RESTRICTED  
  
S/CSC/M/66  
 
30 April 2013  
(13-2291)  Page: 1/6  
Committee on Specific Commitments   
 
REPORT OF THE MEETING HELD ON 20 MARCH 2013 
Note by the Secretariat1 
The Committee on Specific Commitments (CSC) held a meeting on 20 March 2013, chaired by 
Mr. Rodrigo Bardoneschi from Argentina. The representative of Brazil indicated that under Other 
Business, he would make an announcement on a presentation concerning his government's 
integrated system of foreign trade in services. The agenda for the meeting, contained in 
WTO/AIR/4094, was adopted as modified.  
1. ITEM A - CLASSIFICATION ISSUES  
1.1.  The Chairman recalled that at the meeting in October 2012, statistical experts from the WTO 
Secretariat had made a presentation on important services classification changes brought about by 
the new IMF Balance of Payments Manual (BPM6). The focus of the presentation had been on the 
statistical treatment of manufacturing services on a fee basis, as well as of maintenance and repair 
services. The presentation had been well received  and delegations had wished to obtain further 
information on the development of services trade statistics. At this meeting, the Secretariat would 
make another presentation with respect to the stat istical treatment of IP-related products, another 
important change in BPM6 on classification. 
1.2.  On behalf of the Secretariat, M. Joscelyn Magdeleine gave the presentation which focused on 
the new guidelines set out in the BPM6 and the Manual on Statistics of International Trade in 
Services with respect to the classification of international transactions relating to intellectual property products (IPPs).  
1.3.  The main components of the BPM6 cla ssification or the EBOPS (Extended Balance-of-
Payments Services) classification consisted of manufacturing services and physical inputs owned 
by others; maintenance and repair services; transport; travel; other commercial services; and government goods and services. Other commercial se rvices were further broken down into seven 
items which related to construction; instruments and pension services; financial services; charges 
for the use of intellectual property not included  elsewhere (n.i.e.); telecommunications; computer 
and information services; other business services; and personal, cultural and recreational services.  
1.4.  There was no single category for IPP transactions which were actually scattered across the 
different services sectors. Under the item "Charges for the use of intellectual property n.i.e." were recorded payments made for the authorised use of intellectual property, which were not classified in other categories. Services transactions relating to IPPs would also be covered in other items 
such as telecommunications, computer and information services, other business services (research 
and development services), as well as personal, cultural and recreational services. 
1.5.  Based on very rough estimates, services transactions relating to IPPs represented a share of 
approximately 15% of total trade in commercial services as recorded in the balance-of-payments. 
This was a substantive share of the total trade in services. Of course, not all intellectual property transactions would be recorded under the services classification, as some of them would appear in 
the goods and merchandise trade statistics, in particular if these products were bought by 
consumers on physical media such as CDs or DV Ds. However, the distinction between goods and 
services might be blurred in some specific cases. 
                                               
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/CSC/M/66 
 
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  1.6.  The production process of intellectual property products was a two-stage process. The first 
stage was the production of an original, such as movie filming, writing a book, developing a piece of software, or inventing a new product. The output of the first stage of the production process was the original itself, over which legal or de facto  ownership could be established by copyright, 
patent or industrial secrecy. The second stage of the production process was the production of 
copies. The owner of the original might use his righ t to directly produce copies which gave users a 
licence to the final use of the intellectual proper ty embedded, without giving them the right to 
reproduce or distribute the product. Alternatively, the owner might licence other producers to 
reproduce and distribute copies of this original, which were then sold to consumers. So there were two different types of licences: licences for final use and licences for reproducing and distributing copies of the original.  
1.7.  IP products originated from different sect ors of the economy, such as computer software 
from computer services; movies, music, radio and television programmes from audiovisual services; patents, industrial processes and designs, as well as trade secrets from research and 
development. They might also arise from marketin g, such as franchise, i.e. payments for the 
authorized use of trademarks or brand names. Ther e were other types of IP products, in particular 
those that related to mineral exploration and evaluation. However, such products were generally 
not subject to international transactions. 
1.8.  Software, audiovisual products and all other similar products were treated in the same way in 
the balance-of-payments and in the Manual on International Trade in Services Statistics. Computer services covered hardware and software related services and data processing services, including 
the production of software (operating systems, general business productivity software, computer 
games and other applications such as media player s or educational software, etc.). The production 
of software might be customized or mass-produced. Computer services in the balance-of-
payments also covered sales of software under certain conditions.  
1.9.  Audiovisual services were defined in international guidelines as covering the production of 
motion pictures, the production of radio and tele vision programmes, sound recordings, and rentals 
of audiovisual products and charges for access to encrypted channels. Rentals of products referred 
to transactions between distributors and exhibito rs of movies, for example. Audiovisual services 
excluded the performing arts and other live ente rtainment services, but covered the recording of 
performing arts and other live entertainments, wh ich were considered audiovisual products. Again, 
the sales of audiovisual products would be included in audiovisual services under certain 
conditions. 
1.10.  With respect to the treatment of transactions relating to computer software, audiovisual 
products and similar products, it was recommended that customized products, transactions in 
originals, licence fees between the owners of orig inals and producers, downloaded or online use of 
mass-produced products be classified under services items. Because of the particularities of 
originals, the manual recommended that originals be identified separately in the statistics. 
Regarding products delivered on physical media attached with a periodic licence to use which required regular payments to extend the right to use, these payments would be considered as payments for services. Those products on physical media with a licence for perpetual use would be 
classified as goods.  
1.11.  More specifically, for customized products or mass-produced downloaded products or for on-
line use, or products on a physical media attached with a periodic licence to use, transactions were 
classified under the relevant services items, i.e. software transactions classified under computer 
services, movies or music under audiovisual serv ices. Concerning licences to reproduce and/or 
distribute the copies of originals, transactions were recorded under the item "Charges for the Use 
of Intellectual Property n.i.e.", a separate service item within the statistical classification of 
international transactions. Sale or purchase of the ownership rights (the originals) would be recorded under the relevant services items, i.e. the payment for software originals under computer services, and the payment for an audiovisual originals under audiovisual services. 
1.12.  Software could serve as an example of th e statistical treatment of these copyright-related 
payments. Very often software was embedded in co mputers sold. If the licence attached to this 
software was perpetual, the entire value of a computer and embedded software would be recorded 
under goods. If the licence for the software was subject to renewal, the payment for renewal of 
this licence would be recorded in services under computer services as computer software. S/CSC/M/66 
 
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  Concerning the transaction between the PC manufacturer and the owner of the software embedded 
in the computer for a licence to reproduce and distribute the software, if the owner was a company established outside the manufacturer's country, this transaction would then be recorded under "Charges for the use of intellectual property n.i.e.". 
1.13.  Research and development services were defined in the international guidelines as work 
undertaken in a systematic way to increase the stock of knowledge. This item might cover those services that were associated with basic research, applied research and experimental development 
of new products and processes. It would cover the activities in physical sciences, social sciences, 
humanities, whether they were produced by market or non-market uses. The provision of customized services or non-customized R&D services  was classified under this item including, for 
example, the research work conducted to develo p a new molecule for a pharmaceutical company, 
or the design of an ergonomic chair for the manufacture of office furniture. The actual sales of 
property rights arising from research and developmen t, such as the sales of patents, of industrial 
processes and also the copyrights arising from research and development work would also be 
recorded under this item.  
1.14.  Any payments for licences for the right to  use the outcomes of research and development 
would not be included under research and development services, but covered under "Charges for 
the use of intellectual property, n.i.e.".  
1.15.  Payments for franchise and trademarks would be recorded under "Charges for the use of 
intellectual property, n.i.e.", thou gh they related to the use of intellectual property as well as to a 
number of services that might be attached to the use of intellectual property. This classification 
was mainly for practical reasons, because from a statistical point of view, it was difficult to make a 
distinction between the property income and the actual services provided.   
1.16.  Sale or purchase of ownership rights (i.e . trademarks and brand names) was the only item 
that was not covered in either services or goods.  It would be covered in the balance-of-payments 
capital account, as brand names or a trademarks were considered as non-produced assets in economic statistics. Transactions relating to prod uced assets were recorded in the current account. 
1.17.  The representative of Pakistan asked how software with limited functionality was to be 
classified.  
1.18.  The representative of China asked how to distinguish a perpetual licence from a periodic 
licence to use as far as computer software was concerned, for instance operating systems.  
Another question referred to a new business model where the application developers did not 
charge customers for the use of mobile applications but recovered the costs through advertisement. He asked how such business model would fit in the classification of software. 
Referring to the example of iTune, he also sought  clarification on where to draw the line between 
computer services and audiovisual services.   
1.19.  The representative of the Philippines sought clarification on hardware-related services. He 
also asked how to classify software embedded in other media than computer, such as smart TV or 
vehicle.  
1.20.   M. Magdeleine responded to the questions raised. Concerning software with limited 
functionality, if it was embedded in a physical medium, the initial payment for it was included in 
the payment for the medium and thus covered under the goods item. Payments for extending the 
functionalities of the software would be recorded under the services item. The answer to the question raised by China on operating systems would be similar. Downloading music from a 
software platform like iTune was considered as payment for music and thus recorded as 
audiovisual services in statistics. He did not have definitive answer to the question on mobile applications. Regarding hardware-related services, these referred to work on actual hardware, 
such as maintenance and repair of computers, which would be classified under computer services 
in the balance-of-payments. With respect to the question on how to classify software embedded in other media than computers, such as smart TVs or vehicles, the principle was to look at what kind of service was provided to customers rather than how it was provided. Online movies would thus 
be classified as audiovisual services rather than  as computer or telecommunication services in S/CSC/M/66 
 
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  statistics. By the same token, software provided through smart TVs would be considered as 
software services.  
1.21.  The Committee then moved to the discussion on classification issues. It addressed three 
sectors: legal services, maritime transport services, and logistics services.  
1.22.  Concerning legal services, the Chairman re called that at the last meeting, the Secretariat 
had presented an informal Note (JOB/SERV/129) pr oviding an overview of classification issues 
arising in this sector. The summary of the discussion  had been circulated under his responsibility in 
document JOB/SERV/130.  The discussion at the la st meeting had been preliminary. A number of 
delegations had indicated that they would make substantive comments at this meeting. 
1.23.  The following discussion on legal services was in informal mode. 1.24.  With respect to maritime transport servic es, noting that the Secretariat had prepared an 
informal Note (JOB/SERV/137) providing an overview of potentially relevant issues and 
summarizing views expressed by Members in the past, the Chairman first invited the Secretariat to 
introduce the Note.  
1.25.  According to the representative of the Secr etariat, the Note drew upon some of the issues 
raised in the sectoral Background Notes on that sector as well as earlier discussions within the 
Committee. The first Part of the Note presented th e main features of maritime transport services 
under the existing classification (W/120 and CPC Prov.), and then discussed how the sector was 
dealt with in CPC version 2 and in the Maritime Model Schedule. The second Part suggested a number of questions aimed to foster more detailed discussions among delegations.  
1.26.  The following discussion on maritime transport services was in informal mode. 
1.27.  Regarding logistics services, again, the Chairman invited the Secretariat to introduce its 
informal Note (JOB/SERV/138) before opening the floor for discussion.   
1.28.  The representative of the Secretariat noted that there was no separate category for logistics 
services in the current classification system (W/120 and CPC). However, the core components of 
logistics services were generally considered to be covered under the heading "Services auxiliary to all modes of transport". The Note provided an overview of the definition of the sector, logistics-
related services in W/120 and negotiating proposals. It also suggested some specific questions for 
consideration, such as the exact coverage of relevant sub-categories in W/120 and CPC, advantages and disadvantages of the checklist approach, etc. 
1.29.  The discussion on logistics services was also in informal mode.  
1.30.  After the informal discussion on logistics services, the Chairman drew attention to another 
Note (S/CSC/W61) prepared by the Secretariat at the Committee's request, which examined 
services classification issues arising in the WTO jurisprudence, including the interpretative 
approach applied by panels and the Appellate Body. As agreed, the Note was aimed at deepening 
Members' understanding of services classification , and no particular outcome was intended from 
the discussion.  
1.31.  The representative of the Secretariat said th at the Note consisted of three sections. The first 
section provided background information on W/120, its history and purpose as well as its 
application under the GATS. The main section examined classification-related issues arising in WTO jurisprudence, in particular how services at issue had been identified in individual cases and how 
sectoral entries in schedules had been interpreted.  As specifically requested by Members, the Note 
looked into the interpretative approach adopted by panels and the Appellate Body and the role of W/120 in the interpretation of schedules. The Note concluded with some general observations. It 
emphasized that the findings made by panels and the Appellate Body were only applicable to the 
case concerned and should not be considered to be automatically transferrable to future cases. 
1.32.  The representative of India made two preliminary observations on the Secretariat's Note. 
The first concerned the treatment of the Note by the Chairman of the Negotiating Group on Basic 
Telecom (Chairman's Note) in Mexico - Telecoms . It would have been helpful had the Secretariat S/CSC/M/66 
 
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  elaborated on the interpretative value assigned to the Chairman's Note in the case. India 
understood that there had been peculiar circumst ances surrounding the Chairman's Note and how 
it had been used. His delegation also understood that the WTO jurisprudence was case-specific. The Chairman's Note explicitly stated that it was not intended to have any binding legal status. 
Similarly, the footnote to the title of Annex 2 of the Scheduling Guidelines clearly stated that 
"[t]he fact that these documents are annexed to these guidelines should not be interpreted as changing their status." Despite these caveats, the Panel had given substantial interpretative 
weight to the Draft Model Schedule and the Chairman's Note as supplementary means of 
interpretation under the terms of Article 32 of Vien na Convention to confirm the ordinary meaning, 
arrived at through the application of Article 31 of the Vienna Convention. 
1.33.  As a second observation, he noted that certain broad principles laid down by the DSB could 
lead to different interpretations, unless care was taken to clarify the purpose and intent of 
classifications. One case that could be of specific relevance in this regard was the Appellate Body findings in China - Audiovisual , particularly the finding of the Appellate Body in paragraph 397 of 
its report, referred to in paragraph 2.30 of the Secretariat Note. The Appellate Body implied that, 
in interpreting GATS schedules, the ordinary mean ing to be attributed to the terms of specific 
commitments could not only be the meaning that they had had at the time the Schedule had been 
concluded. The Appellate Body's observation could potentially have far-reaching consequences if 
applied literally in the context of new services or new technologies. It implied the possibility of a conflict between the goal of maintaining the predictability, security and clarity of specific commitments and ensuring that there was no au tomatic expansion of a country's schedule over 
time. 
1.34.  The representative of Brazil said that his de legation had yet to take an in-depth look at the 
Secretariat Note. But at first glance it appeared that the Note would be a valuable input to the 
Committee's discussion. It shed light on some of the issues directly relevant, especially the legal 
and interpretative weight of outcomes that might arise from the current exercise. Considering, for instance, the concluding observation regarding the recourse by the Appellate Body to the approach 
prescribed in the Vienna Convention on the Law of  Treaties, it seemed that the framework set for 
the discussion had been rightly circumscribed so as  to provide some level of comfort regarding the 
legal certainty of existing commitments. To this re spect, he shared the comments made by India. 
1.35.  The Chairman suggested that the Committee continue to discuss maritime transport and 
logistics services as well as the Note on WTO jurisprudence under this item at the next meeting. 
He also suggested that the incoming Chairperson of the Committee hold consultations with respect to subsequent work on classification issues, including which sectors, if any, should be examined 
next and how to take stock of the work that had b een done so far in a user-friendly way. Finally, 
he proposed that the Committee take note of the statements made and revert to this item at its next meeting. 
1.36.  It was so agreed.  
2    ITEM B - SCHEDULING ISSUES 
2.1.  There was no intervention. The Chairman sugg ested that the Committee reverted to this item 
at its next meeting. 
2.2.  It was so agreed.  
3    ITEM C - REVIEW OF THE OPERATION OF THE PROCEDURES UNDER ARTICLE XXI 
3.1.  The Chairman recalled that the Council for Trade in Services had adopted the Procedures for 
the Implementation of GATS Article XXI in Ju ly 1999, contained in document S/L/80, and the 
Procedures for the Certification of Rectifications or Improvements to Schedules in April 2000, contained in document S/L/84. Both documents pr ovided that the operation of these procedures 
should be subject to review at the request of any Member (paragraph 24 of S/L/80 and 
paragraph 5 of S/L/84). At the request of Aust ralia, the review of the operation of these 
procedures had been included in the agenda. For the purpose of the review, Australia had submitted a communication (S/CSC/W/59) proposin g that Members share experience with using 
these procedures without re-opening them. Upon request, the Secretariat had also produced a S/CSC/M/66 
 
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  factual report (JOB/SERV/123) on the application of  these procedures to fa cilitate discu ssions. As 
agreed, discussions at the last meeting had been carried out in informal mode and a non-attributable summary had been circulated as document JOB/SERV/131 under his responsibility. Interventions made had touched upon various important issues such as the invocation of Article 
XXI, timing of the negotiations, conclusion of the process, and consolidation and distribution of the 
results of negotiation.  
3.2.  The representative of the Secretariat responde d to an inquiry on Egypt's request to initiate a 
certification process pursuant to S/L/84. On 20 June 2001, Egypt had requested to certify its draft 
schedule of commitments on basic telecommunications. Within the 45-day period after the circulation of its request, Egypt had received ob jections from two Members and then entered into 
consultations. The consultations had lasted ten months, and on 19 April 2002, Egypt had 
submitted a revised draft schedule of commitments on basic telecommunications and invoked 
S/L/84 again. This time there had been no objection from other Members within 45 days after the circulation. In accordance with S/L/84, the Secretariat had issued a communication (S/L/103) 
informing Members of the conclusion of the certification procedure and indicating that the draft 
schedule became an integral part of Egypt's GATS schedule. 
3.3.  The representative of Egypt confirmed the Secretariat's response. 
3.4.  The representative of Australia noted that the discussion at the last meeting on the operation 
of the procedures under Art XXI had been very useful in helping Members get a better 
understanding of when and how to use these procedures. Such discussion contributed constructively to the regular work of the Committ ee. It would hopefully be useful in any future 
negotiations under Article XXI. Australia would be interested in any experiences Members might 
have to share.  
3.5.  The Chairman suggested that the Committee take note of the statements made and revert 
this item at its next meeting. 3.6.  It was so agreed.  
4    ITEM D - OTHER BUSINESS 
4.1.  The representative of Brazil stated that his delegation intended to give a presentation in the 
June cluster on the country's national integrated system of foreign trade in services, SISCOSERV. 
It was a computerized system developed by the federal government as a tool for improving formulation, monitoring and evaluation of public policies pertaining to services. The system was 
also intended to assist businesses in devising strategies on services trade. Essentially, it was a 
statistical database recording services transactions in all four modes of supply between residents and non-residents. Entries were made by exporter s and importers in accordance with instructions 
set out by law and on the basis of the Brazilian serv ices classification system. Further details on its 
function could hopefully be provided at the next meeting. 
5    ITEM E - APPOINTMENT OF THE CHAIRPERSON FOR THE COMMITTEE 
5.1.  The Committee elected Ms. Monica Nagelgaard from Norway as its new Chairperson. 
 
 
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