Substance of Accession Negotiations


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5.2 Rules



Import regulation

Ordinary Customs Duties

The term “ordinary customs duties” is taken from Article II:1(b) of GATT and Article 4.2 of the Agreement on Agriculture. Accession Working Parties have taken the rates included in the customs tariff of each applicant as a basis for their work.

GATT 1994 provides that customs duties may be maintained provided that they are applied in accordance with its basic most-favoured-nation rule198 but also recognizes that they often create serious obstacles to trade and that they should be subject to negotiation and binding against increase.199 Each WTO Member has negotiated a Goods Schedule containing its tariff bindings — legally binding maximum rates of “ordinary customs duties” that it may apply to imports of the products listed in its Schedule. Applicants must do the same. Schedules are usually prepared in the version of the World Customs Organization Harmonized System (HS) nomenclature applied at the time of accession. The tariff negotiations are conducted bilaterally and the results recorded in the Goods Schedule of the new Member.200 There has been little discussion on “ordinary customs duties” in accession Working Parties. Only a few acceders have made Protocol commitments. In some cases Members have wished to ensure that seasonal, specific or mixed specific and compound duties imposed in future do not exceed the bound rate.201

One acceding country made Protocol commitments on the level of its customs duties on specified items. One of these provided that the same rates of duty would be applied under preference programmes or regional agreements as to all imports of wood and paper products. In another, the undertaking was that any new tariff lines for completely knocked down kits for motor vehicles or semi-knocked down kits for motor vehicles would be subject to tariff rates of no more than 10 percent.202

Another country undertook to apply tariffs on an MFN basis to all countries and separate customs territories with which it had a WTO relationship, but a later section of the Report makes clear that this does not prevent it from joining customs unions or free trade areas.203

Other duties and charges

This section deals with any duties or charges levied on imported goods but not on domestically produced goods, other than charges equivalent to internal taxes, anti-dumping duties, countervailing duties and fees and charges for services rendered (for which, see below). Other duties and charges (ODCs) provide revenue for the government and protection to domestic production and therefore, like customs duties, directly affect access to markets. The WTO provides that if the customs duty on an item is bound in a Member’s Schedule, then any other duties and charges on that item are also bound.204

WTO Members have shown that they are particularly interested in obtaining full information about any ODCs, ensuring their removal, and obtaining binding at zero in their Goods Schedules.

In some cases ODCs have been eliminated.205 However, the removal of ODCs entails a loss of revenue for the government and some Working Party Reports indicate that they have been incorporated in the customs duty206 or into internal taxes applicable to both imported and domestically-produced goods207.

In addition, many acceders have accepted Protocol commitments on the subject. While the precise wording of these has differed, most commit the acceder in question to eliminate any existing ODCs and to bind them at zero in their Goods Schedules.208 Some variations have occurred however. Two Protocol commitments grant transitional periods for the elimination of certain ODCs.209 Others provide a limited number of exceptions to the general rule that ODCs be bound at zero.210

Tariff Rate Quotas and tariff exemptions

Tariff Rate Quotas (TRQ)

Tariff rate quotas (TRQ) allow a specific quantity of the product concerned to be imported at a lower rate of import duty than is charged on out-of-quota imports. No restriction of the overall quantity of goods that may be imported is involved but high out-of-quota tariff rates may prevent trade from taking place and the allocation of quotas or licenses may create trade barriers and lead to discrimination between sources of supply.

While the GATT 1994 contains a general prohibition of quotas, it does not prohibit TRQs, provided inter alia that: tariff bindings are observed; they are non-discriminatory; any related fees are limited in amount to the approximate cost of services rendered; they are administered in a transparent way; and any import licensing procedures conform to the agreement on that subject.211 TRQs are used to implement the minimum access commitments provided for in the Agreement on Agriculture: in this case they were regarded as a preferable alternative to other, restrictive, measures (for section on agriculture, see below).212

TRQs are dealt with in the tariff negotiations and bound in the Tariff Schedule.213 They are also discussed in Working Parties on the basis of factual information provided by the applicant.

Applicants must provide full and complete factual information on any TRQs that they maintain and must be prepared for detailed discussion of these in the Working Party as well as bilaterally, in the tariff negotiations. They need to be aware that some WTO Members consider that TRQs distort trade and are difficult to administer. While the lower rates of in-quota duty may provide additional trading opportunities, there are concerns that complex or non-transparent systems for their allocation may be discriminatory and may themselves create obstacles to trade. Members also seek to ensure, as far as possible, that acceding countries do not use TRQs and have particularly resisted their use in the non-agricultural sector. Members have also wished to ensure that any TRQs interfere as little as possible with trade flows.

In the relatively few cases that TRQs have been agreed, they have been bound in the Goods Schedule of the acceder (see Annex 15). Some Working Party Reports contain Protocol commitments that complement these bindings.

Many applicants do not use TRQs and in such cases there is often either no Protocol commitment or a very brief commitment focussing on the importance of non-discrimination and transparency in any future use. In one of these cases the Protocol commitment (which also covers tariff exemptions) reads as follows: “[X] would administer any tariff rate quota or tariff exemptions in conformity with the requirements of the WTO Agreement, in particular Articles I, II, VIII and XIII of the GATT 1994 and the Agreement on Import Licensing Procedures.214 In another case, only Article I of GATT 1994 and the TRIMs Agreement have been picked out for particular mention.215

One early Working Party Report on an acceding country that used TRQs also contains similar commitments, one such providing that “from the date of accession any application of general tariff rate quotas such as those described in [the Report] would be in accordance with the provisions of Articles III and XIII of GATT 1994”.216

If TRQs are being applied in the context of preferential trade agreements, Members will ask for any tariff rate quotas negotiated in the context of WTO accession to be reserved for MFN suppliers. If an applicant is a member of a regional grouping which provides for the opening of a TRQ for the other members of the group, third country members of WTO have asked for a TRQ reserved for them. This is illustrated by one acceding country’s Protocol commitment that “TRQs included in its Schedule of Concessions and Commitments on Goods would be made available only for the importation of product from MFN suppliers and would not be used to meet [its] preferential obligations under bilateral or regional free trade agreements”.217

Later Reports on applicants that use TRQs are more detailed. Their Protocol commitments lay down principles governing the design of TRQs. For instance, one commitment contains a general obligation to ensure that TRQs were administered on a transparent, predictable, uniform, fair and non-discriminatory basis using clearly specified timeframes, administrative procedures and requirements that would provide effective import opportunities; that would reflect consumer preferences and end-user demand; and that would not inhibit the filling of each TRQ.218 These Protocol commitments have also extended the list of relevant WTO provisions.219 Two Protocol commitments provide for review or consultation procedures.220 One of these provides that consultations would be held with any Member to ensure that the TRQs on non-agricultural products would be allocated in a transparent, equitable and non-discriminatory manner and the quota would be fully utilized.221

These commitments also specify the system for administering TRQs in detail.222 One method in particular has given rise to some debate. Some Members, while acknowledging that there was discussion taking place within the WTO on the legality of auctioning or tendering of market access entitlements, were of the view that premiums associated with this method of allocation represented charges imposed on or in connection with imports that were inconsistent with commitments undertaken by Members under Article II:1(b) of GATT 1994. The representative of the acceder concerned accepted a Protocol commitment that, “should it be demonstrated in the WTO that charges associated with allocation by competitive processes were WTO inconsistent, [it] would promptly modify its tariff quota allocation system to bring it into conformity with WTO requirements”.223

Members may require TRQs on non-agricultural products to be phased out. One Protocol commitment provides that TRQs on passenger cars and light commercial vehicles and certain fish products would be removed over an eight year transitional period.224 However, another acceding country persuaded Members to allow it to maintain a TRQ on one non-agricultural product, salt, on the grounds that it was the main source of income for hundreds of thousands of poor farmers living in coastal areas where the use of land for agriculture was almost impossible.225

Tariff exemptions

Tariff exemptions are similar to TRQs, in that they allow some imports to enter either without paying the duty normally charged or at lower rates of duty. Many are for specified end-uses, for instance those which permit diplomatic missions or charities to import goods duty-free. If conditions are attached to tariff exemptions they may contravene WTO provisions. For example, tariff exemptions that are contingent on the purchase or export of domestically produced products are contrary to the Agreement on Trade-Related Investment Measures.226 Exporters of products may be accorded tariff exemptions in respect of imported inputs but any reductions or exemptions that exceed tariffs actually paid on these inputs constitute a prohibited export subsidy and a duty drawback system is the preferred alternative.227 Both TRIMs and export subsidies are dealt with in separate sections below.

Information on all tariff exemptions needs to be provided but particular attention needs to be paid to product-specific tariff exemptions, as well as policy-related exemptions (e.g. those used as investment incentives). Members will be interested in seeing whether tariff exemptions are being applied equally to imports from all WTO Members on an MFN basis and will wish to ensure that conditions attached to the granting of tariff exemptions do not violate WTO obligations.

Tariff exemptions have been relatively uncontroversial and only a few Working Parties have found it necessary to include Protocol commitments on this subject in their Reports. The wording of these has varied. All confirm that the tariff exemptions in question would only be implemented in conformity with the relevant WTO provisions and cite examples of these provisions. The most obvious is Article I of GATT 1994, the basic MFN clause.228 Where it was considered necessary, reference has also been made to the provisions on TRIMs and export subsidies.229

Fees and charges for services rendered

The fees and charges referred to here are charges imposed by governmental authorities for services rendered on or in connection with importation, typically for such services as customs clearance, exchange control, consular transactions, such as consular invoices and certificates, sanitary and veterinary inspections, etc..230 GATT 1994 treats them differently from customs duties and “other duties and charges” which protect domestic production and raise revenue and the basic rule in this case is that they must be limited to the approximate cost of the services rendered. GATT 1994 also recognizes the need for minimizing the incidence and complexity of import formalities, including consular formalities.231

Accession Working Parties have wanted detailed information on the subject and to ensure that the rules will be observed. They have pointed to the jurisprudence that makes it clear that ad valorem fees or charges, which are by definition related to the value of imports and not to the cost of the service provided, do not conform to this requirement.232 They also stress that fees and charges may cover only the variable cost to the government of providing the service and not the capital cost involved, e.g. the cost of processing the customs forms but not the cost of building customs posts. If the fees and charges seem high, some Members may ask to see the calculations on which they are based. Members want details of any such fees. They also stress the importance of transparency and the rules of GATT 1994 relating to publication of laws and regulations dealing with these fees and charges.

The Protocol commitments reflect these concerns. The language is not identical in all Reports but nearly all make a specific reference to Article VIII and most to the need for transparency. Typically, the acceder has “confirmed that from the date of accession [it] would impose fees and charges for services rendered related to importation or exportation only in conformity with the relevant provisions of the WTO agreements, in particular Articles VIII and X of the GATT 1994. Information regarding the application and level of any such fees, revenue collected and their use would be provided to WTO Members on request.”233

Where relevant, the commitments also provide that acceders bring fees into conformity with WTO rules, for instance by eliminating ad valorem fees.234 Commitments may also provide that the acceders shall ensure that customs fees or charges applied or administered by national or sub-national authorities are in conformity with the GATT 1994 and based on unified criteria ensuring that they are limited to the approximate cost of services rendered.235

Questions relating to consular formalities and charges have been raised under this heading. These have long been an irritant for many WTO Members. A few Protocol commitments provide that the requirement for notarization, authentification or consularization of trade documents would be terminated by a certain date.236 One acceder confirmed that consular charges were not required for the authentification of documents necessary to import goods and another confirmed that regarding import/export documentation there was no requirement for authentification of the documentation by its consulates overseas, and there was no fee charged in this respect.237

Application of internal taxes to imports

WTO rules provide for both national treatment and MFN treatment in this area. The basic provision is the relevant national treatment rule of GATT 1994 Article III: “imported products must not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products”. So Members may levy indirect taxes such as excise taxes, stamp duties, general sales taxes or value added taxes on imported goods provided that they do not afford protection to domestically-produced goods.

The general MFN rule of GATT 1994 Article I provides that, when levying these taxes, governments must not discriminate between imports from different Members. Products imported from a Member must be treated no less favourably than like products imported from any other Member, including those not members of the WTO.

It is important that applicants provide full information about their indirect taxes, such as excise taxes, general sales taxes or value-added taxes, including a list of the products subject to each tax, the rate of tax (where appropriate, the general rate of tax and a list of any products that pay lower rates or are exempt from tax) and the base for the calculation of the tax. Tax rates applied to imported and to domestic products should be clearly stated.

Working Parties scrutinize internal taxes in detail. During the fact-finding stage, if the methodology for the calculation of taxes makes it difficult to compare the taxes applied to imported and domestically produced goods, Members are likely to request the acceder to simplify its system.238 Members of accession Working Parties are particularly interested in any differences between the treatment of imported products and domestically-produced products or of imports from different origins and any differences in the treatment of like products. There is no general definition of the term ’like products’ in the WTO and the practice is to determine whether imported and domestic products are’ like’ on a case-by-case basis. An extensive jurisprudence on the subject does, however, provide guidance on this issue.239

Some Members consider that the exemption of the domestic output of very small producers from application of the sales tax, while all imports were subject to that tax without exception, constituted a breach of national treatment with regard to the application of that tax.240 VAT thresholds have been discussed and accepted in some instances.

It is difficult to speak of a standard Protocol commitment on this matter. However, the following text is a succinct expression of the basic point: “The representative of [X] confirmed that, from the date of accession, [X] would apply its domestic taxes, including value-added and excise taxes, in a non-discriminatory manner consistent with Articles I and III of the GATT 1994.”241 Some other texts call for the non-discriminatory application of domestic taxes to imports but refer specifically only to Article III of GATT 1994.242

Many acceders have needed to modify internal taxes to bring them into line with WTO requirements. In these cases, it is standard practice either to note the changes already made to bring them into line or to agree a Protocol commitment.

Some applicants have based their border tax adjustments on the origin principle, rather than the destination principle. This means that goods are subject to the tax in the exporting country, rather than the importing country. It has been pointed out in Working Parties that the application of the destination principle to imports from some countries and the origin principle to imports from others might lead to breaches of the MFN rule in Article 1 of GATT 1994. Some acceders therefore agreed to apply the destination principle to all imports.243

The Protocol commitments of several acceders provide for changes in the tax base in order to ensure that imported products are treated no less favourably than domestically-produced products. For example, changes were made to the base for the levying of a commodity tax, to the timing of payments of an excise tax on domestically produced goods and imports, to eliminate the use of minimum values, including domestic wholesale prices or any other domestic prices, for the application of its domestic taxes to imports.244

In a significant number of cases, acceders charged higher rates of tax on certain imported products than on the “same” products when domestically produced and committed themselves to eliminate this discrimination. Products concerned included agricultural products, alcohol and tobacco products, and new and used automobiles.245

WTO Members have also taken issue with applicants for charging higher rates of tax on certain products that were imported than on “like” products that were produced domestically. These cases all concerned alcoholic beverages or tobacco products. In all of these cases, the acceders concerned accepted obligations to remove the differentiation involved.246

In some cases short transitional periods have been granted to provide time for new Members to implement their commitments in this area. An acceding country was allowed a transitional period of three and a half years to equalize its taxes on spirits and beer.247 In another case that involved a change in an integral part of the country’s agricultural support system, a period of about six years was agreed. In this instance the acceding country was required to notify the General Council annually of the status of the tax exemption and its scope and level and, upon request, to consult with WTO Members concerning the status of the VAT exemption and its effect on their trade.248 A few other of the Protocol commitments also contain provisions to ensure transparency during the transitional period.249



198. Called the most-favoured-nation rule because it provides that any benefits granted to imports from the most-favoured nation must be accorded to like products from all WTO Members. For the precise text of the basic MFN provision, see GATT 1994, Article I:1. There are a number of exceptions to this rule, inter alia for preferences for developing countries and for customs unions and free trade areas. back to text
199. GATT 1994, Article XXVIII bisback to text
200. See section on tariff negotiations below. back to text
201. Viet Nam, para 155; Armenia, para 53; Kyrgyz Republic, para 34. back to text
202. China, paras 91 and 93. back to text
203. Viet Nam, paras 155, 158 and 526. For membership of regional groupings, see section on Trade Agreements. back to text
204. See Understanding on the Interpretation of Article II:1(b) of the GATT. back to text
205. Tonga, para 58. back to text
206. E.g. the former Yugoslav Republic of Macedonia, para 68; Jordan, para 56; Bulgaria, para 31. back to text
207. Bulgaria, para 31. back to text
208. Tonga, para 59; Viet Nam, para 162; Cambodia, para 55; Nepal, para 42; the former Yugoslav Republic of Macedonia, para 71; Armenia, para 54; Chinese Taipei, para 40; China, para 96; Jordan, para 58; Albania, para 51; Mongolia, para 10; Bulgaria para 30. back to text
209. Nepal, para 42; the former Yugoslav Republic of Macedonia, para 71. back to text
210. Saudi Arabia, para 115; Chinese Taipei, para 40. back to text
211. Tariff bindings, Article II; non-discrimination, Articles I and XIII (subject to exceptions for regional groups, preferences); fees, Article VIII; transparency, Article X. back to text
212. Agreement on Agriculture, Article 5. back to text
213. For an examination of these bindings, see the relevant section below. back to text
214. Saudi Arabia, para 113. back to text
215. Tonga, para 62. back to text
216. Lithuania, para 56. back to text
217. Lithuania, para 55. back to text
218. China, para 116. back to text
219. Viet Nam, para 174. back to text
220. China, paras 116 — 120 and Protocol Annex 1A, IV 1 (a), Chinese Taipei, para 61. back to text
221. Chinese Taipei, para 61. See also analysis of Goods Schedule below. back to text
222. See Viet Nam, paras 165-174; Chinese Taipei, paras 36-39, 61 and Goods Schedule. back to text
223. Chinese Taipei, paras 36-39. back to text
224. Chinese Taipei, para 61. back to text
225. Viet Nam, para 165. back to text
226. Agreement on Trade — Related Investment Measures, Article 2 and Annexback to text
227. Agreement on Subsidies and Countervailing Measures, Article 3.1(a) and Annexed Indicative List of Export Subsidies, Item (i). back to text
228. Viet Nam, para 177; Saudi Arabia, para 113; Cambodia, para 59; China, para 111; Kyrgyz Republic, para 37. See also Jordan, para 63. back to text
229. TRIMs: Viet Nam, para 177; Cambodia, para 59. Export subsidies: Viet Nam, para 177. back to text
230. See GATT 1994 Article VIII:4back to text
231. GATT 1994 Article VIII:1(c). GATT BISD II/210, BISD 1S/25 and 100, BISD 6S/25. back to text
232. GATT 1994 BISD 35S245. back to text
233. Tonga, para 68; Viet Nam, para 184; Saudi Arabia, para 123; Nepal, para 44; Cambodia, para 62; the former Yugoslav Republic of Macedonia, para 84; Armenia, para 60; Chinese Taipei, para 45; China, para 103; Lithuania, para 59; Croatia, para 58; Oman, para 49; Albania, para 53; Georgia, para 53; Jordan, para 72; Estonia, para 50; Latvia, para 48; Kyrgyz Republic, para 44; Panama, para 23; Mongolia, para 10. back to text
234. Viet Nam, para 184; Cambodia, para 62. back to text
235. China, para 103 and Protocol I.11. back to text
236. Saudi Arabia, para 122 (31 December 2007, two years after accession); Jordan, para 72 (providing for the termination of its consular formalities by 31 December 2002). back to text
237. Moldova, para 61; Armenia, para 54. back to text
238. Chinese Taipei, para 53; Mongolia, para 11. back to text
239. See GATT and WTO Analytical Indexes for relevant cases. back to text
240. Mongolia, para 12. See also Tonga, para 72; Viet Nam, para 190; Cambodia, paras 68 and 71; Nepal, para 61. back to text
241. For this and similar texts, see Tonga, para 75; Saudi Arabia, para 171; Cambodia, para 71; Nepal, para 64; Armenia, para 72; Croatia, para 64; Oman, para 51; Jordan, para 76; Estonia, para 62. back to text
242. Viet Nam, para 198 (basic commitment); the former Yugoslav Republic of Macedonia, para 97; Chinese Taipei, para 50; Moldova, para 74; Lithuania, para 66; Albania, para 58; Bulgaria, para 45. back to text
243. See: Armenia, para 71; Moldova, para 66; Georgia, para 61; Kyrgyz Republic, paras 47 and 48. back to text
244. Respectively, Chinese Taipei, paras 49 and 50; Moldova, para 69 and Georgia, para 62. back to text
245. Cambodia, para 64; Armenia, para 65; Chinese Taipei, para 55; Moldova, para 68; Jordan, para 75; Estonia, para 57; Latvia, para 52 and Ecuador, para 19. back to text
246. Alcoholic beverages: Viet Nam, paras 190, 198, 199; Nepal, para 64; the former Yugoslav Republic of Macedonia, para 91; Armenia, para 70; Moldova, para 72; Lithuania, para 66; Albania, para 57; Georgia, para 57; Bulgaria, paras 43 and 45. Tobacco products: the former Yugoslav Republic of Macedonia, para 97; Albania, para 57; Georgia, para 57 and Bulgari,a para 45. back to text
247. Lithuania, para 66. back to text
248. Armenia, para 65. back to text
249. Viet Nam, paras 198 and 199; the former Yugoslav Republic of Macedonia, para 97; Armenia, para 64; Lithuania, para 66; Kyrgyz Republic, para 48; Bulgaria, para 45 and Ecuador, para 19. back to text




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