e-bgd-ma-72
-
Upload
bharat-gupta -
Category
Documents
-
view
215 -
download
0
Transcript of e-bgd-ma-72
-
7/28/2019 e-bgd-ma-72
1/20
e-bgd-ma-72.doc
BACKGROUND MATERIAL
This summary has been prepared by the Secretariat under its ownresponsibility. The summary is for general information only and is not
intended to affect the rights and obligations of Members.
World Trade Organization, 2004
With written permission of the WTO Secretariat, reproduction and use of thematerial contained in this document for non-commercial educational and
training purposes is encouraged.
WTO Institute for Training and Technical Cooperation,Centre William Rappard, 154 Rue de Lausanne, 1211 Geneva 21
Tel: (41 22) 739 56 31 , Fax: (41 22) 739 57 81
-
7/28/2019 e-bgd-ma-72
2/20
MARKET ACCESS (Goods) MA1
Background / Rules
Definitions
Market access is one of the most basic
concepts in international trade. It describes the
extent to which a good or service can compete
with locally-made products in another market.
In the WTO framework the term stands for the
totality of government-imposed conditions
under which a product may enter a countryunder non-discriminatory conditions.
Tariffs and non-tariff measures
Market access in the WTO sense, in the case
of goods, is regulated through border
measures, i.e. tariffs, quantitative restrictions
and other non-tariff measures. The aim of
multilateral trade negotiations has been to
make market access more liberal as well as
more predictable.
Tariffs - bindings
Tariffs are the oldest and probably the most
familiar of all trade measures. Tariffs have
been the GATT's traditional and most
successful field of activity and represent, in
principle, the only instrument of protection
allowed generally by the General Agreement.
Under Article II, contracting parties can "bind"
their tariffs; the rates bound after reduction or
at a low level without reduction are referred toas "tariff concessions" and are contained in
schedules of tariff concessions. Each Member
of the WTO has a schedule, except when they
have one schedule for a customs union as in
the case of the member States of the European
Communities, which have one schedule. A
"binding" is a commitment not to raise the
tariff rate above the levels specified in the
schedules of concessions. Although eight
rounds of negotiations held in GATT since
1947 have lowered the level of average tariff
protection in industrialized countries
considerably, there are still some peaks in the
case of sensitive products in which the tariff
levels are significantly high.
3.2
TARIFF
A tariff is a duty or a levy levied at the
border on goods going from one customs
territory to another.
Ad valorem duty
An ad valorem duty is a customs duty
expressed as a percentage of the value of
the imported goods.
Specific duty
A specific duty is a customs duty which is
not related to the value of the imported
goods, but to the weight, volume, etc. ofthe goods. It is levied as a fixed sum per
unit of quantity, e.g. 2 dollars per
kilogram.
Compound and mixed
A compound duty is a customs duty
comprising an ad valorem duty to which is
added or, less frequently, subtracted a
specific duty, e.g. 10% + 2 dollars per
kilogram. A mixed duty is a duty where a
minimum or a maximum tariff protectionis ensured by the choice between, in
general, an ad valorem duty and a specific
duty as in the following examples: 10%
minimum 2 dollars per kilogram; 10% or 2
dollars per kilogram whichever is less;
10% maximum 2 dollars per kilogram.
-
7/28/2019 e-bgd-ma-72
3/20
MARKET ACCESS (Goods) MA
Non-tariff measures
Non-tariff measures include all measures,
other than tariffs, used to protect domestic
industry. One of the main principles of GATT
is that protection to domestic industries should
be given through tariffs and not through
imposition of quantitative restrictions andother non-tariff measures restricting imports.
While reduction or elimination of tariff takes
place through specific commitments, non-tariff
measures are dealt with by developing rules
and disciplines to limit their trade restrictive
effect.
Quantitative restrictions
Article XI of the GATT 1994 prohibits the use
of quantitative restrictions in both imports and
exports. Exceptions to the general prohibition
of the use of QRs contained in Article XI, as
well as in Articles XII, XVIII, XX and XXI
govern the precise conditions under whichsuch measures can be used. Additionally,
several WTO Agreements contain provisions
governing the use of quantitative restrictions
in certain other circumstances.
In Brief
Predictable and growing access to markets for
goods and services is an essential principle of
the WTO. This principle is fulfilled throughvarious provisions so as to guarantee security,
predictability and continued liberalization of
trade.
In the case of goods, a basic GATT postulate
is that tariffs should normally be the only
instrument used to protect domestic industry.
Furthermore, tariffs should be predictable and
stable.
Security and predictability in trade in goods
are achieved through the commitments
embodied in the "binding of tariffs". A
"bound" tariff is a tariff in respect of which
there is a legal commitment not to raise it
beyond the bound level. The binding of a tariff
at a level higher than the tariff actually applied
is considered as a legitimate concession. In
this case, the concession is the binding itself,
that is, the commitment not to raise the tariff
beyond that level. The developed countries
have normally bound their tariffs at the applied
levels. By contrast, and consistently with openmarket policies, developing countries have
adopted commitments on "ceiling bindings",
that is, bindings at levels higher than the
applied rates. This has allowed developing
countries to substantially increase their bound
commitments, thus underpinning their open
markets policies, while keeping a certain
margin for protection in case of need.
In the past, tariff negotiations were launched
periodically under the auspices of the GATT.
3.3
OTHER DUTIES AND CHARGES
(ODCs)
"Other duties and charges" include all
taxes levied on imports in addition to the
customs duties which are not in conformity
with Article VIII (Fees and Formalities) of
GATT 1994. Article II:1 (b) stipulates that
the products described in the schedules
"shall be exempt from other duties or
charges of any kind imposed in excess of
those imposed at the time a concession was
granted". Such other duties may include a
"development tax", a "stamp tax", a "fiscal
tax" etc.
The Understanding on the Interpretation of
Article II:1 (b) of GATT 1994 negotiated
during the Uruguay Round is aimed at
obtaining greater transparency in the use
by governments of other duties and
charges. This Understanding, which is
legally part of the GATT 1994 itself,
requires Members to indicate in their
schedules any other duty or charge existingon 15 April 1994. Any duties and charges
not notified by then had
-
7/28/2019 e-bgd-ma-72
4/20
MARKET ACCESS (Goods) MAThese negotiations served to reduce
progressively the level of tariff protection in
many countries now Members of the WTO.
Tariff negotiations will remain important inthe future, particularly in relation to
agricultural products, where all non-tariff
barriers have been eliminated and substituted
by tariffs, in many cases at very high levels.
The contractual nature of a bound tariff
concession lies in the fact that the tariff rate
cannot be increased beyond the bound level.
However, countries would not enter into this
kind of commitment without the possibility of
revision when the situation of a domestic
industry so requires. The GATT 1994 allows
for the possibility of renegotiations. A
Member desiring to withdraw or modify tariff
bindings has to renegotiate them with other
interested Members and provide
compensation, that is, substantially equivalent
tariff concessions on other products.
Historical Background
Tariffs, or customs duties on imports, are the
oldest and probably the most familiar of all
trade measures. While they raise revenues for
the State, their usual underlying aim is to give
a price advantage to locally-produced goods.
Protection through tariffs reached its height in
the 1930s when many nations erected high
tariff walls - in the process, stifling world
commerce and production, and deepening the
worst economic depression of modern times.
The first rounds
Geneva Round (April to October 1947)
The very first round of multilateral trade
negotiations was held in Geneva in 1947 while
the Havana Charter was being drafted.
Twenty-three countries which accepted the
Havana Charter negotiated tariff cuts covering
a trade volume which represented half of
world trade; over 45,000 concessions were
exchanged.
Annecy (1949), Torquay (1950-51) and
Geneva (1955-56)
Three additional rounds of tariff negotiationswere held in the period 1949 to 1956. Only the
Torquay Round yielded appreciable tariff
reductions (around 25 per cent in relation to
1948 levels).
Dillon Round (May 1961-March 1962)
Following the establishment of the European
Economic Community in 1957, large-scale
negotiations were held between September
1960 and May 1961 under Article XXIV:6 ofthe General Agreement. These negotiations
were supplemented by a round of tariff
negotiations, proposed by Douglas Dillon,
Under Secretary of State of the United States.
The Dillon Round yielded modest results: only
4,400 tariff concessions were exchanged, and
agriculture and certain sensitive products were
not covered.
Kennedy Round (November 1963-May
1967)
For the Kennedy Round, a new approach to
tariff negotiations was introduced. This was
the adoption of a linear reduction formula, by
which most industrialized countries agreed to
reduce their tariffs on industrial products by 50
per cent. Because of exceptions to the formula,
an average reduction of 35 per cent was
obtained. This approach was not applied to
agricultural products, which were subject to
product specific concessions on the basis of
requests and offers.
During the Kennedy Round, the negotiations
went beyond MFN tariffs for the first time,
leading in particular to the conclusion of the
Anti-Dumping Code, the first multilateral
GATT agreement on non-tariff measures. This
Round was also the starting-point for the
recognition of the concept of non-reciprocity
in trade negotiations between developed and
developing countries and of the commitment
by the developed countries to accord high
priority to granting improved market access in
3.4
-
7/28/2019 e-bgd-ma-72
5/20
MARKET ACCESS (Goods) MAproducts of export interest to the developing
countries. These aspects were subsequently
embodied in Part IV of GATT 1947.
Tokyo Round (September 1973-
November 1979)
A Ministerial Meeting held in Tokyo in
September 1973 launched a further round of
negotiations on the basis of the Tokyo
Declaration adopted by the 102 developed and
developing countries. The results of the Tokyo
Round went far beyond the scope of previous
negotiations, particularly in the field of non-
tariff measures. In the tariff negotiations,
industrialized countries applied a
harmonization reduction formula for industrial
products which resulted in a 34 per cent cut in
the trade-weighted average (i.e., the rate of
duty weighted according to the value of trade)
of these duties.
The Uruguay Round
Procedures for negotiations
For industrial products the only mandate wasto reach the objective agreed at the Montreal
Ministerial meeting in December 1988, of
obtaining a reduction equivalent to that
secured during the Tokyo Round. This
translated itself into an overall reduction by
one-third. The choice of modalities to reach
this aim was left to each individual country (or
group of countries). The base rates for the
reductions were the bound rates or, for
unbound items, those rates applied in
September 1986. For agricultural products the
norm was to be a reduction by a simpleaverage of 36 per cent, with a reduction on
individual products of at least 15 per cent.
Submission of final schedules
The process of tabling preliminary offers
started in 1990. Due to continuing bilateral
and plurilateral negotiations, few countries
submitted offers. Participants were invited to
table draft comprehensive schedules, including
commitments for both agricultural and
industrial products, only in March 1992.
QUAD Tokyo Meeting
After the submission of schedules there was no
visible progress in the multilateral negotiations
as negotiations were being pursued bilaterally
and plurilaterally. The negotiations received a
big impulse, however, in July 1993 from a
Tokyo meeting of the "Quad" countries
(Canada, European Communities, Japan and
the United States). The meeting decided on:
(1) elimination of duties on a series of sectors
(20 sectors were proposed); (2) harmonization
in other sectors; (3) a 50 per cent reduction in
tariff peaks (15 per cent and above); and (4) a
one-third reduction in residual items.
On the basis of the Tokyo agreement, some
other participants, particularly developed
countries, agreed to eliminate duties affecting
agricultural equipment, beer, construction
equipment, distilled spirits (brown), furniture,
medical equipment, paper, pharmaceuticals,
steel and toys. Harmonization of duties was
agreed only for chemicals, with theharmonization levels fixed at 0, 5.5 or 6.5 per
cent. It was agreed that duties between 5.5 and
10 per cent would be reduced to 5.5 or 6.5 per
cent over five years, those between 10.1 and
25 per cent to 6.5 per cent over 10 years, and
duties above 25 per cent to 6.5 per cent over
15 years. The agreement for reduction of
peaks by 50 per cent was not put fully into
effect even by the Quad countries, and for
many products the duty remained above 15 per
cent.
15 December 1993
Further extensive bilateral negotiations took
place, and participants submitted draft offers
up to 15 December 1993, when it was decided
that while scope for improvement of schedules
remained the negotiations were substantially
concluded. The draft offers became draft final
schedules by 15 February 1994.
3.5
-
7/28/2019 e-bgd-ma-72
6/20
MARKET ACCESS (Goods) MA
The Marrakesh Protocol was signed, as an
integral part of the (Uruguay Round) Final
Act, in Marrakesh on 15 April 1994. It entered
into force, together with the Agreement
establishing the WTO on 1st January 1995.
Schedules of concessionsEighty-nine schedules were annexed to the
Marrakesh Protocol, including the schedule of
the European Communities on behalf of the
twelve States which at that time made up its
membership. The schedules total up to 23,000
pages, contained in 31 volumes.
Staging and other technicalities
Unless a participant has offered a ceiling
binding across the board, concessions areexpressed on a line-by-line basis, in the
Harmonized System nomenclature. In the case
of industrial products, if no special staging is
clearly specified in the schedule of a
participant, the provisions of the Marrakesh
Protocol in this regard apply, and the
concessions are to be put into effect over a
period of five years, in five equal stages of
reduction, starting on the date of
implementation for that participant.
For agricultural products, as defined in Article
2 of the Agreement on Agriculture, the
required staging of reductions is specified in
the relevant parts of the schedules.Implementation periods starting in 1995 of six
and nine years were agreed as reflected under
Article I (f) of the Agreement.
A schedule annexed to the Protocol became a
Schedule of GATT 1994 relating to the
Member concerned on the day on which the
Agreement Establishing the WTO entered into
force for that Member.
Schedules submitted after Marrakesh
Least-developed countries were allowed to
submit their schedules of concessions and
commitments on goods and on services by
April 1995, i.e. one year after the date of the
Marrakesh Protocol. Thus, 26 additional
schedules, submitted after Marrakesh, are also
considered (by certification of the Director-
General) as annexed to the Marrakesh
Protocol.
Negotiating techniques
The history of the GATT is also the history of
techniques of tariff negotiation. The
bilateralism of the 1930's was replaced by
multilateral item-by-item negotiation from
1947 to 1962.
Bilateral item-by-item/country-by-
country technique
This is the oldest traditional negotiating
technique, whereby submission of request listsis followed by offer lists. This was the only
technique used in GATT negotiations until and
including the Dillon Round (1961-1962); it is
still being used for any bilateral negotiations
during a Round, for Article XXVIII
renegotiations, and in the process of accession
of new WTO Members.
3.6
MARRAKESH PROTOCOL
The Marrakesh Protocol forms an integral
part of the Marrakesh Agreement which
constitutes the legal instrument embodying
the results of the Uruguay Round.
Schedules of concessions annexed to the
Protocol record the commitments made by
participants in the Round's market access
negotiations on trade in goods.
-
7/28/2019 e-bgd-ma-72
7/20
MARKET ACCESS (Goods) MA
Linear reduction
This is the method whereby all tariffs,
regardless of their levels, are reduced by an
agreed percentage. This method was applied
for industrial products in the 1960s during the
Kennedy Round (50 per cent reduction, but
because of the exceptions, the final average
was only 35 per cent reduction).
Harmonization formula
The purpose of applying a harmonizationformula is to reduce high tariffs more than
those that are relatively low. Such a reduction
formula was used during the Tokyo Round of
the 1970s.
Sector approach
This approach aims at the complete
elimination (or harmonization) in a given
sector and has been applied during the
Uruguay Round negotiations, and also morerecently, in the 1996 Ministerial Declaration
on Trade in Information Technology Products.
The practice has been for the elimination or
harmonization to be agreed only among the
Members with significant shares in
international trade. In the Information
Technology Agreement it was decided that the
Agreement would come into effect once
Members or States or customs territories with
a share of 90 per cent of world trade had
joined it. The concessions are, however,
applied on an MFN basis.
Reciprocity in trade negotiations
Central to the negotiating framework for
reduction of tariff since the inception of GATT
1947 is the principle of reciprocity. It implies
that during rounds of negotiations for
reduction of tariffs each country will make
equivalent tariff concessions.
Measurement of reciprocity
No provision in GATT provides guidance on
how reciprocity is to be established, and it has
been left to each government to determine for
itself the economic benefits and advantages of
the exchange of concessions. During early
negotiations a crude method was used. Each
participating government was expected to
offer tariff concessions measured in terms of
the trade coverage of imports and the depth of
tariff out, equal to what it received from other
3.7
STRUCTURE OF A GOODSSCHEDULE
Part I
Most-favoured-nation Tariff (list of
concessions, i.e. bound rates)
Section I - Agricultural Products
Section IA Tariffs
Section IB - Tariff Quotas
Section II - Other Products
Part II
Preferential Tariff (according to
Article I of the General Agreement, if
applicable)
Part III
Concessions on Non-Tariff Measures
Part IV
Commitments Limiting Subsidization
Section I Domestic Support
Section II Export Subsidies -
Budgetary Outlay and Quantity
Reduction Commitments
Section III Commitments Limiting
-
7/28/2019 e-bgd-ma-72
8/20
MARKET ACCESS (Goods) MAparticipating governments. For measuring the
value of concessions received by them, the
participating governments generally took only
those products into consideration of whichthey were principal or substantial suppliers. In
other words, payment (through reciprocal
concessions) was made by a government
benefitting from tariff concession on a product
only if it was a principal or substantial supplier
of that product. The smaller suppliers got a
free ride by virtue of the application of the
MFN clause.
Reciprocity in last three rounds
The principle of reciprocity remained valid
even after the adoption of the linear or formula
basis for tariff cuts during the Kennedy and
Tokyo Rounds and the reciprocity test was
applied for exclusions from, or exceptions to,
the applications of the formula. Even for the
technique of elimination or harmonization of
tariffs in specific sectors the principle is
substantially applicable. Sectoral agreements
generally ensure that most if not all
governments with significant shares of the
world export market join the agreement.
Concept of non-reciprocity
Since the early 1960s the concept of non-
reciprocity has been accepted in respect of
trade negotiations among developed and
developing countries. It is elaborated in Part
IV of GATT 1994 as well as in the 1979
Decision of the CONTRACTING PARTIES
known as the Enabling Clause. It means that
developing countries should not be expected,
in the course of trade negotiations, to makecontributions which are inconsistent with their
individual development, financial and trade
needs.
Modification of Schedules
Concessions: modification vs.
temporary action
Where a tariff rate is bound under the GATT,
each WTO Member has the obligation not to
raise this rate above the bound level contained
in its schedule. The GATT contains a number
of exceptions to this rule. Tariffs may be
raised above the bound level, for instance, inthe course of temporary safeguard action
under Article XIX or for balance-of-payments
reasons. Anti-dumping and countervailing
duties are other examples. In such cases, the
obligations contained in the schedule remain
unchanged. The modification of a tariff
concession, on the other hand, entails a
permanent change of a negotiated maximum
tariff rate and is incorporated in the Schedule.
Modification - compensation
Temporary suspension of concessions can be
invoked unilaterally. The permanent
modification of a concession, on the other
hand, is based on the principle of renegotiation
and compensation. If a concession is
withdrawn, compensation in the form of new
concessions needs to be granted. The overall
level of concessions should not be less
favourable than before the modification of the
concession (Article XXVIII:2).
Scope of Article XXVIII
The provisions of Article XXVIII prescribe:
- the period for negotiation of withdrawal or
modification of a concession;
- the Members that are involved in
negotiations and/or consultations;
- the actions that should be taken after the
negotiations, whether or not an agreement is
reached among the interested members.
Members are of course free to reduce tariff
rates below the GATT bindings at any time
without recourse to Article XXVIII. If a
reduction of a tariff rate is agreed, a Member
is obliged, by the MFN clause of Article I, to
extend the reduced rate to all WTO Members.
3.8
-
7/28/2019 e-bgd-ma-72
9/20
MARKET ACCESS (Goods) MARenegotiation of Schedules
Original Article XXVIII
The original Article XXVIII provided that on
1 January 1951 (three years after the GATT
1947 came into effect) or thereafter, any
Member could renegotiate its concessions in
accordance with certain rules. This provision
made the validity of schedules temporary. The
validity of the schedules was in stages
extended until 1 January 1958. In 1955 Article
XXVIII was amended, giving schedules
indefinite application and establishing fixed
periods for renegotiations.
Triennial period for renegotiation
There are several possibilities for renegotiation
of concessions. Article XXVIII:1 stipulates
that a Member may renegotiate a concession
after the termination of successive three-year
period. The first three-year period started on 1
January 1958. The latest three-year period
started on 1 January 2000.
A Member wishing to renegotiate a concession
must notify the Members of its intention not
earlier than six months before, and no later
than three months before the expiration of a
legal period (Ad Article XXVIII para 1:3). For
the period starting on 1 January 2000, a
notification must have been received between
1 July 1999 and 1 October 1999.
Renegotiation in special circumstances
Article XXVIII:4 provides for renegotiationsat any time in special circumstances, when
authorized by the General Council. Up to
1997, this provision had been used 66 times.
Reservation of the right to renegotiate
Each Member can reserve its right to
renegotiate a concession at any time during a
three-year period by notifying the Members
before the end of a three-year period. For the
last period that started on 1 January 2000, 43
Members reserved their rights under paragraph
5 of Article XXVIII.
Renegotiation due to formation of a
Customs Union
If a customs unions is formed, a common
external tariff replaces the individual national
tariffs. Where this common external tariff
requires an increase in a tariff rate above that
bound in a previous national tariff, GATT
Article XXIV:6 requires compensatory
adjustment according to the procedures of
Article XXVIII. Negotiations on
compensations have to take into account the
compensation that is gained through
introduction of the common external tariff,
through reduction of previously higher
national tariffs, that may have been applied to
the same product by other members of the
customs union.
Renegotiations by Developing Countries
A developing country can renegotiateconcessions under Article XVIII:7, to promote
the establishment of a particular industry with
a view to raising the general standard of living
of its people. The country has to notify the
Members of its desire to do so, and must enter
into negotiations with the Members with initial
negotiating rights as well as those with a
substantial interest.
(Re)Negotiations and consultations
(Re)Negotiations with Members whohave initial Negotiating Rights (INRs)
For each concession, the Member with whom
a concession was initially bilaterally
negotiated holds an Initial Negotiating Right.
INRs should be specified in the schedule of
the Member which granted the concession, and
can also be determined by reference to the
negotiation records.
3.9
-
7/28/2019 e-bgd-ma-72
10/20
MARKET ACCESS (Goods) MAIn the Kennedy Round, as well as the Uruguay
Round, it was agreed that where a tariff
concession is not the result of bilateral
negotiations, a Member has an InitialNegotiating Right if during a representative
period prior to the time when the question
arises, it had a principal supplying interest in
the product concerned. A period of three years
is generally considered representative in this
respect (floating INR).
Members can also grant an INR to other
members during negotiations (negotiated
INR).
(Re)Negotiations with Members who
have a Principal Supplying Interest
A Member has a principal supplying interest in
a concession, if it had, over a reasonable
period of time before the negotiations, a larger
share in the market of the applicant Member
than another Member with which the
concession was initially negotiated, or who
would have had such a larger market share in
the absence of discriminative quantitative
restrictions (Ad Article XXVIII, para 1:4).Unless two Members have an almost equally
large market share, only one can have a
principal supplying interest. For the
determination of the market share, only MFN
trade is taken into account. (Understanding on
the Interpretation of Article XXVIII of the
GATT 1994, para 3).
Exceptionally, an additional supplying country
can be recognized as a principal supplier if the
concession in question affects trade which
constitutes a major part of the total exports ofthat country (Ad Article XXVIII, para 1:5).
The Understanding on the Interpretation of
Article XXVIII of the GATT 1994 grants an
additional principal supplying interest to the
Member who has the highest ratio of exports
affected by the concession to total exports
(para 1). The objective of this supplementary
right is to allow access to negotiating rights for
a wider range of countries, particularly small
and medium-sized exporting Members.
Consultations with Members withsubstantial interest
While negotiations have to be held with a view
to reaching an agreement by the Member
proposing modification or withdrawal of a
concession with Members having initial
negotiating rights and principal supplying
interest (referred to as Members primarily
concerned), the requirement in respect of
Members with substantial interest is only for
consultations. However, in practice,
consultations/negotiations usually occur with
principal and substantial suppliers.
A substantial interest is generally assumed
when a Member has (or could be expected to
have in the absence of discriminatory
quantitative restrictions) a significant share of
the market of the Member who is asking for
renegotiations. A 10 per cent share has been
customarily considered sufficient to fulfil this
requirement.
Results of (Re)Negotiations
3.10
Scenario A
Agreement can be reached among all
parties
The Members primarily concerned, and the
Members having a substantial interest, all
reach agreement: WTO Members are
informed of the agreement and theschedules are modified accordingly. The
negotiations under Article XXVIII need to
be concluded before the new tariff rates
can be implemented. A Member with a
principal supplying interest in a concession
which is modified or withdrawn has to be
accorded an INR in the compensatory
concessions, unless agreed otherwise by
the Members involved.
-
7/28/2019 e-bgd-ma-72
11/20
MARKET ACCESS (Goods) MA
Product Classification
Background
Before 1987, many countries and territories
used the Customs Cooperation Council
Nomenclature (CCCN), as a classification
basis for their customs tariffs. However, some
countries, notably including the United States
and Canada used different nomenclatures. In
1970, a Study Group was established in the
Customs Cooperation Council to examine the
possibility of preparing a new system of
nomenclature capable of meeting the principal
requirements of Customs authorities,
statisticians, carriers and producers.
CCC/WCO Harmonized System Convention
The "Harmonized Commodity Description and
Coding System" (Harmonized System) is an
international product nomenclature which has
been developed as a result of the above-mentioned study under the auspices of the
World Customs Organization (WCO)
(formerly the Customs Cooperation Council
(CCC)) in Brussels. This nomenclature is
broadly based on the CCC (Customs
Cooperation Council Nomenclature, used by
the European Communities and many other
countries) and the SITC (Standard
International Trade Classification) revised
(which was the statistical nomenclature used
by the United Nations), but it also takes into
account some aspect of the TSUS (nationaltariff of the United States) and the Canadian
nomenclature. The Harmonized System was
developed not only for customs purposes but
also for the collection of trade statistics and for
all kinds of transactions in international trade
(transport, insurance, etc).
For the purpose of tariff classification, the
Harmonized System also provides a legal and
logical structure within which a total of 1,241
headings are grouped in 96 chapters,
3.11
Scenario B
Agreement only with primarily
concerned parties
If Agreement can be reached among the
Members primarily concerned, but not
with the Members having a substantial
interest, the latter are free to retaliate by
withdrawing (...) substantially equivalent
concessions initially negotiated with theapplicant Member not later than six
months after such action is taken, upon the
expiration of thirty days from the days on
which written notice of such withdrawal is
received by the WTO Members (Article
XXVIII:3 (b)).
Scenario C
No Agreement can be reached
If the Members primarily concerned cannot
reach an agreement, the applicant Member
is free to withdraw or modify its
concession, but all other Members that
were involved in the negotiations and/or
consultations are also allowed, not later
than six months after the action is taken, to
withdraw substantially equivalent
concessions initially negotiated with theapplicant party upon the expiration of
thirty days from the day on which written
notice of such withdrawal is received by
the WTO Members (Article XXVIII:3 (a)).
-
7/28/2019 e-bgd-ma-72
12/20
MARKET ACCESS (Goods) MAthemselves divided into 21 sections. Thus, the
Harmonized System comprised in 1988 a total
of 5,018 separate groups of goods identified
by a 6-digit code. The first four digitscorrespond to the relevant heading number,
while the fifth and sixth digits identify the
one- and two-dash subheadings respectively.
The HS constitutes a coherent set of headings
and subheadings which, together with the
Interpretative Rules, and Section, Chapter and
Subheading Notes, provide for the systematic
and uniform classification of goods.
Consequences for schedules
There was no obligation under the GATT, nor
is there now under WTO, for Members to
adopt the Harmonized System or to implement
subsequent changes. The only obligation for
WTO Members is to keep the authentic texts
of their schedules of tariff concessions up to
date and in conformity with their national
tariffs.
The Harmonized System has not been
developed under the responsibility of the
WTO, but the fact that practically all WTOMembers use this customs nomenclature in
their national tariffs, and have established their
schedules of concessions on goods in the
Harmonized System, means that all the issues
related to the HS have a direct impact on the
WTO schedules. This is even more obvious if
one takes into account the fact that, as a result
of the Uruguay Round, industrialized countries
have bound practically 100 per cent of their
tariff lines and that tariffs on 88 per cent of all
WTO Members' trade are bound. Although it
was agreed that the main principle to beobserved in the introduction of the
Harmonized System in national tariffs was that
existing bindings should remain unchanged,
the introduction of the Harmonized System on
1 January 1988 implied considerable changes
in the schedules of tariff concessions. It led to
intensive negotiations in 1986 and 1987 for the
countries which decided to adopt this new
system, in order to establish new consolidated
schedules in the Harmonized System
nomenclature. Special procedures were drawn
up to carry out these negotiations.
Negotiations are still under way for those
members which have not yet transposed their
pre-Uruguay Round schedules into theHarmonized System and for those members
that have implemented the amendments to the
Harmonized System in their national tariffs
but not incorporated those changes into their
WTO schedules.
Modifications of the Harmonized System
Article 16 of the HS Convention foresees
periodic revision of the Harmonized System.
To keep the Harmonized System up to date,
and to take into account changes in
technology, new products and developments in
international trade, two sets of amendments to
the Harmonized System have already taken
place on 1 January 1992 and 1 January 1996.
The changes introduced the Harmonized
System on 1 January 1996 involved numerous
modifications in the WTO schedules. A third
set of amendments is to be introduced on
1 January 2002.
Cooperation between WTO and WCO
Close cooperation exists between the two
organizations on the questions related to the
Harmonized System. The WTO participates as
an observer at the sessions of the Harmonized
System Committee (HSC) and usually a
representative of the WCO's Nomenclature
and Classification Division participates as an
observer in the meetings of the WTO Market
Access Committee.
Loose-leaf schedules (LLS)
The practice in GATT 1947 has been that the
changes in the schedules resulting from rounds
of negotiations or from renegotiations are
attached to separate protocols or other legal
instruments. Thus information on concessions
made by a GATT contracting party was spread
out in about forty different legal instruments.
Following the conclusion of the Tokyo Round
in 1979 it was decided that a single document
should replace all earlier schedules and
3.12
-
7/28/2019 e-bgd-ma-72
13/20
MARKET ACCESS (Goods) MAnegotiating records with respect to each
contracting party. It was also decided that such
consolidated schedules should be in a loose
leaf format, so that they could be updated asand when necessary. In 1996 a further decision
regarding the establishment of consolidated
loose-leaf schedules was adopted in order to
provide the legal framework for such
schedules. In 1999 the Market Access
Committee commenced work on the
consolidated tariff schedules (CTS) project so
that all WTO schedules would be complete in
loose-leaf format.
3.13
-
7/28/2019 e-bgd-ma-72
14/20
MARKET ACCESS (Goods) MA
2
Monitoring Bodies
Surveillance and Monitoring
The Committee on Market Access was
established by the General Council in January
1995 with the following terms of reference:
(a) in relation to market access issues not
covered by any other WTO body:
supervise the implementation of
concessions relating to tariffs and non-
tariff measures
provide a forum for consultation on
matters relating to tariffs and non-tariff
measures
(b) oversee the application of procedures for
modification or withdrawal of tariff
concessions;
(c) ensure that GATT schedules are kept up to
date, and that modifications, including those
resulting from changes in tariff nomenclature,
are effected;
(d) conduct the updating and analysis of the
documentation on quantitative restrictions and
other non-tariff measures, in accordance with
the timetable and agreed procedures;
(e) oversee the content and operation of, andaccess to, the Integrated Data Base (IDB);
(f) report periodically - and in any case not
less than once a year - to the Council for Trade
in Goods.
3.14
Ministerial ConferenceMinisterial Conference
General CouncilGeneral Council
Council for Trade in GoodsCouncil for Trade in Goods
Committee on Market AccessCommittee on Market Access
-
7/28/2019 e-bgd-ma-72
15/20
MARKET ACCESS (Goods) MA
3
NotificationRequirements
1. Tariffs
Bound tariff rates can only beincreased (or withdrawn) undercertain rules, which are specified inArticle XXVIII. The basic principle ofmodifications of tariff concessions
(paragraph 2) is that a compensatoryadjustment should be made withrespect to other products, and that"(...) the members concerned shallendeavour to maintain a general levelof reciprocal and mutuallyadvantageous concessions", thuspreserving at least the samefavourable trade environment. Theprovisions of Article XXVIII relate to:
the period to negotiate awithdrawal or a modification of aconcession;
the members that are involved in
negotiations and/or consultations;
the actions that should be taken
after the negotiations, whether anagreement is reached or not amongthe interested members.
This Article also foresees thatnegotiations and consultations shouldbe conducted with "(...) the greatestpossible secrecy in order to avoidpremature disclosure of details ofprospective tariff changes (Ad. ArticleXXVIII), and that only the results ofthese negotiations need to becommunicated to the WTO Members.
a) Procedures for Notificationand Renegotiation
The original Article XXVIII providedthat on 1 January 1951 or thereafter,any member could renegotiate itsconcessions according to certainrules. This provision, which made the
schedules and the renegotiationrights temporary, was extended twomore times. In 1955, at the GATTReview Session, a new Article XXVIIIand an Article XXVIIIbis were adoptedgiving the schedules an indefiniteapplication, and establishing fixedperiods for renegotiations, while thelatter settles rules for multilateralrounds of tariff negotiations.
Periods of three years, the first periodbeginning on 1.1.1958, constitute thelegal time-frame to renegotiatemodifications of schedules. Memberscan also renegotiate at any othertime requesting authorization from
the Council. In practice, a Memberwanting to withdraw or modify itsSchedule should, according to:
"Article XXVIII, para.1(Ad.Article XXVIII), notify theMembers of its intention not earlierthan six months, nor later than threemonths prior to the termination dateof a legal period (for example,between 1.7.87 and 30.9.87 before athree-year period starts, i.e. 1
January), or,
Article XXVIII, para.4, request
an authorization to the Members toenter into negotiations at any othertime than the legal period; or,
Article XXVIII, para.5, reservesits right to do so in the next legalperiod by a notification to theMembers before the end of a three-
3.15
-
7/28/2019 e-bgd-ma-72
16/20
MARKET ACCESS (Goods) MAyear period (commencing in 2000 43Members reserved their rights)."
The notification should indicate theitem and the tariff line number forwhich modifications are envisaged inbound tariffs, and the countries thathave initial negotiating rightsregarding this product. It should beindicated whether the intention is towithdraw or modify a concession. If aconcession is to be modified, theproposed modification should be alsostated in the notification (orcirculated as soon as possible to theconcerned contracting parties).Statistics regarding the imports byorigin of the product for the last threeyears for which statistics areavailable should be annexed to thenotification, as the countries to beinvolved in negotiations and/orconsultations should be identifiedthrough import data. (If relevantimport statistics cannot be suppliedby the applicant contracting party, it
shall give due consideration to exportstatistics provided by contractingparties claiming an interest in theconcession concerned.) Also, ifspecific or mixed duties are affected,both values and quantities should beindicated, if possible. From the dateof circulation of statistics, othercountries have ninety days to notifytheir interest to renegotiate.
Paragraph 1 of this Article indicates
that the applicant member should (a)negotiate with members that haveinitial negotiating rights (INRs)and with those that have a "principalsupplying interest", this group beingcalled "contracting parties primarilyconcerned" and (b) enter intoconsultation with any other memberthat has a "substantial interest" onthe concession. The definitions ofthese expressions are as follows:
Initial negotiating rights aregenerally the results of bilateral
negotiations - thus being determinedbe reference to negotiation records -and should be specified in theSchedules -as well as to multilateralnegotiations (floating INRs). In thelatter case, when the question arises,the member deemed to have initialnegotiator rights shall be the one thathad, during a representative periodprior to the time when the questionarises, a principal supplying interest
in the product concerned. (A periodof three years is considered to be a"representative" or a "reasonable"period of time).
A member has a principalsupplying interest in a concessionif it has had, over a reasonable periodof time prior to the negotiations, alarger share in the market of theapplicant member than another partywith which the concession was
initially negotiated, or would havehad it in the absence of discriminatory quantitativerestrictions. The Members canexceptionally determine that anadditional supplying country can berecognized to be a principal supplierif to this contracting party theconcession in question affects tradewhich constitutes a major part of thetotal exports of such party
(Paragraph 7 of Ad. Article XXVIIIp.74).
A member has a substantialinterest in a concession only if ithas, or could be expected to have inthe absence of discriminatoryquantitative restrictions, a significantshare in the market of the applicantcontracting party. In the GATT, a 10per cent share rule has been
3.16
-
7/28/2019 e-bgd-ma-72
17/20
MARKET ACCESS (Goods) MAgenerally applied for the definition ofa "substantial supplier".
Any member which considers that ithas a principal or a substantialinterest in the concession in questionand wanting to negotiate or consultunder Article XXVIII should, in aperiod of ninety days following thecirculation of the statistics,communicate its claim in writing tothe applicant contracting party andinform the GATT secretariat. If theclaim is accepted by the applicantmember, the parties involved in theArticle XXVIII negotiations aredetermined, otherwise the membermaking the claim may refer thematter to the Council.
b) Understanding on theinterpretation of Article XXVIII ofthe GATT 1994
Some new provisions and/or
clarifications of Article XXVIII werediscussed in the GATT Articles Groupin the Uruguay Round. They refer to(a) the additional definition ofmembers having a principal supplyinginterest, (b) the basis of tradebetween the affected members, (c)the modifications of concessionsrelating to new products, (d) thereplacement of a tariff concession bya tariff rate quota, and (e) thegranting of initial negotiating rights.
Agreement was reached in all thefollowing items:
(i) Additional principal supplyinginterest - An additional principalsupplying interest is accorded to theMember which has the highest ratioof exports affected by the concession(i.e. exports of the product to themarket of the Member modifying orwithdrawing the concession) to its
total exports if it does not alreadyhave an initial negotiating right or aprincipal supplying interest as
provided for in paragraph 2 of ArticleXXVIII. The objective of this"supplementary" right is to allowaccess to negotiating rights for awider range of countries, particularlythe small and medium-sizedexporting contracting parties.
(ii) MFN trade - only trade on a MFNbasis should be taken into account inthe determination of countries with aprincipal supplying interest. Thisprovision should not apply if, at thetime of the renegotiation, the tradebetween concerned members (a) hasceased to benefit from preferentialtreatment or (b) will do so by itsconclusion.
(iii) New products - when a tariffconcession is modified or withdrawnon a product for which three years'trade statistics are not available,
initial negotiating rights should begiven the country that had it whenthe previous classification was used:some clarification is also given inorder to establish countries havingprincipal supplying and substantialinterests in the concession.
(iv) Tariff rate quota - when a tariffis replaced by a tariff rate quota, theamount of compensation shouldexceed the amount of trade actually
affected by this replacement, but itshould not exceed the amount ofcompensation entailed by completewithdrawal of the concession.
(v) New initial negotiating rights a member having a principalsupplying interest in a concessionwhich is modified or withdrawn shallbe accorded an initial negotiatingright in the compensatory
3.17
-
7/28/2019 e-bgd-ma-72
18/20
MARKET ACCESS (Goods) MAconcessions, unless some other kindof compensation is agreed betweenthe members involved.
2. Quantitative Restrictions
At its meeting on 1 December 1995,the Council for Trade in Goodsadopted the" Decision on NotificationProcedures for QuantitativeRestrictions" contained in documentG/L/59. This Decision wastransmitted to the Council for Tradein Goods from the Committee onMarket Access which has a mandate"to conduct the updating and analysisof the documentation on quantitativerestrictions and other non-tariffmeasures, in accordance with thetimetable and procedures agreed bythe CONTRACTING PARTIES in 1984and 1985."
The Decision on QRs requires WTOMembers to notify, by 31 January1996, QRs which they maintain and
any changes to their QRs as andwhen these changes occur. Theyshall make such notifications at two-yearly intervals thereafter. Thenotifications must contain thefollowing information:
a full description of the productsand tariff lines (or parts of tariff lines)affected and the relevant heading orsub-heading in the HarmonisedSystem nomenclature;
a precise indication of the type of
restriction, using the symbols agreedin the annex to the Decision;
an indication of the grounds andWTO justification for the measures,including citation of the preciseprovisions for justification;
a statement on the trade effects
of the measure, including informationon the quantity of permissible
imports, on the degree of quotautilization (in the case of existingquotas) and, on the level ofproduction or consumption whereavailable.
With respect to the last item, thenotification should include adescription of the administrativemechanism associated with themeasure, unless the mechanism has
been notified under another WTOAgreement. With respect tonotifications of QRs made under otherWTO provisions (such as theAgreement on Import LicensingProcedures or the GATT TechnicalGroup on QRs and Other Non-TariffMeasures) which are up-to-date,Members must notify this fact to theMarket Access Division so that theSecretariat will input suchnotifications into the QR data base.
This data base will be newly created,identical to the existing QR data basewhich officially ceased to exist whenthe GATT 1947 was terminated.However, on request, the Secretariatcan provide extracts from the olddata base pertaining to Members'own restrictions to assist them inpreparing their notifications.Members are also allowed to makereverse notifications, in other words,notifications of third party QRs, wherethey deem appropriate.
According to the Decision, theSecretariat will publish periodically adocument listing the WTO Membershaving made a notification. Membersare free to request from theSecretariat at any time detailedextracts, either printouts or on disk,of the QR data base, and thenotifications will be available for
3.18
-
7/28/2019 e-bgd-ma-72
19/20
MARKET ACCESS (Goods) MAconsultation in the Secretariat. TheCommittee on Market Access will, attwo-yearly intervals after receipt of
the complete notifications, reviewthem on the basis of summaries to beprepared by the Secretariat.
3. Reverse Notification of Non-Tariff Measures
At its meeting on 1 December 1995,the Council for Trade in Goodsadopted the "Decision on ReverseNotification of Non-Tariff Measures"contained in document G/L/60. ThisDecision was transmitted to theCouncil for Trade in Goods from theCommittee on Market Access whichhas a mandate "to conduct theupdating and analysis of thedocumentation on quantitativerestrictions and other non-tariffmeasures, in accordance with thetimetable and procedures agreed bythe CONTRACTING PARTIES in 1984and 1985."
This Decision allows WTO Membersthe possibility of making notificationsof non-tariff measures maintained byother Members in so far as suchmeasures are neither subject to anyexisting WTO notification obligationsnor to any other reverse notificationpossibilities under the WTOAgreement. This differs from theDecision on QRs which requiresMembers to notify their own QRs and
allows them the possibility to makereverse notifications where theydeem appropriate. Here, provision ismade for only reverse notificationprocedures.
The reverse notifications shall containthe following information:
an indication of the precise
nature of the measures;
where applicable, a full
description of the products affected,
including the corresponding HSheadings or sub-headings;
where appropriate, a reference
to the relevant WTO provisions; and
a statement on the trade effectsof the measure.
The Member maintaining themeasures is required to comment on
each point contained in thenotification. These comments andthe notification will be included in anew Inventory of Non-Tariff Measureswhich will replace the existingInventory of NTMs which ceased toexist when the GATT 1947 wasterminated. It is important to notethat the new Inventory will cover allnon-tariff measures relating to allproducts (chapters 1-97 of the HSnomenclature) whereas the old
Inventory related only to industrialproducts. In cases where theinclusion or the contents of thenotification is challenged, furtherinformation will be sought from thenotifying Member. In these cases,the Members concerned might holdbilateral consultations with the aim ofverifying the existence of themeasure and its precise andcomplete description. The result of
these consultations shall betransmitted to the Secretariat toinform whether or not to include theinformation in the Inventory.
Additionally, when a measure whichhas been the subject of a reversenotification is notified by themaintaining Member under anotherWTO provision, the maintainingMember shall so notify theSecretariat. Upon receipt of such
3.19
-
7/28/2019 e-bgd-ma-72
20/20
MARKET ACCESS (Goods) MAnotification, the Secretariat, satisfiedthat the subject of the twonotifications is the same, delete the
reverse notification from theInventory and inform Members of theaction taken.
The Inventory of NTMs will be madeavailable to WTO Members in a loose-leaf format in the three WTOlanguages and amendments will becirculated to all Members by theSecretariat. The Committee onMarket Access shall, at two-yearlyintervals on the occasion of thereview of the notifications of QRs,review the reverse notifications ofNTMs received, on the basis ofSecretariat analyses similar to thoseprepared for the GATT TechnicalGroup on QRs and Other NTMs.
3.20
All Notifications are to be sent only to theCentral Registry of Notifications:
WTO Central Registry of Notifications
Centre William Rappard
CH-1211 Geneva 21
Switzerland
Telephone: (41-22) 739 55 69
Telefax: (41-22) 739 56 38
E-mail: [email protected]