T RAINING P ROGRAMME F OR T HE G OVERNMENT O F I NDONESIA SESSION 8: Indonesia Goods Schedule Modification and Rectification Jogjakarta, Indonesia 26-29 March 2019
ORDINARY CUSTOMS DUTIES Each Schedule has four parts: Part I – MFN Concessions • Section IA – tariffs on Part II – Preferential agricultural products concessions • Section IB - tariff quotas on agricultural products • Section II – other products Part IV – Specific commitments on Part III – Concessions on domestic support and non-tariff measures export subsidies on agricultural products
ORDINARY CUSTOMS DUTIES The most salient elements in Part I of a Schedule are the following: ▪ Tariff item number. ▪ Description of the product. ▪ Bound rate of duty. ▪ Initial Negotiating Rights (INRs), current and historical. ▪ Other duties or charges. ▪ Special Safeguards (SSG) (for agriculture products). ▪ Determining a Member’s concession on a particular tariff line could involve the examination of several legal instruments. http://www.wto.org/english/tratop_e/schedules_e/goods_schedules_table _e.htm
I NDONESIA ' S S CHEDULE
ORDINARY CUSTOMS DUTIES Can a Member, which has bound an ad valorem customs duty, apply a specific customs duty instead? VS Argentina – Textiles and Apparel (DS56) : ▪ Article II:1(b) does not state whether the type of duty applied may differ from that listed in the Schedule. ▪ Argentina bound an ad valorem duty of 35 percent on textiles. However, it applied a specific minimum duty (DIEM).
ORDINARY CUSTOMS DUTIES Can a Member, which has bound an ad valorem customs duty, apply a specific customs duty instead? VS Argentina – Textiles and Apparel (DS56) : ▪ Article II:1(b) does not state whether the type of duty applied may differ from that listed in the Schedule. ▪ Argentina bound an ad valorem duty of 35 percent on textiles. However, it applied a specific minimum duty (DIEM). ▪ The panel found that as the binding was in ad valorem terms , Argentina could not apply a specific minimum duty. ▪ The Appellate Body found that Article II:1(b) requires Members to refrain from applying duties above bindings.
ORDINARY CUSTOMS DUTIES "the structure and design of the Argentine system is such that for any DIEM, no matter what ad valorem rate is used as the multiplier of the representative international price, the possibility remains that there is a 'break-even' price below which the ad valorem equivalent of the customs duty collected is in excess of the bound ad valorem rate of 35 percent." " It is possible for a Member to design a specific duty system containing a "ceiling" or "cap" on the level of duty applied: ensuring that the equivalent ad valorem rate remained below the binding." Appellate Body Report, Argentina – Textiles, paras. 41-56.
OTHER DUTIES AND CHARGES (ODCS) What are "other duties and charges" ("ODCs")? • No definition. In practice, any duty or charge "in addition" to an ordinary customs duty. Wide variety of charges, such as development taxes, foreign exchange fees, revenue duties, etc. • Article II:1(b), second sentence: products listed in the Schedules cannot be subject to ODCs unless (i) they were imposed at the date of the GATT or (ii) they were mandatorily required to be imposed at that date. • In Peru – Agricultural Products the Appellate Body upheld the Panel's finding that the PBS additional duties are "variable import levies" in the Agreement on Agriculture. Not an "ordinary customs duty" and therefore an "other duty or charge" within the meaning of Article II:1(b) of the GATT 1994, second sentence. Upheld Panel's finding . Appellate Body Report, Peru – Agricultural Products, paras. 5.74, 6.6.b.
OTHER DUTIES AND CHARGES (ODCS) How do we know if a Member has ODCs? • Prior to the WTO Agreement: no record of the level and nature of ODCs. • Thus, a complainant has to show that the ODC was not in place or required under domestic legislation of the importing Member as of the time when the concession was made. • Now, pursuant to the Understanding on the Interpretation of Article II:1(b), all ODCS have to be recorded for transparency reasons. The date as of which ODCs are bound is 15 April 1994.
OTHER DUTIES AND CHARGES (ODCS) Apart from the imposition of ordinary customs duties in excess of bound rates or the imposition of non-permitted ODCs, in what other manners can the value of concessions be undermined? ▪ Reclassification of a product under a different heading having a higher ordinary customs duty (EC – Chicken Cuts) . ▪ Modification of criteria for the valuation of goods ( ad valorem duties) ( Colombia – Indicative Prices and Ports Restrictions ).
OTHER DUTIES AND CHARGES (ODCS) Article II:2 exempts certain measures from Article II:1: a) a charge equivalent to an internal tax imposed consistently with the provisions of paragraph 2 of Article III in respect of the like domestic product or in respect of an article from which the imported product has been manufactured or produced in whole or in part; b) any anti-dumping or countervailing duty applied consistently with the provisions of Article VI; c) fees or other charges commensurate with the cost of services rendered.
. MODIFICATION OF TARIFFS
APPLICABLE LEGAL INSTRUMENTS Article XXVIII of the GATT 1994 • (main provision on modification of schedules) Article XXVIII of GATT 1994 Ad Notes to Article XXVIII • (clarify definitions and procedures) Understanding on Article XXVIII • (definition of Principal Supplying Interest (“PSI”) ; conversion of unlimited tariff concession into TRQ) 1980 Procedures for Negotiations under Article XXVIII (“ 1980 • Guidelines”) 1980 (procedures for the negotiation of modification of schedules) Instruments 1980 Procedures for Modification and Rectification of Schedules • of tariff concessions (“ 1980 Procedures”) (procedures for certification of rectifications of purely formal character and certification following substantive modifications)
TYPES OF CHANGES TYPES OF CHANGES MODIFICATION/WITHDRAWAL RECTIFICATION - Renegotiation/withdrawal of - Rectifications of purely formal concessions character - Increases in bound rates resulting from formation of a customs union (GATT - New concessions resulting from Art. XXIV:6) plurilateral arrangements (e.g. ITA) - Amendments to reflect latest version of Harmonized System CERTIFICATION
TYPES OF CHANGES TYPES OF CHANGES MODIFICATION/ Art. XXVIII CERTIFICATION WITHDRAWAL RENEGOTIATIONS (i) Article XXVIII (ii) 1980 Procedures 1980 Guidelines RECTIFICATION CERTIFICATION (purely formal) (i) 1980 Procedures
WHEN CAN YOU MODIFY? There are designated three-year periods (beginning on 1 January 1958) during which WTO Members can notify their interests to modify their schedules. The current three-year period is 1 January 2018 – 31 December 2020. Cyclical Renegotiation (Article XXVIII:1) ▪ Authorization must be requested between three and six months before start of the three-year period. Negotiations must conclude by end of the period. No need to reserve rights in advance. Renegotiation in "special circumstances" (Article XXVIII:4) ▪ Request for authorization at any time. Must be approved by CTG. ▪ Complete negotiations within 60 day period (can be extended by CTG) Renegotiations following a reservation (Article XXVIII:5) ▪ WTO Members having reserved their right at the beginning of the period may renegotiate at any time. Most common .
HOW TO MODIFY A GOODS SCHEDULE? • Initiating Member submits notification to Secretariat for circulation in a Secret document to all WTO Members. • Notification must include: i. List of items intended to be modified/withdrawn with corresponding tariff lines; ii. Intention to modify (increase duty/convert to TRQ/convert to tariff) or withdraw; iii. Statistics of imports by country of origin for past three years. • Advise parties “primarily concerned” (INRs, PSI) it is ready to enter into negotiations on compensatory adjustments.
WTO MEMBERS WITH RIGHTS TO NEGOTIATIONS OR CONSULTATIONS 1. INITIAL NEGOTIATING RIGHTS Member that had originally negotiated the (“ INRs ”) concession. - Right to negotiations 2. PRINCIPAL SUPPLYING - Member with the largest share of imports in the INTEREST (“PSI”) requesting Member's market over the past three years; - Right to negotiations or - Member with the highest ratio of exports affected by the concession. Only MFN trade. 3. SUBSTANTIAL INTEREST (“SI”) No specific definition. 10% of trade - Right only to consultations
PSI, SI EXERCISE: WTO Member “X” notifies its intention to renegotiate its tariff concession for poultry. Who has PSI and SI? Value (in thousand euros) Quantity (in tons) 2003 2004 2005 Average 2003 2004 2005 Average 2003-2005 2003-2005 Total 223,338.4 120.2 5,911.8 76,456.8 137,693.0 427.8 3,271.7 47,130.8 Switzerland 4.9 1.6 0.2 0.1 Nicaragua 0.7 0.2 0.0 0.0 Bulgaria 1.3 0.4 0.1 0.0 Ukraine 9.4 3.1 20.0 6.7 USA 149.5 18.3 55.9 26.0 1.5 9.2 Brazil 138,846.2 87.7 5,887.4 48,273.8 88,764.4 423.8 3,231.1 30,806.4 Bolivia 0.1 0.0 0.0 0.0 Argentina 2,289.4 763.1 1,432.7 477.6 Israel 11.8 7.9 4.1 8.0 1.5 2.0 0.6 1.4 Thailand 82,040.2 0.5 27,346.9 47,468.3 0.1 15,822.8 China 0.1 0.0 0.2 0.1 Australia 0.1 0.0 0.0 0.0 N. det. Extra 10.9 3.6 20.0 6.7
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