WORLD TRADE  
ORGANIZATION  TN/TF/W/25 
21 March 2005 
 
 (05-1162) 
Negotiating Group on Trade Facilitation Original:   English 
  
 
COMMUNICATION FROM THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, 
PENGHU, KINMEN AND MATSU 
  
 The following communication, dated 18 Marc h 2005, from the Delegation of the Separate 
Customs Territory of Taiwan, Penghu, Kinmen and Ma tsu, is being circulated in advance of the 
Negotiating Group meeting of 22-24 March 2005.  
_______________ 
  
TRADE FACILITATION:  POSSIBLE MEASURES TO IMPROVE  
GATT ARTICLE VIII ON FEES  
 
 
I. INTRODUCTION 
1. Unreasonably high fees charged by Members in th e course of international trade will increase 
the transaction costs for traders, and thus re duce the opportunities for conducting international 
business. It is also the small- and medium-sized  enterprises (SMEs) that are the most affected, 
because they survive on very tight profit margins.  For example, we often hear complaints from 
traders about high fees for consular invoices and certificates  charged by importing Members.  Not 
only do high charges and an excessive amount of do cumentation increase transaction costs, but they 
also cause inconvenience to applicants, often to the point where exporters are discouraged from 
pursuing international trade. Moreover, it can be es pecially burdensome when there is no consulate 
office in the exporting Member country, and the exporter has no choice but to apply through nearby 
consulate office in another country. 
2. GATT 1994 Article VIII:1(a) requires that " all fees and charges of whatever character (other 
than import and export duties and other taxes with in the purview of Article III) imposed by 
contracting parties on or in connection with impor tation or exportation shall be limited in amount to 
the approximate cost of services rendered and shal l not represent an indirect protection to domestic 
products or a taxation of imports  or exports for fiscal purposes ."  One of the contentious issues about 
this provision is how to estimate the approximate co st of services rendered.  Although past dispute 
settlement cases have touched upon the definition of a f ee or charge limited to the approximate cost of 
services rendered, there is still no clear guidance on exactly how the approximate cost of services 
rendered should be calculated. 
3. Some Members have contributed their thoughts on  how to proceed with this issue.  For 
example, Hong Kong, China, has suggested that  "Members may consider the desirability of 
introducing basic GATT/WTO principles like necess ity and review " (G/C/W/398). The EU argues 
that "the fees or charges in question may not therefore be calculated on an ad valorem  basis" 
(G/C/W/394). The United States proposed to "estab lish specific parameters for fees charged by 
Members under Article VIII of GATT 1994" (TN/TF/W/14).   TN/TF/W/25 
Page 2  
 
 II. POSSIBLE MEASURE FOR CONSIDERATION 
4. We are of the view that the costs of services rendered can be broken down into two main 
components: (1) direct costs,  and (2) indirect costs .  Direct costs are those directly related to the 
specific services provided, including labour, materials, equipment and utilities. Indirect costs, by 
contrast, are costs incurred that are not directly re lated, but are nonetheless attributable to the specific 
services rendered, e.g., costs of supporting labour, e quipment, and office rent.  (Please refer below to 
Figure 1: Structure of Cost of Services Rendered. )  The Generally Accepted Accounting Principles 
(GAAP) may also be used, if necessary, as reference on  the allocation of direct and indirect costs.  
 
  
Labour 
Indirect cost  Equipment 
  Rent 
  Other 
   
  Labour 
  Material 
Direct Cost  Equipment 
  Utilities 
  Other 
 
           Figure 1: Structure of Cost of Services Rendered 
    
5. To put this concept into operation, a table for analyzing relevant costs would be helpful.  
Periodical reviews  of the levels of fees and charges imposed on or in connection with import and 
export should also be conducted, for example, at least once every three years.                
III. AN EXAMPLE 
6. Our "Special Cargo Examination Fee" is a useful example to illustrate how a Cost Analysis 
Table might be applied.  The occasions on which a "Special Cargo Examination Fee" may be charged 
include: examinations conducted out of  regular office hours, or at the special request of the applicants, 
or for goods not stored at customs-designated loca tions. Thus, special arrangements need to be made. 
7. The total estimated cost of c onducting a special cargo examination is made up of direct costs 
and indirect costs.  In this particular example, the direct costs  are the addition of the costs of the 
directly-related labour (inspector, chief and drive r) and directly-related materials (gasoline and office 
supplies). To calculate the indirect costs , an estimate is made of the depreciation and maintenance 
costs of the car used partially for examination a nd attributable office utilities and other materials.  
8. As can be seen from Figure 2: Cost Analysis Table for "Special Cargo Examination Fee" 
below, in this case, the estimated  cost of one special examination is NT$ 1,327.6 (equivalent to about 
US$ 41). We now make a charge of NT$ 1,300 for each Special Cargo Examination.   TN/TF/W/25 
 Page 3 
 
 
  
Total Cost:   NT$1327.6 
 Unit Quantity Cost/unit Subtotal 
1. Direct Cost     
 a. Labour     
  Inspector hour 3 229 687 
  Chief's Review hour  0.5  336  168 
  Driver hour  1.5  180  270 
 b. Material     
  Gasoline litre  1  22.6  22.6 
  Office supply     30 
 c. Equipment --  --  --  -- 
 d. Utilities --  --  --  -- 
 e. Other --  --  --  -- 
2. Indirect Cost     
 a. Labour --  --  --  -- 
 b. Equipment     
 - Depreciation and  
  maintenance of  
  car hour  1.5  33  50 
 - Shared office  
  utilities and  
  materials     100 
 c. Rent --  --  --  -- 
 
Figure 2: Cost Analysis Table for "Special Cargo Examination fee" 
  IV. COSTS/BENEFITS AND OTHER CONCERNS 
9. Our view is that the implementation by Member s of the type of measures described above 
would be a feasible solution to the existing proble m and would constitute a more scientific way of 
arriving at a level of fees that more fairly represent the real costs of services rendered in the context of GATT 1994 Article VIII. Furthermore, from our experi ence, the costs of implementing this type of 
system, or measure, are minimal. The first step would have to be the enactment or amendment of 
relevant laws and/or regulations to establish the necessary measures. This would need to be followed 
by training of the relevant accounting officers.   
10. We would be happy to share further with interested Members and other international 
organizations our experience with these types of systems, and to work out details such as, 
implementing principles, design of a cost analys is table, S&D treatment, technical assistance and 
capacity building, as necessary. 
__________