ORDINARY CUSTOMS DUTIES Each Schedule has four parts: Part I MFN - - PowerPoint PPT Presentation

TRAINING PROGRAMME FOR THE GOVERNMENT OF INDONESIA

SESSION 8:

Indonesia Goods Schedule Modification and Rectification

Jogjakarta, Indonesia 26-29 March 2019

Each Schedule has four parts:

Part I – MFN Concessions

• Section IA – tariffs on

agricultural products

• Section IB - tariff quotas on

agricultural products

• Section II – other products

Part II – Preferential concessions Part III – Concessions on non-tariff measures Part IV – Specific commitments on domestic support and 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

ORDINARY CUSTOMS DUTIES

INDONESIA'S SCHEDULE

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

• f 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.

ORDINARY CUSTOMS DUTIES

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.

Apart from the imposition of ordinary customs duties in excess

• f bound rates or the imposition of non-permitted ODCs, in what
• ther 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.

OTHER DUTIES AND CHARGES (ODCS)

MODIFICATION OF TARIFFS

Article XXVIII

• f GATT 1994

1980 Instruments

• Article XXVIII of the GATT 1994

(main provision on modification of schedules)

• 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”) (procedures for the negotiation of modification of schedules)

• 1980 Procedures for Modification and Rectification of Schedules
• f tariff concessions (“1980 Procedures”)

(procedures for certification of rectifications of purely formal character and certification following substantive modifications)

APPLICABLE LEGAL INSTRUMENTS

TYPES OF CHANGES

MODIFICATION/WITHDRAWAL

• Renegotiation/withdrawal of

concessions

• Increases in bound rates resulting from

formation of a customs union (GATT

• Art. XXIV:6)
• Amendments to reflect latest version of

Harmonized System RECTIFICATION

• Rectifications of purely formal

character

• New concessions resulting from

plurilateral arrangements (e.g. ITA) CERTIFICATION

TYPES OF CHANGES

TYPES OF CHANGES

MODIFICATION/ WITHDRAWAL

• Art. XXVIII

RENEGOTIATIONS CERTIFICATION RECTIFICATION (purely formal) CERTIFICATION (i) Article XXVIII 1980 Guidelines (ii) 1980 Procedures (i) 1980 Procedures

TYPES OF CHANGES

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)

• r 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.

1. INITIAL NEGOTIATING RIGHTS (“INRs”)

• Right to negotiations

Member that had originally negotiated the concession. 2. PRINCIPAL SUPPLYING INTEREST (“PSI”)

• Right to negotiations
• Member with the largest share of imports in the

requesting Member's market over the past three years;

• r
• Member with the highest ratio of exports

affected by the concession. Only MFN trade. 3. SUBSTANTIAL INTEREST (“SI”)

• Right only to consultations

No specific definition. 10% of trade

WTO MEMBERS WITH RIGHTS TO NEGOTIATIONS OR 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 2003-2005 2003 2004 2005 Average 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

NEGOTIATION PROCESS

I. Claim of interest

• Members with INRs, PSIs or SIs communicate their claim in writing within 90

days of the notification.

• If initiating Member recognises the claim, it constitutes a determination

within the meaning of Article XXVIII:1. What if claim of interest is not recognized? (discussed later). II. Negotiations

• Bilateral negotiations between initiating Member and Members with INR &

PSI and consultations with Members with SI.

• Upon conclusion, initiating Member notifies Secretariat and with initialled

joint letter and final report, then circulated to all WTO Members. III. Certification

• Initiate procedures to reflect resulting changes in its Schedule using 1980

Procedures.

NEGOTIATION PROCESS

What if the PSI or SI claim of interest is not recognised?

• Member making the claim can refer the matter to the General

Council for determination (para. 4 of 1980 Procedures).

• What

happens if the General Council does not make a determination? – Honduras and Guatemala raised the non-recognition of rights at General Council. Agenda item from 2005 to 2009. – EU – Poultry (China) (DS492): China challenged EU failure to determine it as an SI holder. Panel found that: (i) it had jurisdiction over this matter; and (ii) the EU did not violate Article XXVIII because China did not export the relevant product during the reference period.

WHAT IF NO AGREEMENT?

• Initiating Member can implement its modification or

withdrawal even without agreement (Article XXVIII:3). It is an “absolute right”.

• But Members with INRs, PSIs and SIs can withdraw

equivalent concessions (retaliate) to restore balance of concessions.

• If

agreement with INRs/PSIs reached, but SI not "satisfied", SI can retaliate separately.

MODALITIES OF RETALIATION

• Retaliation should be on items on which the initiating

Member (EU) has an INR in the Schedule of the Member with the claim of interest (Affected Member). This requires looking at the Schedule of Concessions of the affected Member.

• Claiming Member has to give 30 days notice.
• Retaliation:
• must take place no later than six months after the

modification or withdrawal of the concession;

• may be applied for as long as the initiating Member

maintains its modified Schedule.

1980 PROCEDURES FOR CERTIFICATION

• Detailed procedures for certifying purely formal rectifications or

“modifications resulting from action taken under Article II, Article XVIII, Article XXIV, Article XXVII or Article XXVIII”. – Changes that do not alter the scope of a concession or rectifications

• f a purely formal character communicated to DG to be certified.
• Objections must be provided to DG within 3 months.
• Objections can be filed if draft Schedule does not correctly reflect the

modifications agreed to, or if the proposed rectification is not purely of a formal nature.

• Certifications shall record date of entry into force/effective date.