. /.   WORLD TRADE  
ORGANIZATION  WT/REG173/5 
18 July 2007 
 
 (07-3048) 
Committee on Regional Trade Agreements Original:   English 
  
 
FREE TRADE AGREEMENT BETWEEN ARMENIA AND MOLDOVA 
 
Questions and Replies
 
  
 The following communication, dated 9 July 2007,  is being circulated at the request of the 
Delegation of Moldova.   This document reproduces the follow-up questions  addressed to the Parties and the responses 
submitted.  
  
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Questions from the United States
 
 
1. According to paragraph 14 of the Factual P resentation, rules of origin are governed by 
Article 1.2 of the FTA as well as by the Decision on Rules for the Determination of a Country of 
Origin Goods, which governs rules of origin for the CIS FTA.  Pursuant to paragraph 9 of that 
decision, in order for a good to receive preferential  treatment, the good must be exported on the 
basis of an agreement/contract between resident s of the CIS FTA and the importer must be a 
resident of a party to the CIS FTA.  This measure raises two concerns.  First, it imposes a 
potentially significant non-tariff barrier to trade between Moldova and Armenia by denying 
preferential access for goods based solely on co untry of residency of parties involved in the 
transaction (buyer/seller/importer of record), notwithstanding the fact that those goods are of 
Armenian or Moldovan origin.  Second, it exte nds benefits under the FTA to countries (other 
signatories to the CIS FTA) that are not parti es to the Armenia-Moldova FTA;  that is, a good 
of Moldovan or Armenian origin th at is bought or sold by a resident of a CIS country, or that is 
imported by a resident of a CIS country, will receiv e preferential treatment as if that good had 
been bought/sold/imported by a resident of Mo ldova or Armenia.  By contrast, a good of 
Moldovan or Armenian origin that is bought/s old/imported by, example, a resident of the 
United States will be denied preferential treatment. 
• What is the rationale for this residency requirement?  How does this provision, in the 
world of Article XXIV:4, "facilitate tr ade" between Armenia and Moldova, 
particularly considering that (as we understand it) such a limitation on trading rights did not exist between the two countries before the FTA? 
 
 Moldova's authorities consider that mentioned FTA is in full compliance with provisions of 
the Article XXIV of the GATT 1994.   The Decision on Rules for the Determination of  a Country of Origin of Goods, adopted on 
30 November 2000 by the Council of Prime-minister s of the CIS countries, establishes a framework 
of regulations of bilateral relati ons between contracting parties. 
 WT/REG173/5 
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  • How is the extension of preferential access to residents of countries that are not a party 
to the FTA consistent with Armenia and Mo ldova's obligations under GATT Article I? 
 
The applied CIS Decision on RO's encourages and stimulates bilateral trade and economic 
relations between legal entities of contracting par ties by reducing tax avoidance and offshore trade. 
 
The realization of direct transaction betw een residents of FTA countries both at the 
documentary level and physical delivery, permit an adequate monitoring of chain of goods and 
ftnancial flows that assure the avoidance of  utilization of money-laundry schemes through the 
offshore zones.  At the same time the direct tr ansactions assure the avoidance of tax evasion in FTA 
countries. 
 
In this context, we would like to note that at the present moment the Decision on  Rules for the 
Determination of Country of Origin of Goods is in  the process of modifications and particularly the 
provisions of Article 9.  There are initiated discussi ons in the CIS workgroup and consultations with 
CIS countries on modifications that would establish a more liberalized provision for trade facilitation 
and development.  
As soon as the consultations will be finish ed, the Republic of Moldova will notify the 
Secretariat about the concluded final text of the Article 9 of the named decision. 
 
• In light of the fact that this provision applies to trade in any product, how is it 
consistent with the obligations under Arti cle XXIV:8 to eliminate duties or other 
restrictive regulations of commerce on "substantially all the trade"? 
 
 In the context of FTA, "substantially all the tr ade" is liberalized, there are no customs duties 
or restrictions or other measures with equivalent  effect for goods that are compatible with the 
provisions of the Decision on Rules for the Dete rmination of a Country of Origin of Goods. 
   The Rules of Origin allow for full cumulation of origin:  all processing activities conducted in  
any of the CIS countries can be included in the calcula tion of sufficient domestic processing.  This is 
an important incentive for trade integration among th e CIS countries and avoids the adverse effects of 
a hub-and-spoke system where trade is centred on the dominant member(s) of the free trade 
arrangement (i.e., Russia) with little interaction betw een the spoke countries.  Tax residents in the free 
trade area must conduct exports subject to the free trade treatment.  
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