Asia Pacific Trade Facilitation Forum 2014 24 25 September 2014, BITEC Bangkok, Thailand
Implications of the WTO Trade Facilitation Agreement for Asia and the Pacific Asia Pacific Trade Facilitation Forum September 2014, Bangkok, Thailand Dr Mohammad Saeed Senior Trade Facilitation Adviser
2 Agenda 1 What is Trade Facilitation? 2 Overview of the Trade Facilitation Agreement 3 Implementation by developing countries 4 The TFA process at the WTO: where do we stand?
3 Agenda 1 What is Trade Facilitation? 2 Overview of the Trade Facilitation Agreement 3 Implementation by developing countries 4 The TFA process at the WTO: where do we stand?
4 International trade transaction process Buy Ship Pay Prepare for export Export Transport Prepare for import Import Commercial Procedures Transport Procedures Regulatory Procedures Financial Procedures Establish Contract Order Goods Advise On Delivery Request Payment Establish Transport Contract Collect,Transport and Deliver Goods Provide Waybills, Goods Receipts Status reports Obtain Licences etc Provide Customs Declarations Provide Cargo Declaration Apply Trade Security Procedures Clear Goods for Export/Import Provide Credit Rating Provide Insurance Provide Credit Execute Payment Issue Statements Source: UNECE
5 Broad TF definition encompasses the full trade transaction scope In its broader sense, Trade Facilitation involves all operations and all stakeholders from buyer to seller Source: UNECE
6 However, the TFA focuses on regulatory procedures Buy Ship Pay The WTO Trade Facilitation Agreement Prepare addresses for the border Exportregulatory Transport activities, export practices and formalities Prepare for import Import Commercial Procedures Transport Procedures Regulatory Procedures Financial Procedures Establish Contract Order Goods Advise On Delivery Request Payment Establish Transport Contract Collect,Transport and Deliver Goods Provide Waybills, Goods Receipts Status reports Obtain Licences etc Provide Customs Declarations Provide Cargo Declaration Apply Trade Security Procedures Clear Goods for Export/Import Provide Credit Rating Provide Insurance Provide Credit Execute Payment Issue Statements Source: UNECE
Trade Facilitation is Transparency and efficiency in international trade supply chain with the objective to reduce time and costs of crossborder procedures through: Simplification, Standardisation, Harmonisation and Modernisation An ongoing and multi-agency function Better achieved through collaboration between public and private sector
8 Agenda 1 What is Trade Facilitation? 2 Overview of the Trade Facilitation Agreement 3 Implementation by developing countries 4 The TFA process at the WTO: where do we stand?
9 Trade Facilitation at the WTO No universally accepted definition Not even in the Trade Facilitation Agreement However, the WTO defines Trade Facilitation as: Simplification and harmonization of the activities, practices and formalities involved in collecting, presenting, communications and processing data required for the movements of goods in international trade Trade Facilitation is not a new concept Already included in the GATT (1948-1994): Articles V, XIII and X In Singapore Ministerial, some members desired Trade Facilitation to be a stand alone Agreement Precedent of Uruguay Round where certain GATT articles were made stand alone Agreements (e.g. SPS, Safeguard) Trade Facilitation, as part of Singapore issues became more visible
10 Trade Facilitation Timeline Singapore Issues July Package Bali Declaration TFA 1996 2001 2003 2004 2013 1 st WTO Ministerial Conference
11 WTO Mandate on Trade Facilitation Annex D of the General Council Decision of 1 August 2004 (July Framework) sets out modalities for Negotiations: Clarify and improve GATT Articles V, VIII and X: Aim: to reduce transaction costs of trade Special and differential treatment, technical assistance and support for capacity building in developing countries and LDCs: Aim: to help developing countries and LDCs to develop and implement better trade facilitation practices Increase customs cooperation: Aim: better communication between customs authorities of Members
... Outlook of Bali Ministerial Decision Negotiations on TF concluded Text of TFA agreed Preparatory Committee Established to: Legal scrubbing of the TFA Adoption of Protocol of Amendment Open Protocol for Acceptance Developing countries to submit Category A measures
Structure of the Trade Facilitation Agreement 13 Preamble Section I - Substantive Provisions TFA Articles Scope GATT articles Articles 1 to 5 Transparency Article X Articles 6 to 10 Fees and Formalities Article VIII Article 11 Transit Article V Article 12 Customs cooperation Addition to GATT Section II - Special and Differential Treatment Section III Institutional Arrangements and Final Provisions
Review of section I - Substantive Provisions 14 Overview of transparency articles: Art.1 to 5 Building on article X of GATT 1 2 3 4 5 Publication & availability of information Prior publication & consultation Advance rulings Appeal or Review Procedures Other measures Publish trade related information, including through the Internet Creation of enquiry points to answer enquiries and provide forms Provide opportunity to comment changes to trade-related regulations Consult on a regular basis public and private stakeholders Provider traders, authoritative and binding information about various customs disciplines before importation/exportation Provide right to administrative review and/or to judicial appeal of decisions made by Customs authority Regulate notification for enhanced controls or inspections Inform the importer in case of detention Provide an opportunity for a confirmatory test 5 TFA - Article number
Review of section I - Substantive Provisions 15 6 7 8 9 10 Overview of fees & formalities articles (6 to 10) Building on article VIII of GATT Disciplines on fees and charges Release and clearance of goods Border agency Cooperation Movement of goods under custom control Import, export and transit formalities Publish fees & charges imposed Periodically review them to reduce number and diversity Limit fees and charges to the costs of service rendered Establish best practices in customs and other border procedures, Ensure cooperation and coordination between national and international border regulatory agencies (e.g. alignment of working days and hours, of procedures, formalities ) Provide the possibility to transport goods dedicated for import within the Member state territory under custom control Minimize the incidence and complexity of import, export and transit formalities and decrease and simplify documentation requirements 5 TFA - Article number
Review of section I - Substantive Provisions 16 Article 7 review release & clearance of goods 7 Pre-arrival processing Provide traders the facility to submit import documents prior goods arrival Release and clearance of goods Electronic payment Separation of release from determination Provide traders the facility to submit electronic payments for duties, taxes, fees and charges Allow the release of goods prior to the final determination of customs duties, taxes, fees and charges Riskmanagement Set-up a risk management system that focus controls on high-risk consignment and quickly release low-risk consignment 5 TFA - Article number
Review of section I - Substantive Provisions 17 Article 7 review: release & clearance of goods 7 Postclearance audit Average Release Times Ensure consignment documentation compliance after release of the goods Measure and publish periodically the average release time of goods Release and clearance of goods Authorized Operators Provide additional facilitation to selected operators called authorized operators Expedited Shipments Set-up up facilitative procedures to expedite release of air cargo Perishable goods Release within the shortest possible time (incl. outside standard business hours if required by circumstances) 5 TFA - Article number
Review of section I - Substantive Provisions 18 Article 10 review: fees & formalities 10 Formalities and docs. requirements Review formalities and documentation requirements to minimize complexity of operations and simplify documentation requirements Formalities connected with importation, exportation and transit Acceptance of Copies Use of International Standards Single Window Acceptance by border regulatory agencies of paper or electronic copies of the required documentation Formalities, procedures and documentation requirements are based on international standards Set-up a single entry point through which traders will submit, only once, information to all border agencies and through which agencies will submit their response back Pre shipment Inspection No mandatory use of pre-shipment inspections for tariff classification and customs valuation 5 TFA - Article number
Review of section I - Substantive Provisions 19 Article 10 review: fees & formalities (con d) 10 Use of Customs Brokers No mandatory use of customs brokers (i.e. the use of customs brokers shall be optional) Formalities connected with importation, exportation and transit Common Border Procedures and forms Rejected goods Apply the same procedures for the release and clearance of goods at the border points throughout its territory Offer to the importer a realistic possibility to return the goods to the exporter or re-consign (if rejected on the basis of failure to comply with SGS or technical standards) Temporary admissions, in/outward processing Release of goods, without payment of duty and taxes, for importation for a predefined period and predefined purpose of use 5 TFA - Article number
Review of section I - Substantive Provisions 20 11 Review of Article 11: freedom of transit Building on article V of GATT Freedom of transit Disciplines on Transit formalities doc., fees and charges requirements Infrastructure Simplified formalities, documentation and controls No restrictions affecting traffic in transit No discrimination vs. import traffic Controls limited to the beginning and end of the operations Fees limited to transportation / administration services costs No quality controls for goods in transit Regulations of transit guarantees and customs convoys Making available physically separate infrastructure for traffic in transit (Best endeavor measure) Cooperation & Coordination Cooperating and coordinating with other countries with a view to enhance freedom of transit Appointing a national coordinator for transit 5 TFA - Article number
Review of section I - Substantive Provisions 21 Review of Article 11: freedom of transit Improvement versus article V of GATT New / improved provision Do not apply technical regulations and conformity assessment on goods in transit (Article 11.8) Impacts Further limits burdensome procedure Provide advance filing and processing for goods in transit (Article 11.9) Becomes a binding commitment Limit use of customs convoys (Article 11.5) Enhance member cooperation and appoint transit coordinator (Article 11.12 and 11.13) Only in high-risk circumstances Not when a guarantee has been granted Transparency obligation Improved coordination to smoothen traffic in transit
Review of section I - Substantive Provisions 22 Review of Article 12: Customs cooperation 12 Bestpractices sharing Share information on best practices in managing customs compliance and cooperate in technical guidance or assistance in building capacity Customs cooperation Cargo specific information sharing Exchange of information and documents to verify an import or export declaration Confirm that the documents provided are true copies of the documents Regional agreements Members retain the possibility to enter / maintain bilateral, or regional agreement for exchange of customs information TFA cannot alter or affect the Members rights and obligations under these agreements 5 TFA - Article number
Review of section I - Substantive Provisions Language of the TFA provides for different levels of obligations Binding: Shall E.g. Art. 11.8 Members shall not apply technical regulations and conformity assessment procedures to goods in transit Best Endeavour: Encouraged E.g. Art.1.2.3 Members are encouraged to make available further trade related information Combination: shall, to the extent possible/practicable E.g. Art.2.1 Each member shall to the extent practicable [ ] provide opportunities [ ] to traders [ ] to comment
24 Agenda 1 What is Trade Facilitation? 2 Overview of the Trade Facilitation Agreement 3 Implementation by developing countries 4 The TFA process at the WTO: where do we stand?
Review of section II - Special and Differential Treatment 25 TFA provides for unique S&DT Developing and LDCs having favourable treatment as compared to Developed Countries has been an integral part of WTO S&DT in WTO Agreements Lesser tariff reduction Rate of duty Product coverage Longer implementation period Delayed or deferred implementation Lesser Obligations Special Provisions S&DT in TFA go further Self designation of provisions into category A, B &C Timing of each category to be decided by individual country Obligations linked with acquisition of implementation capacity Through provision of TA and CB (including financial assistance) for Category C commitments implementation
Review of section II - Special and Differential Treatment 26 Timing and extent of commitments (Art.14) 3 different categories of commitments: A, B & C Cat. C provisions implementation process Categories Timing Conditionality Category A Time of entry into force of the TFA Ø Category B (x) years after entry into force Ø Implementation TACB provision 2 3 Category C (x) years after entry into force TACB Transitional period 1
Review of section II - Special and Differential Treatment 27 Notification and Implementation of Category A commitments (Art.15) Developing countries Implement upon entry into force Category A commitments will then be made an integral part of the Agreement LDCs Notify to the Committee up to one year after entry into force And thereby be made an integral part of the Agreement Notifications due by 31 July 2014
Review of section II - Special and Differential Treatment 28 Category B notification & implementation (Art.16 and 18) TFA entry into Force 1 Year 2 Years 3 Years Developing Countries Notify the Committee the provisions and indicative dates for implementation Notify definitive implementation dates - member may request an extension of the notification period...... LDCs... Notify the Committee the provisions and indicative dates for implementation... Confirm designations of provisions and notify implementation dates - Member may request an extension
Review of section II - Special and Differential Treatment 29 Category C Notification & implementation (Art.16 and 18) TFA entry into Force 1 Year 2 Years 2.5 Years 4.5 Years 5.5 Years Developing Countries Notify Committee provisions and indicative dates Member and donor inform TACB arrangeme nts... Inform on progress in TACB and notify definitive dates...... LDCs Notify Notify information Committee on TACB...... Category C required in provisions order to implement Inform TACB arrangeme nts and indicative dates Inform on progress in TACB and notify definitive dates
Review of section II - Special and Differential Treatment 30 Early Warning Mechanism (Art.17) If a Member experiences difficulties implementing by the definitive dates it established, it should notify the Committee: Developing Countries: no later than 120 days before the expiration date LDCs: no later than 90 days before the expiration date Notify new dates and indicate reasons for delay Automatic extension if it is the first request and: Extension requested less than 1.5 years (developing) Extension requested less than 3 years (LDCs) Subsequent extensions submitted to the Committee which will give sympathetic consideration
Review of section II - Special and Differential Treatment 31 Other TFA mechanisms (Art.19 and 20) Shifting between Cat. B and C Dispute Settlement Grace Period Developing members and LDC would have option to shift between categories Through notification to Committee Shifting from B to C would contain information on Technical Assistance Capacity building and Financial needs Extension in time frame, if needed, through Early waning Mechanism For Cat A measures Developing: 2y after entry into force LDCs: 6y after entry into force For Cat B&C measures 8 years after implementation of the provision for LDCs only Opportunity for consultation during the grace period For discussing issues relating to implementation Due Constraint for invoking DSU for LDCS
Review of section III - Institutional Arrangements and Final provisions 32 Art.23.1 provides for the establishment of a Trade Facilitation Committee at the WTO At least one dedicated session per year to: Discuss problems regarding implementation Review progress in provision of TACB Share experiences and information Review donor notifications
Review of section III - Institutional Arrangements and Final provisions 33 Art.23.2 requires the set up of a National Committee on Trade Facilitation To have a TF Committees has been made a binding obligation This obligation cannot be categorized as B or C Must be implemented upon entry into force of the TFA Art.23.2 - Each Member shall establish and/or maintain a national committee on trade facilitation or designate an existing mechanism to facilitate both domestic coordination and implementation of provisions of this Agreement.
Review of section III - Institutional Arrangements and Final provisions 34 Overview of article 24: Final provisions All provisions are binding on all Members Developed countries Members shall implement the Agreement from the date of its entry into force Developing countries and LDCs Members shall implement the Agreement in accordance with Section II S&DT provisions If they choose to use S&DT provisions Members of customs unions or regional economic arrangement may adopt regional approach to assist in the implementation
Review of section III - Institutional Arrangements and Final provisions 35 Nature of TFA obligations The language of the text will determine the nature of obligations Shall, May, encouraged to, shall subject to and consistent with Categorization of measure within Cat. A, B or C would not change the nature of obligations Categorization will only determine at what point in time a particular measure will be implemented To the extent of cat. C provisions, the categorization will also help in soliciting technical assistance and capacity building Including financial assistance
Review of section III - Institutional Arrangements and Final provisions 36 Relationship with GATT and other Agreements According to TFA article 24: Final provisions Article V,VIII and X of GATT 1994 still hold the full force As they have not been amended TFA cannot diminish any obligations contained in the GATT 1994 Including the V,VIII and X articles In case of conflict between GATT 1994, the provisions of the TFA would prevail to the extent of conflict General interpretive note to Annex 1A The TFA cannot diminish the rights and obligations under SPS and TBT Agreement (s)
37 The implementation of the TFA is expected to reduce trade costs and improve world GDP TF measures at the border have a high potential for cost reduction From 13% to 15% depending on countries income levels Overall potential trade cost reduction by income group The TFA implementation is also expected to have a significant impact on world GDP and employment 1 trillion $ income gain 20 millions jobs created (90% of which in developing countries) Source: OECD, ICC
38 ~20% trade cost reduction expected in APC Reduction in direct trade costs from trade facilitation implementation in selected Asia-Pacific countries (US$ per container) Direct cost of containerized trade for the 29 Asia Pacific countries fall by US$ 31 billion (or 20% of direct trade costs) under the full trade facilitation implementation scenario. Source: UNESCAP, Trade Facilitation and paperless trade implementation, June 2014
39 Changing the mindset Facilitation vs. control Client vs. partners Ambitious implementation vs. Legal compliance Collaborative approach vs. Turf issues
40 Going forward with implementation Prepare implementatio n Thoroughly structure TFA implementation roadmap Conduct national assessment on compliance status with TFA obligations Identify priority reforms and categorize TFA commitments Identify potential donors and implementation partners Institute public-private dialogue Involve private sector in finalizing the prioritization of the TFA commitment implementation Businesses are the main service users, and as such are best suited to point the main barriers to trade Ensure strong Inter-agency coordination Involve border regulatory agency for fine tuning the implementation of measures countries are partially compliant with As well as in the prioritization of category commitments National Trade Facilitation Committee could be the appropriate body to carry out these objectives
41 Agenda 1 What is Trade Facilitation? 2 Overview of the Trade Facilitation Agreement 3 Implementation by developing countries 4 The TFA process at the WTO: where do we stand?
42 Making TFA a binding treaty: next steps Text has been adopted in all three WTO languages Protocol of Amendment drafted to insert the Agreement into Annex 1A of the WTO Agreement to make it part of WTO law General Council was to adopt Protocol by 31 July 2014 After adoption of the Protocol by the General Council The Protocol will be open for acceptance Members will go through their internal treaty ratification process and notify acceptance of protocol to WTO The Agreement will enter into force once 2/3 of the WTO Members ratify it
43 The Adoption of the Protocol of amendment has been delayed General Council was expected to adopt Protocol before 31 July 2014 To insert the Agreement into Annex 1A of the WTO Agreement but the procedural deadline was missed following refusal of few developing countries to adopt the Protocol of Amendment India support to the Trade Facilitation agreement remains India has agreed to the text in all three WTO language on July 10 th However, India wish that progress are made on the negotiation of other Bali package, and notably food security, prior to adopting the Protocol India has suggested that issues of its interest included in the Bali package (e.g. food security) be also addressed as part of the work program of the WTO
44 Thank you for your attention For Further information, questions or comments please contact Mr. Rajesh Aggarwal: aggarwal@intracen.org Acting Director, Division of Business & Institutional Support Chief, Trade Facilitation and Policy for Business Dr. Mohammad Saeed: saeed@intracen.org Senior Trade Facilitation Adviser Mr. Ezequiel Mariano Guicovsky Lizarraga: guicovsky@intracen.org Senior Business Development Officer Mr. Pierre Bonthonneau: bonthonneau@intracen.org Junior Professional Officer, Trade Facilitation