WORLD TRADE  
ORGANIZATION  TN/TF/W/39 
2 May 2005 
 
 (05-1779) 
Negotiating Group on Trade Facilitation Original:   English 
  
 
COMMUNICATION FROM PARAGUAY, RWANDA AND SWITZERLAND 
 
  The following communication, dated 29 Apr il 2005, from the Delegations of Paraguay, 
Rwanda, and Switzerland, is being circulated in  advance of the Negotiating Group meeting of 2-
4 May. 
 
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TRADE FACILITATION: IM PROVEMENT OF ELEMENTS RELATED TO TRANSIT 
  I. INTRODUCTION 
1. This proposal aims to clarify and improve GATT Article V with a view to further expediting 
the movement of goods in transit in accordance wi th Annex D of the July Package and the Doha 
mandate. It intends to address issues that are of  special relevance to landlocked Members and, 
therefore, important to all WTO Members, since trade facilitation will bring along global benefits. 
2. The following proposal is not exhaustive and we reserve the right to revise, supplement or 
withdraw this proposal on this subject in the future, individually or collectively. 
II. THE SPECIFIC CHALLENGE OF LANDLOCKED COUNTRIES 
3. 10% of the total population of the developi ng world lives in landlocked countries. This 
represents approximately 350 million people. Globali zation did not bring the expected positive change 
in terms of development to these countries nor provided incentives for more dynamic trade relations, despite the efforts undertaken with a view to pa rticipate more actively in the regional and world 
commercial exchange.  
4. Landlocked developing countries
1 (LLDCs) have been highly under performing with trade 
flows reaching only one quarter of those of other de veloping countries that are not landlocked. Studies 
have indicated that the annual growth rate of the LLD Cs’ is 0,7% inferior to that of coastal countries, 
as a consequence of their geographical situation. Export values for all developing countries grew at 
respective average rates of 3.2% and 8.7% during 1980-90 and 1990-94, the corresponding figures for LLDCs were only 2.9% and 0.4%.  
5. These figures show that many LLDCs have not been able to compete efficiently in the 
international trade market, mostly as a consequence of  the high cost of transport. As liberalisation of 
border measures continues, the effective rate of prot ection provided by transport costs is now, namely 
in the case of LLDCs, considerably higher than that  provided by tariffs. Their freight and insurance 
costs as a percentage of exports (12.9% on averag e) largely exceed those of developing (8.1%) and 
                                                     
 
1 For purposes of this submission, this will in clude least developed land locked countries. TN/TF/W/39 
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 developed countries (5.8%), yet reaching astronomic  proportions namely in Africa (in some cases 
over 50%). A recent study estimates, that doubling of transport costs reduces trade volumes by 45%. 
Another recent research paper revealed that tr ansport costs for the landlocked South American 
countries are about 43 % to 66% higher than the sa me costs for other MERCO SUR members, and up 
to 240% the costs in the US.  Transport costs weigh particularly h eavy in their total trading costs, as  
LLDCs exports are little diversified, composed of bulky, often low value commodities. In the great 
majority of countries, three products account for more than 50% of total exports in LLDC WTO 
Members States in terms of value based on HS 6 digit classification.  
6. It is not only cost but also speed and low pred ictability of shipping tim es, highly dependent on 
transport infrastructure and transit procedures in their transit neighbours that leave LLDCs neglected 
destinations for FDI, thus impeding vertical divers ification in manufacturing. Yet, being landlocked is 
not a hopeless case per se. Many of the European la ndlocked countries, as is the case for Switzerland, 
have demonstrated that it is possible to overcom e the geographical handicap and prosper. Studies 
attribute theses success stories to three fundamental  conditions: (1) the development of adequate 
national transport networks and efficient transit tr ansport systems, (2) proximity to a large regional 
market and (3) promotion of industries and activities that are not sensitive to distance. 
7. In addition to these important factors, others  have been shown to be essential: the economic 
relationship with neighbour ing countries (regional integration), th e transparency and predictability of 
transit countries’ rules, the degree of coordina tion and cooperation and tr ust between the parties 
involved (government to government but also betw een customs and the private sector), the will to 
implement adequate rules as well as bilateral a nd multilateral arrangements or agreements and an 
appropriate legislation to en force penalties and sanctions. 
8. Probably all landlocked countries ha ve made and continue to ma ke efforts to alleviate the 
geographical handicap by seeking arrangements with their costal neighbours. In the following, we 
describe two types of transit arrangements, which Me mbers may wish to consider in order to inform 
the negotiations on necessary improvements of GATT ar ticles V, VIII and X. The first example shows 
the case of Switzerland, which for a long time has cu ltivated strong economic ties with Member States 
of the EU and EFTA. The second example describ es an arrangement of the kind implemented in 
Africa (e.g., Northern and Central Corridor Arrangeme nt (linking Eastern and Central Africa), Trans 
Kalahari Corridor, etc.) and in Asia (e.g., Treaty of  Transit between Nepal and India). Also it is worth 
mentioning that in South America, there are some at tempts to implement integration hubs (such us the 
Andean hubs, the Central Interoceanic hub and the Para ná – Paraguay Waterway hub) with a view to 
facilitate trade, through the promotion of measu res capable of improving the regional physical 
integration.
2 
III. DIFFERENT SOLUTIONS (TRANSIT ARRANGEMENTS) 
9. The transit arrangements cover "traffic in transit" according to GATT Article V:1: " Goods 
(including baggage), and also vessels and other means of  transport, shall be d eemed to be in transit 
across the territory of a contracting party when th e passage across such territory, with or without 
trans-shipment, warehousing, breaking bulk, or change in the mode of  transport, is only a portion of a 
complete journey beginning and terminating beyond  the frontier of the contracting party across 
whose territory the traffic passes.  Traffic of this nature is termed in  this article "traffic in transit". 
The "Common Transit" Convention (between European/EFTA countries )  
10. In the very large majority of cases when Switzer land is involved in international transit, the 
rules defined in two Conventions signed in 1 987 between the European Community and the EFTA 
                                                      
2 For further Information please refer to www. IIRSA.org.  TN/TF/W/39 
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 countries are applicable: One Convention establishe d a common transit procedure, while the other 
provided for the simplification of import, export and transit formalities by  introducing the Single 
Administrative Document (SAD). In the remaining cases the provisions under the TIR Convention apply. 
11. The common transit procedure provides for customs and excise duties, VAT and other 
charges on goods to be suspended during their moveme nt from the office of departure to the office of 
destination thus requiring only one (final) customs formality. It may be  used by economic operators to 
facilitate the movement of goods from one Contrac ting Party to another. However there is no 
obligation to use it. The procedure starts at the o ffice of departure and ends when the goods and transit 
declaration are presented at the office of destinati on. Under certain circumstances and subject to an 
authorisation being granted by the relevant cust oms authority, the common transit procedure is 
simplified (i.e. authorised consignors and consi gnees carry out transit operations without presenting 
the goods and the corresponding documents at the customs office). 
12. The most recent reforms of the system – th e so-called European and EFTA wide "New 
Computerised Transit System" (NCTS) – tend to bring the customs towards the goods rather than 
presenting the goods to the customs. The NCTS  implies modern techniques such as fully 
computerised procedures; sampling based on risk management; collaboration between customs of the 
Parties to the Convention as well as the private sector ; and most importantly an atmosphere of mutual 
trust. Under this system, all information flows ar e electronic. The overall objective of the NCTS is to 
enhance the security of international moveme nt of goods while facilitating the latter. 
Corridor Transit Arrangements
 
 
13. Solutions as described above have taken decad es to materialise. In many cases developing 
countries have started with a framework agreement between interested parties fixing very general 
principles of cooperation in relation with trans it. Based on these frameworks parties have then 
engaged into more detailed arrange ments with their neighbours, wh ich secure facilitated transit of 
goods along specific routes, so called transit corridor s (such arrangements are implemented in Africa, 
Asia and Southern America). The importance of su ch corridor agreements has been acknowledged in 
the Almaty Programme of action: "The establishment of regional transport corridors and the 
adoption of common rules and standards, where appropr iate, should play a major role in transit 
transport facilitation ." In these arrangements transit is confin ed to specific routes (networks), which 
link landlocked countries with major seaports d esignating for this purpose specific entry and exit 
customs offices. For these corridors the signatories to the arrangement have agreed on a set of 
streamlined transit procedures, which will be detailed below.  
14. All measures in the arrangements seek a balance of the two-fold objective of facilitating cargo 
transit and preventing diversion of good s in transit into the local market.  
15. Although, in accordance with the Specific Anne x E of the Revised Kyoto Convention, the 
free movement of goods across the territory rema ins an objective, confining simplified transit 
procedures to specific corridors are considered to be a manageable solution for many countries when 
such arrangements are not conceiva ble for the free movement of goods  across the whole territory. As 
a consequence of high volumes transiting these corridor s, they may lead to a number of economies of 
scale in investment (namely road and logistics infrastructure) and transport operations. Some 
countries have used the enhanced predictability and traffic concentration due to these arrangements to 
construct so called "dry ports" that either serve to disencumber sea ports in transit countries or to 
concentrate logistics facilities (inland clearance de pots) in landlocked countries. They also frequently 
serve as transhipment points. The management of corridor arrangements as well as dry ports may involve public private partnerships. TN/TF/W/39 
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 IV. COMMON FEATURES 
16. All bilateral, regional or international tran sit arrangements show some common features. 
They all strive to strike the right balance between  legitimate safety/security concerns (including the 
illegal diversion of goods into the domestic market) and the faster and more efficient movement of 
goods in transit.  
1. Special procedures for transit 
17. Special procedures for transit that consist of  separate physical lines for border crossing and 
simplified border formalities. 
2. Distinct requirements according to the risk involved and the especial characteristics of 
goods 
18. Treatment of goods in transit is adapted to the risk involved and the special characteristics of 
goods, making a difference between "normal" goods , "dangerous goods", "perishable goods" and 
"sensitive goods" that show particular ri sks to fraud (e.g.,, tobacco and alcohol). 
3. Common customs documentation and procedures 
19. The contracting parties agree on common custom s documentation and procedures of the kind 
of introducing simplified documents that are aligne d to international standards (e.g., the use of a 
regional single administrative document attached to a shipment as in the arrangement between the EU 
and EFTA-States).  
4. Limiting physical inspections and controls 
20. As a major achievement, and based on mutu al trust between governments and federal 
governments amongst them, but also between the govern ment of departure and its private sector, the 
parties are limiting their physical inspection where these are warranted by the actual circumstances or 
risks. Border authorities avoid to carry out inspec tions and controls more than once over the same 
shipment, unless it is absolutely necessary. Also, usually no quality cont rol and no veterinary, 
medicosanitary or phytosanitary inspection are impos ed for goods in transit (e xcept in cases where a 
risk of contamination exists).  
5. International or regional customs guarantee system 
21. In response to past experience th at the transit regime has often been used as a means to import 
goods fraudulently, the arrangements foresee the use of an internationally or regionally valid 
guarantee system in order to avoid provisional ta xation while securing revenue in case of inland 
diversion of goods. Usually, an individual guaran tee is provided for each transport movement, 
covering the full amount of customs duties and other charges, like VAT or excise duties. The amount 
is based upon the highest rate applicable to the goods  in the country of departure. For certain goods, 
involving greater risks, special rates apply or partic ular types of collaterals are required. Adopting an 
efficient guarantee system is central to the success of any transit arrangement, particularly through the 
use of a single guarantee in all the transit count ries, and where the guarantee is renewable for 
subsequent consignments once a previous one is  proved to have reached its destination. 
  TN/TF/W/39 
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 6. Identification of consignments (sealing) 
22. Identification of goods under the transit pro cedure is very important to stop any fraudulent 
importation of goods. As a general rule, identificati on of these goods is ensured by sealing. In addition 
to this classic function of seals, electronic seals have  been developed to provide for the detection and 
tracking of trucks. Members may wish to consid er Annex E, Standard 3 of the Revised Kyoto 
Convention that enumerates minimum requirements to be met by Customs seals and fastening. 
7. Communication, Cooperation and Coordination between authorities 
23. Due to the nature of transit involving at least two states, cooperation and coordination 
between authorities is a determinant factor in the success of such arrangements. This cooperation and 
coordination can take different forms reaching from the simple harmonisation of border crossing 
procedures and working hours to shared infrastru cture (one-stop border posts) and delegated 
competencies (both exit and entry formalities are handled by the same authority). Under these 
bilateral or regional transit arrangements, the c ontracting parties set up communication systems to 
exchange information and fight crime in the border area. 
8. Cross-border vehicle regulations 
24. Varying regulations on vehicles and loading can be very cumbersome, often leading to the 
transhipment and unsealing of goods and he nce impeding the speedy transport of goods. 
Harmonisation of vehicle and loading requirement s, as well as the recognition by the contracting 
parties of international or other agreed vehicle in surances, are therefore also part of many transit 
arrangements.  
9. Monitoring, including enhancing transparen cy and predictability, of the transit 
arrangement 
25. Experience has demonstrated that transit arrangements are not implemented with the 
ratification of the arrangement. A close monitori ng in each contracting party is crucial. Some 
arrangements foresee the appointment of national tran sit coordinators; others  introduced performance 
indicators (e.g.,, target clearance times). Some  African countries have set up public private 
partnerships to manage and monitor the arrangement.  
26. It is also important that the contracting par ties do not enforce unilateral rules and regulations 
affecting goods in transit where common regulations s hould prevail. It is reco mmended that all parties 
incorporate measures relating to transit into their arrangements. Such measures need to be addressed 
in regular meetings between trans it coordinators, or contracting parties. Coordination platforms also 
play an important role in ensuring through appr opriate measures that rules regarding transit and 
connected activities are executed in  accordance with the mandate. This is particularly accurate in 
relation with the levy of unpublis hed new or modified fees and charges pertaining to transit. Of 
course, the objective remains the elim ination of transit fees and charges, where it cannot be associated 
to services rendered.  
10. Promotion of regional transit arrangements 
27. Given that transit arrangements benefit all parties involved, it becomes obvious that the 
promotion of regional transit arra ngements should be part of the cl arification and improvement of 
GATT Article V. TN/TF/W/39 
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 How do these common features relate to Article V Freedom of Transit?
 
 28. The above listed common features can all find a root in to the principles set out in GATT 
article V. They namely specify what is meant by goods in transit "shall not be subject to any 
unnecessary delays or restrictions" (article V:3). They also relate to the requirement that no distinction 
be made affecting goods in transit based on origin , ownership, destination, or mode of transit 
(article V:2). 
V. PROPOSAL 
29. We propose that members examine the elements  discussed above, with the view to improving 
and clarifying the provisions of GATT Article V. 
30. In addition, we are aware that many transit a rrangements currently exist all over the world, 
but we also note that, unfortunately, many of such agreements face huge difficulties in their 
implementation. Establishing WTO rules on transit would provide landlocked countries with effective 
instruments to put in place and make such agre ements work. They are essential for these countries' 
trade development and therefore is a priority for them.  
31. There could be a provision encouraging Members to engage in discussions in their region. 
32. Furthermore, Members should give careful c onsideration to the possibility of acceding to 
international instruments relating to Customs transit if they are in a position to implement them. If this 
is not possible, when drawing up bilateral or regional agreements with a view to setting up 
international Customs transit procedure, they  should consider the Standards and Recommended 
Practices of Annex E of the Re vised Kyoto Convention of 1999. 
33. Transport of goods in transit will significantly improve with the introduction of some degree 
of automation: pre-announcement of the goods in tr ansit to the exit Customs offices and Customs of 
destination, direct trader inputs (submission of all entries to customs) as well as the handling of the transit guarantee (management of guarantee accounts, calculation of total duties, etc.). The inclusion 
of these elements of automation could be part of an  additional package of measures under article V, in 
the context of Annex D of the July package. 
34. Other upgrading measures include specially simplif ied procedures for authorised traders. The 
bundling of various packages of measures needs to be  further explored. Seque ncing of measures needs 
to be considered carefully. In effect, the impl ementation of some measures may require the prior 
implementation of other measures.  
VI. SPECIAL AND DIFFERENTIAL TREATMENT 
35. Many developing countries, particularly the l east developed of them will need special and 
differential treatment, based on their capacities to implement the proposals above mentioned. This is 
for example true for those countries that have no or very little IT in place or, where the banking system is not sufficiently developed for customs to re quire that transit shipments be covered by a bank 
guarantee. The implementation of these proposals will, in many cases require that technical and 
financial assistance be extended to developing countri es, most especially the least developed of them 
as envisaged in Annex D of the July package. The extent and the timing of entering into commitments 
shall be related to the implementation capacities of developing and least-developed Members. On its 
part, Switzerland will make every effort to ensure support and assistance directly related to the nature 
and scope of the commitments in order to allow implementation. Further elements of special and 
differential treatment may be proposed at a future date. The modalities and funding for such technical 
assistance needs to be further explored.  TN/TF/W/39 
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 VII. ELEMENTS FOR TECHNICAL ASSISTANCE 
36. Countries may require technical assistance in the following areas: 
- training on the procedures of a transit arrangement;  
- upgrading of systems such as ASYCUDA and others with transit modules 
introducing a certain degree of automation to transit procedures; 
- technical assistance to install computerised risk assessment; 
- support customs authorities and national fi nancial institutions to put in place 
procedures to implement a functioning guarantee system.  
 
 
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