998, at other international
events such as the recent UN-ECE conference, and in the CTG itself, have seen support from a large
number of governments and business sectors to address transit in the WTO. Traders seek, as a matter
of priority, simple, transparent international tran sit regimes, that correspond to the just-in-time
business methods and integrated multi-country supply chains increasingly applied throughout the
world. As international trade increases, the volume of transit operations does likewise, making it all
the more essential to review or improve transit an d to ensure coherence and co-ordination between the
actions taken in the various international fora dealing with transit related matters.
6. At the same time, Members must ensure that any measures taken to simplify transit
operations, or indeed any other customs procedures, maintain the level of, or indeed improvenecessary control functions. It would not be acceptable if important public policy goals related for
example to health, safety, the environment, prevention of  fraud, or national security, were in any way
compromised by transit facilitation. Instead, a virtuous relationship between greater facilitation,
greater compliance by traders, and improved controls, should be sought.  In pursuing the discussions
on Article V and any possible future improvements to it, full weight should therefore be given to theneed to ensure these objectives are met and that in this respect the exceptions provided for in GATT
Articles XX and XXI  are fully applicable and relevant and  should  therefore  be kept in view.
7. Ease of transit is, for obvious reasons, of high interest to landlocked WTO Members, many of
whom are developing countries. They are by definition more dependent on transit to access markets.They generally have to rely on the possibilities for transiting through neighbouring countries, either
by road, rail or by ship. A number of such Members have on various occasions underlined the fact
that the expense of or inadequate possibilities for transit constitutes an important impediment to the
development of their trading (both import and export) potential. A recent World Bank study
3 has
highlighted – and quantified - the way in which the transport and transit costs faced by landlockedcountries, irrespective of the physical distance their exports have to travel, can significantly impede
their trade performance and overall economic growth. Transit is therefore a key issue for such
Members.
8. The discussions held so far have also shown however that facilitation of transit is of interest
not only to landlocked WTO Members. Traders in all WTO members, for whom the most cost-
effective way of exporting goods to their final destination will be to cross the territory of anotherWTO Member, have an obvious interest in securing the freedom of transit.
9. The facilitation of transit is also of interest to countries of transit themselves, in the broader
context of ensuring harmonious relations with their neighbouring countries (e.g. in their capacity of
point of entry for landlocked countries), as well as being a key element in regional level economicintegration and trade expansion. In the absence of an agreed transit regime, such integration, and the
increase of trade that flows from it, is less likely to be achieved.  Several studies, by the World Bank,
the UN and others, have pointed to the beneficial effects on the economy of transiting countries of
facilitating transit.  Transit operations across a Member’s territory can also contribute to economic
activity and to the maintenance of well-functioning and up-to-date infrastructure networks.
10. The usefulness of establishing good conditions for transit is documented by the various
agreements on transit which have been concluded on a regional or bilateral basis, e.g. the TIR
                                                     
3 Limão N. & Venables A. (2000), “Infrastructure, Geographical Disadvantage, Transport Costs and
Trade”, mimeo, World Bank.G/C/W/422
Page 3
convention under the auspices of the UN/ECE, th e Common Transit Convention between the EU, the
EEA and the Visegrad countries or the ASEAN Framework Agreement on the facilitation of goods in
transit. The World Bank study cited earlier quantifies the trade and economic advantages enjoyed by
countries operating effective transit regimes between them.
3. Key elements of  GATT Article V
In addition to the basic obligations of non-discrimination, Article V contains a number of
important elements aiming at ensuring, consistent with other public policy goals , the smooth flow of
trade across borders for the purpose of transit .  Notably:
• It provides a broad definition of "Traffic in transit" by making it encompass not only the goods
transported, but also the vessels or other means of transport. This potentially is a far reachingprovision in terms of the commitment it establishes for WTO-members to ensure that other WTO
members are given satisfactory conditions of transit through their territory. (Article V,paragraph 1).
• It provides a general obligation for WTO members to facilitate transit rather  than just to tolerate
transit by obliging members to provide freedom of transit through their territories, via the routesmost convenient for international transit, for traf fic in transit to or from the territory of other
contracting parties (Article V, paragraph 2).
• It emphasises the principle of non-discrimination in the transit context by prescribing that, for
traffic in transit, there should be no discrimination based on the origin of the transit or on the
mode of transit (Article V, paragraph 2).
• It specifies the obligation of parties to ensure that transit is not subject to any unnecessary delays
or restrictions and restricts the charges that can be imposed in respect of transit (Article V,
paragraph 3).
• It underlines that charges should be commensurate to services rendered stressing that any charges
and regulations related to the transit shall be reasonable, having regard to the conditions of transittraffic (Article V, paragraphs 3 and 4).
• It underscores the importance of WTO members granting MFN treatment in respect to all charges,
regulations and formalities in connection with transit (Article V, paragraph 5).
• It underlines the importance of respecting prin ciple of non-discrimination between goods that
have gone through transit and those which have been imported directly (Article V, paragraph 6).
4. Current problems in relation to transit
While the basic obligations in Article V aim at ensuring optimal conditions for transit, there
are indications that, on the ground, real freedom of transit is often absent or compromised. The
conditions of international trade and the requirements for transit have changed since Article V was
originally formulated in the late 1940s, and comments from business, international organisations and
WTO-members, in particular developing ones, have suggested a number of obstacles andshortcomings in relation to transit
4. The EC’s own consultations with both European and non-
                                                     
4 WTO TRADE FACILITATION SYMPOSIUM 9-10 March 1998 , Report by the WTO Secretariat G/C/W/115
and the  International Forum on Trade Facilitation: 29 - 30 May 2002: For more information see
http://www.unece.org/trade/forums/forum02/index.htmG/C/W/422
Page 4
European business groups,  have also highlighted se veral areas where, in their view, transit operations
could be improved, potentially  through further clarifying or strengthening the provisions of GATT
Article V.
Without prejudice to whether the WTO in general, or Article V in particular  represents in all
cases the appropriate forum in which to find solutions , among the problems identified are:
(a) Non-standardised documentation requirements, excessive documentation and physical checks
on transiting goods, vehicles and vessels, notwithstanding the provision in GATT Article V to
avoid this.
(b) Non-application of international, regional or bilateral instruments for transit such as the TIR
system.
(c) More (too) onerous customs requirements for transiting cargoes than for final destination
imports.
(d) Unjustifiable restrictions on transiting vessels, vehicles or their drivers, and unwarranted
restrictions on the entry of non-national transport operators.
(e) Unjustifiable restrictions on the nature of goods that are allowed to transit.(f) Measures equivalent to restrictions on transit, in the sense that aspects of the transit regime
are applied in such a way as to restrict the access of non-domestic operators to transit
schemes. Examples include:, difficulty with the return, at the point of exit, of cash guarantees
posted at the point of entry; imposition of disproportionate guarantees imposed in respect of
the financial stakes represented by the consignment; the impossibility for operators to start a
transit operation without being resident in the country transited, unwarranted requirements forconsignments to be transported under escort.
(g) Lack of willingness or refusal on the part of transiting countries to co-operate with exporting
or importing countries, e.g. in establishing regional transit corridors supported by regional
transit authorities.
(h) Inadequate infrastructure which inhibits the inability of some Members – especially
landlocked developing country Members – to participate effectively in international trade, and
a concomitant need for technical assistance and investment to build up domestic
infrastructure. It is worth noting that the WSSD in Johannesburg also underlined the
importance of supporting the development of transport infrastructures, Implementation of this
commitment will be an important measure to improve transit arrangements for land lockedMembers and others.
Without prejudice to the precise legal scope of GATT Article V, the EC’s preliminary
conclusion is that there may indeed be scope for clarifying and strengthening the provisions of GATT
Article V to better facilitate international trade and that the Doha mandate offers an importantopportunity to do this. Again, it must be stressed that in pursuing this work, the right of WTO
members to continue  to pursue legitimate public policy objectives, (including those specified in
GATT Articles XX and XXI), must in no way be compromised.
                                                                                                                                                                    G/C/W/422
Page 5
5. Proposals to clarify and improve  GATT Article V
In light of the above, the EC invites WTO members to consider the following issues that
would be relevant in any possible clarification or improvement of the provisions of Article V.
A. Ensuring Non Discrimination between modes of transport in relation to transit procedures
GATT Article V specifies that there should be no discrimination in treatment of traffic in
transit via whatever mode (road, rail, inland waterway, air etc). It is natural however that in most
countries it will be easier to transport goods via particular transport modes, as a consequence of
normal commercial behaviour and the legitimate transport policy choices of individual countries (e.g.
environment, health and safety). We therefore believe  it is worth discussing further how, in practice,
the requirement for non-discrimination between different transit modes is applied, in transit
procedures, documentary and data requirements in view of Members’ need for flexibility in terms oftransport and other policy choices. In addition to “classic” modes of transit such as air, road, rail or
boat, it should be noted that the carriage e.g. of oil and gas and other products via pipelines or other
means may also fall within the scope of transit. WTO Members may wish to evaluate whether
freedom of transit for such goods is effective and whether there is any need or scope for reassessing
GATT Article V to take account of the special nature of this form of transit.
B. Ensuring Non Discrimination between Individual Carriers in relation to transit procedures
As noted above, specific problems have been cited by WTO members regarding refusal to
allow transit of non-national transport operators. Examples include: refusal by border authorities of
licences and certificates relating to the vehicle used to transport the goods by one country's truck
companies seeking to transit the territory of another country to get to the coastal port; refusal of entry
to drivers from one country carrying out a transit operation; refusal to allow transit by operators not
established in the country where the transit it taking place.  If not stemming from the afore mentioned
exceptions permitted by the GATT, such restrictions may be in conflict with GATT V, paragraph 2, inwhich case it may be necessary to examine ways in which full and faithful implementation of the
provision can be ensured. Perhaps it would be possible to draw up some illustrative guidance as to
measures that would  or would  not be considered consistent with GATT V, paragraph 2. However, to
the extent that any such measure operates as an unwarranted restriction on the services provided (in a
broader sense than transit alone) through cross-border supply or through commercial presence offoreign operators, this would be an issue more appropriately raised in the context of the GATS. The
EC simply wants to note at this point the need to better clarify the interface between the freedom of
transit for third country vehicles and vessels guaranteed by GATT Article V and the fact that, under
the GATS, the right to provide a transport service in or across the territory of a third country depends
on specific commitments having been made by that third country. It would be useful if Members were
to consider this inter-relationship further to ensure, at a minimum, consistency between work being
done in the GATS (including scheduling of commitments  in the transport sector) and that in the CTG
as regards Article V.  This issue could usefully be drawn to the attention of the Council on Trade in
Services.
C. Ensuring Non-discrimination between types of consignment
Some WTO members have complained that freedom of transit is denied for carriage of certain
(usually controlled) goods, with local carriers bein g given the sole right to transport them across the
transiting territory, notwithstanding security/safety guarantees being given by the exporting /importing
Member. It is important to distinguish whether, in  such cases, these measures are being applied for
legitimate public protection reasons of the kind referred to earlier, or simply to favour domesticG/C/W/422
Page 6
operators. It should be recognised that certain types of goods will always be subject to special
provisions or may even be excluded from transit altogether. The solution is therefore not to accord
carte blanche  freedom of transit to all consignments: this will not be possible or even desirable. WTO
members could however consider the need for countries individually to publish a list of such
“sensitive” goods and  strengthening the obligation of WTO members to ensure consistency of
treatment for such goods and for operators so that when goods are allowed to transit only subject toexceptional guarantee requirements, those requirements are proportionate and applied uniformly.
D. Facilitation of transit by simplification of documentary and data requirements, and procedures
applied  for transit purposes
In its separate submission to the WTO5 on GATT Article VIII, the EC has made proposals in
respect of general simplification of import and export documentation and modernisation of customsprocedures. Other WTO Members have made similar proposals. Some of these proposals may
automatically apply to transit, although those tied to import and export by definition would not. It
would therefore be necessary to determine only which additional requirements specific to transit
should apply. As a general aim, however, Members could consider provisions to limit to the minimum
and harmonise to the best possible degree the extent and nature of the documents and data to bepresented purely in respect of transiting goods. It would seem appropriate that any specific rules in
this context should begin with specifying that the requirements and procedures applied to traffic in
transit should be significantly less onerous than that for imported or, as the case may be, exported
goods.
The EC considers it unlikely that a common set of transit data could be agreed upon for all
WTO members given the significant number of transit agreements that have their own data
requirements. The most operational way to proceed will be to introduce a rule that stipulates that the
data required for transit and any other procedures applied must be:
a) Based on international standards where they exist (comparable to the proposals in the EU
paper on Article VIII).
b) The minimum needed and for a legitimate purpose.
c) Based on the presumption that they be less comprehensive and onerous than those for
importation.
As regards unnecessary procedures, paragraph 4 above noted a number of examples cited by
Members of the WTO or other interested parties on certain seemingly excessive procedures and
requirements. In addition to these examples there may also be requirements and procedures relating to
excessively cumbersome or inefficient consignment reporting or forms of unjustified customs
intervention. It would be useful to hear the views of other Members on problems encountered which
could be resolved through a tightening up of the co mmitments in GATT Article V. In identifying such
“problems” experienced by operators, it will of course be necessary to distinguish between procedures
that are necessary to carry out a legitimate control objective, and those which are unwarranted.
E. Fees, Charges and Securities relating to transit
GATT Article V, paragraph 4 states that all fees and charges shall be “reasonable”. It would
be useful to provide a clearer definition of this and that fees should only be charged in respect of the
provision of legitimate services necessary to ensure the effective transit of the goods. WTO members
could consider establishing an indicative list of such legitimate services. The further work on this
should take into account the fact that charges or fees could be justified not only by direct and specific
                                                     
5 See supra footnote 1.G/C/W/422
Page 7
services connected with the movement of goods but also fees caused by services of more general
benefit to transporters, e.g. derived from the use of harbour waters and infrastructure maintenance for
which public authorities are responsible. Excessive fees charged for overflying WTO Members'
airspace would also appear to be covered by such a provision, to the extent such operations fall within
the scope of Article V paragraph 7.
As regards securities, in view of the problems identified in part 4 h) above, it would be useful
to introduce disciplines on the level, nature and management of securities or deposits demanded from
transit operators, to ensure that such requirements do not have a chilling effect on trade.
The EC submission on GATT Article VIII concerning and fees and charges connected with
importation and exportation, made a number of proposals to clarify such fees, and these proposals
may constitute a good basis for elaborating parallel provisions on fees and charges in connection withtransit.
F. Regional transit instruments or arrangements
In many cases solutions to transit problems can only be found through regional co-operation,
since it is at the regional level that a large part of the problems related to unnecessary hindrances to
transit are experienced.
Even though current Article V only requires WTO members to operate national transit
schemes and does not prescribe or encourage the formation of larger transit areas between countries,some WTO members have responded to the need for fa cilitating transit by entering into international
or regional transit agreements. As a result a number of international and regional transit instruments
exist, (including the TIR Convention, the Eu ropean Convention on common transit; the ASEAN
Framework agreement on the facilitation of goods in Transit and existing UN instruments relevant to
transit).
Given the existing lack of recognition in relation to transit at a regional level, it should be
considered what further action should be taken in the framework of GATT Article V. Members could
consider whether it would be useful, in the framework of GATT Article V, to promote the
establishment of regional transit regimes and provide guidance on their main elements. WTOmembers could also envisage provisions encouraging accession to international instruments relating to
customs transit, or to take account of the standard s in such instruments when drawing up bilateral or
regional instruments. The EC would be ready to discus s this issue further at a later stage, if it finds
favour among WTO members.
6. Special and differential treatment
The biggest beneficiaries of improved conditions for transit will be those who today suffer
most from the absence of adequate conditions, i.e. those countries which suffer from infrastructure
problems or are not part of well-functioning regional transit arrangements, as well a significant
number of developing and least developed countries and in particular landlocked ones. Small and
medium sized enterprises in developing countries are also likely to stand to gain from strengthened
transit provisions. SMEs often do not have the same resources and economies of scale necessary totake advantage of alternative transport options that bigger firms might be able to.
Within its own development aid programmes the EC has attached priority to improving
conditions of transit, often as part of broader efforts to increase regional trading capacities. A good
example of this is the EC’s work with the ACP countries in the framework of the Cotonou
Agreement. Here, the EU is encouraging the establishment of more integrated regional economies
(with whom the EC will then negotiate region-to-region free trade agreements), and a key element ofG/C/W/422
Page 8
this – particularly in Africa – is the establishmen t of fully functioning transit regimes and corridors
within the different regional groupings. The EC will be ready to share the details of this work with
other WTO Members and intergovernmental bodies in order to improve co-ordination and coherence
of efforts.
As far as the WTO work is concerned, the EC in its recent submission on GATT Article VIII6
has suggested a number of ways in which the principle of Special And Differential Treatment could
be integrated, and made operational, within any future WTO commitments on trade facilitation. In
that earlier paper the EC suggested that special and differential treatment in trade facilitation could
encompass:
• possible differentiation in commitments, particularly for least developed countries, but also
possibly for other developing country Members with specific needs or facing specific difficulties
in implementing commitments which may carry appreciable resource implications.
• the use of transitional periods to enable progressive implementation of the results, at a pace and in
a manner suited to the needs of developing country Members.
• and action to improve the quality, quantity and co-ordination of technical assistance, aimed at
improving the conditions of transit for developing countries, including through more systematic
co-operation between donor bodies and recipient Members, while involving as appropriate the
private sector.
The aim of the above would, again, be to encourage the progressive implementation of all
commitments in a manner best suited to the capacity, level of development and trade needs of each
individual Member, to ensure that technical assi stance flows effectively to those Members most in
need, and more generally to ensure a coherent relationship between future WTO rules, and the
tailoring of assistance to aid in their implementation.
The EC would welcome further discussion on how the WTO’s future work on trade
facilitation and transit could best respond to the needs and interest of developing country Members,
several of whom have attached great importance to this aspect of the Doha work programme on trade
facilitation.
7. Conclusions
The above represents some initial ideas on how GATT Article V could be clarified, which the
EU looks forward to discuss with other WTO members.
__________
                                                     
6 See supra footnote 1.