./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/IT/SPEC/Q2/2
2 March 2001
(01-1047)
Committee of Participants on the Expansion
of Trade in Information Technology ProductsOriginal:  English
SUBMISSION FOR THE NON-TARIFF MEASURES WORK PROGRAMME
Communication from Canada
The following communication, dated 27 February 2001, has been received from the
Permanent Mission of Canada.
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Import Licensing of Information Technology Products
Introduction
Import licensing requirements for information technology products can constitute a serious
market access barrier.  While they may not be readily apparent to many exporters, these barriers canimpose undue costs and undermine the intent of the ITA, which is to foster and enhance global trade
in information technology products.
As is the case with many other non-tariff measures, there are WTO provisions governing the
use of import licensing: specifically, the WTO Agreement on Import Licensing Procedures.  This
Agreement provides the parameters within which Members have the right to operate import licensing
regimes.  However, we would recall that the Agreement recognizes “that the flow of internationaltrade could be impeded by the inappropriate use of import licensing procedures” and that import
licensing “should be implemented in a transparent and predictable manner”.  In addition, it specifies
that “non-automatic licensing procedures should be no more administratively burdensome than
absolutely necessary to administer the relevant measure”.  It would appear that some of the major
provisions in the Agreement which may be of particular relevance are those which cover issues suchas scope, publication and transparency, time periods, number of approval bodies, complexity and
administrative practices.
Product coverage
The number of information technology products covered by import licensing regimes
throughout the world appears to be large.  The principal ITA 1 products, automatic data processing
machines (8471) and telecommunications e quipment (8517 and 8525), face import licensing
requirements in the largest number of countries.  Many other information technology goods are also
confronted with automatic or non-automatic import licensing requirements, such as IT-related electricconductors under HS headings 8544 and various instruments under HS heading 9027.
Impact on trade
Exporters have indicated that, when they or their customers apply for import licences, they
regularly face disagreements regarding the appropriate classification of information technology goodsG/IT/SPEC/Q2/2
Page 2
under the Harmonized Commodity Description and Coding System.  As the importing nation does not
always make it clear in advance which code to use, the exporter and importer have no way of ensuring
the correct one is used.  This leads to the invali dation of the original import licence and can lead to
extensive delays in clearing the good in question through customs.
Additional processing delays are engendered by the number of administrative bodies which
often must approve import licences.  For example, it  is not uncommon for it to be necessary to obtain
the approval of the Customs, Transport and Communi cations departments, as well as others.  The
number of approval authorities also reduces the level of transparency and accountability making it
difficult for exporters to determine when their import licence will be approved and what actions they
must take to expedite approval.  As well, comp lex administrative requirements, if linked to the
approval of many agencies, provide opportunities for irregularities.
As well, our research has revealed further concerns regarding the absence of transparency.
Industry reports that administrative procedures are, at times, unclear and subjectively applied.
Moreover, they have indicated that the requirements with which a particular shipment must comply
can change between the time contracts are signed and the customer receives its shipment.Unfortunately, some countries have failed to consistently respond to the Import Licensing
Committee’s questionnaire, or report at all. In addition to questions regarding H.S. coding, the
definitions of the goods covered by a particular licensing regime are, on occasion, vague—  leading to
uncertainty regarding the coverage of import licensi ng regimes.  In some instances no distinction is
made between automatic and non-automatic licensing provisions and the source of further information
is not always provided.
As a result of the foregoing, and other causes, manufacturers of information technology
equipment have expressed serious concern regarding the total length of time required to process
import licences which ranges from several days to several months and, in some instances, up to oneyear.  They indicate that these delays are costly.  Broadly, inventory costs are a significant portion of
total costs.  More specifically, the warehousing co sts at the port of entry are considerable and include
indirect costs related to damage and pilferage.  These costs total several percent of the total cost of the
good per month.  For example, a two month delay can  be the equivalent of an additional import duty
totalling four to six percent of the value of the product.  Further costs can result from the penalties
imposed by customers for failure to meet project completion dates which typically equal 10% of the
price paid for the exported good.
Beyond the cost of delays are those associated with the administration by exporters or
importers of import licensing requirements.  Expert staff must be engaged to initiate, monitor, submit
and track each licensing application.
It should be noted that it is the responsibility of the importer (i.e. the customer) to meet import
licensing requirements.  Hence, the exporting firm may rely on its customer to absorb the cost of
compliance with import licensing obligations.  Consequently, while there are real barriers to trade,
they may be hidden from the exporting firm.
Conclusion
Canada believes that the removal of unnecessary impediments created by certain import
licensing requirements for information technology products would significantly enhance trade in this
sector, without jeopardizing the achievement of their WTO-consistent objectives.  To do so would, inCanada’s opinion, improve all participants’ access to the leading edge technologies which have
become central to economic growth.
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