Tariff and Trade Affairs
Cross-cutting activities: Revenue Package and Advance Rulings
The WCO continued to assist its Members in the implementation of the Revenue Package which provides guidance and good practices for improving the efficiency and effectiveness of revenue collection.
WCO experts conducted a national and a regional seminar to promote the Revenue Package and Advance Rulings. The national seminar was held in Swaziland to assist the country’s Revenue Authority in implementing an advance ruling system for classification and origin, as required under the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO).
The regional seminar gathered 22 countries in the WCO Asia/Pacific region. At the end of the event, all participants shared the view that well-organized infrastructure formed the basis for objective, predictable and transparent practices in the subject areas, and recognized the importance of increasing their institutional capacity to carry out the core Customs functions of classification, origin and valuation in an efficient and effective manner.
An accreditation workshop was also held in Ghana to identify expert diagnostic facilitators on tariff and trade topics who will be expected to provide assistance to WCO Members on the Revenue Package and its materials in the WCO West, Central, East and Southern Africa regions.
Rules of origin
Harmonization of non-preferential rules of origin
As WTO Members continued to hold extremely polarized views about the need and benefits of harmonized non-preferential rules of origin, the WTO Committee on Rules of Origin (CRO) had not held any negotiations or discussions on the Harmonization Work Programme or the draft rules since its April 2015 meeting.
Preferential rules of origin
Through the initiatives contained in the WCO Action Plan on Preferential Origin, the WCO continued to be active in preparing its Members to face the challenges arising from the growing importance of preferential trade by providing them with all the necessary tools and modern techniques to ensure that Rules of Origin (RoO) are clearly understood and implemented.
Comparative Study on Preferential Rules of Origin
A new section on the Trans-Pacific Partnership (TPP) Agreement, which was signed on 4 February 2016, was added to the Comparative Study on Preferential Rules of Origin which aims to enhance overall understanding of preferential RoO. The study now offers a comparison of the characteristics found in the four existing origin models, i.e. the European EUR-MED, NAFTA, ASEAN and the TPP, from which most of the preferential agreements in force today derive.
Technical update of preferential rules of origin
To assist WCO Members with the updating of their existing RoO in relation to changes in the Harmonized System (HS), the WCO recently issued a ‘Guide for the Technical Update of Preferential Rules of Origin.’
Such technical updates should be carried out in administrations at the same time as their preparations for the implementation of the new edition of the HS. For this reason, a presentation on the technical update was made at the six WCO Regional Workshops on HS 2017 Implementation that were conducted in 2016.
Capacity building activities relating to RoO have included sub-regional workshops for the Arab Maghreb Union (AMU), as well as for the Gulf Cooperation Council (GCC), and national workshops in the Democratic Republic of the Congo, Georgia, Haiti and Kazakhstan. WCO experts also participated in the following workshops:
- A workshop organized in September 2015 by the Asia Pacific Economic Cooperation (APEC) bloc, dealing with the new trade landscape, the complexities of RoO and the logistical challenges of trade facilitation;
- A seminar organized in October 2015 by the United Nations Conference on Trade and Development (UNCTAD) and the European University Institute, aimed at improving the RoO negotiating and drafting skills of representatives from Least Developed Countries (LDCs);
- A workshop organized in December 2015 in Morocco by the Islamic Centre for Development of Trade (ICDT) and the Organisation of Islamic Cooperation (OIC), focusing on the administration of regional trade agreements and regional trade integration.
In addition, WCO experts participated in several conferences, such as the Conference on Trade Compliance in the Middle East held in the United Arab Emirates (UAE) in March 2016, the 14th World Free Zone Convention held in February 2016 in Thailand, the 5th International Origin Conference held in Korea in November 2015, and the 8th Advanced Forum on Customs Compliance held in the United Kingdom in November 2015.
The WCO continued its efforts in assisting its Members with the uniform application of the WTO Agreement on Customs Valuation, in particular, by providing guidance on the management of Customs valuation in an increasingly complex trade landscape.
Examination of Customs valuation questions
One technical question posed by a WCO Member led to the adoption and release of a new instrument on transfer pricing and Customs valuation. The instrument, Case Study 14.1, illustrates a specific scenario where Customs took into account transfer pricing information in the course of verifying the Customs value [see the June 2016 edition of WCO News]. In view of the strong interest from the business community, the WCO has made Case Study 14.1 available via its website. It will also be published in the WCO Valuation Compendium.
As Members of the WCO Technical Committee on Customs Valuation (TCCV) could not reach consensus, two questions were placed in Part III of the Conspectus of Technical Valuation Questions, i.e. questions raised, but not being considered by the TCCV at present. The two questions relate to:
- the treatment of fees for unlocking a function of imported goods after importation – the application of Articles 1, 8.1 (c) and 8.1 (d) of the Agreement;
- the treatment of advertising and promotion costs in a situation where the seller decides to carry out advertising and promotion activities in the country of importation, and requires the buyer to contract and pay for the goods.
Two other questions were also placed in Part III of the Conspectus as the issues raised in these questions were already covered in existing instruments. They relate to:
- the treatment of goods in a global value chain (goods imported after a series of purchases of goods and/or services for transformation, processing or repair);
- the meaning of the expression “sold for export to the country of importation” (one sale and split consignments to different countries).
The TCCV continued and will continue examining questions concerning:
- related party transactions as they pertain to the Agreement and transfer pricing;
- sales conditions, objective and quantifiable data – whether a royalty paid under a franchise agreement could be added to the value of imported inputs used in the manufacture of a finished product;
- examining the circumstances surrounding a sale under the provisions of Article 1.2 (a) – goods produced in different countries;
- international marketing fees – whether the payment of an international marketing fee is dutiable.
National workshops on valuation issues took place in Georgia, Swaziland and Tanzania. Two sub-regional workshops on Customs valuation were also organized, the first one in the Islamic Republic of Iran which included the Islamic Republic of Afghanistan and Pakistan, and the second one in Belarus which included Armenia, Azerbaijan, Georgia, Moldova and Ukraine.
Valuation-related diagnostic missions were carried out in Cameroon, El Salvador, Togo and Swaziland. Experts and trainers in Togo received training to enable them to implement some of the recommendations of the diagnostic as well as guidance in developing a valuation database. The WCO also provided assistance to the Democratic Republic of the Congo, Ghana and Nigeria, in order to enhance their capacity in light of the cessation of contracts with private sector inspection companies.
A train-the-trainers mission was delivered in the Maldives in terms of a multi-year assistance project, aimed at improving Customs valuation control ideally through post clearance audit (PCA) and risk management, under which a training kit was developed to remedy the gaps identified through an observation tour conducted in May 2015. The Maldives Customs Service now has its own trainers, as well as a new tailor-made training module and supporting material.
Moreover, accreditation workshops were organized in Ghana for English speakers in the WCO West and Central Africa and East and Southern Africa regions, and in China for countries in the Asia/Pacific region. The workshops focused on the diagnostic tool for tariff classification, origin and Customs valuation which was recently developed by the WCO.
Transfer Pricing/Customs-tax cooperation
WCO experts participated in several conferences to promote the Organization’s work on transfer pricing and Customs valuation to government representatives and the tax business community, with a view to encouraging closer Customs-tax cooperation:
- The 92nd meeting of the Organisation for Economic Co-operation and Development (OECD) Committee on Fiscal Affairs held in June 2016 in Japan;
- The th and the 6th Global Transfer Pricing Conference organized by Bloomberg BNA and Baker & McKenzie held respectively in March 2016 in France and in June 2016 in the United States;
- The 10th Meeting of the OECD Forum on Tax Administration held in May 2016 in China;
- Transfer Pricing Minds International 2016 held in March 2016 in the UK;
- The 5th Tax Planning Strategies and Experiences Forum held in November 2015 in the Netherlands;
- The sub-regional Workshop on Curbing Illicit Financial Flows held in November 2015 in Ghana;
- The Annual Conference of the International Bar Association held in October 2015 in Austria;
- A transfer pricing course organized by the Tax Institute for Austrian and International Tax Law at Vienna University in September 2015 in Austria;
- The annual World Customs Law Meeting organized by the International Customs Law Academy in September 2015 in Switzerland.
Nomenclature and classification
The WCO continued to carry out its work on the uniform application of the HS, with the adoption of numerous classification decisions and intensified capacity building efforts devoted to preparations for the implementation of HS 2017, infrastructure for classification, the implementation of advance ruling systems for classification, and Customs laboratories.
Status on the implementation of HS 2012
The fifth edition of the HS, or HS 2012, entered into force on 1 January 2012 and, at present, 118 out of 154 Contracting Parties have notified the WCO of their implementation of the amendments to the HS Nomenclature that became effective from 1 January 2012. Five WCO Members which are not Contracting Parties to the HS Convention have also implemented the HS 2012 amendments.
Classification decisions and amendments to HS publications
At its 56th and 57th Sessions, the WCO HS Committee took 354 classification decisions, of which 305 related to International Nonproprietary Name (INN) pharmaceutical products linked to the implementation of the WTO Agreement on Trade in Pharmaceutical Products. The Committee also adopted 18 amendments to the HS Explanatory Notes, 44 new Classification Opinions, and a number of consequential amendments to the HS 2017 Explanatory Notes.
The HS classification decisions (with the exception of those for which reservations have been entered), the amendments to the HS Explanatory Notes, and the amendments to the Compendium of Classification Opinions are available on the WCO website.
HS-related capacity building assistance to WCO Members is delivered in the form of national and regional seminars and workshops on the implementation and uniform application of the HS, on the implementation of advance ruling systems for classification, as well as advice on the classification of commodities following the submission of a request by a Member.
Ten national seminars focused on the HS and related matters, including Customs laboratory infrastructure and analysis methodology, were conducted in Bosnia and Herzegovina, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Kazakhstan, Serbia and Tanzania. Moreover, a national workshop focusing on the development of an advance ruling system for classification was held in Bangladesh.
A regional workshop on the implementation of the HS 2017 was organized in each of the six WCO regions. Technical assistance on this topic was also delivered to the committee in charge of managing the Common External Tariff of the West African Economic and Monetary Union (UEMOA). The workshop also enabled awareness to be raised among UEMOA administrations on the HS review cycle.
The 2017 edition of the HS includes new specific provisions for the 33 most traded chemicals covered by the Chemical Weapons Convention (CWC). The Organisation for the Prohibition of Chemical Weapons (OPCW) invited the WCO to present the provisions and the use of the HS in controlling these chemicals at two training courses: the first one gathered GCC Customs authorities and other Arabic-speaking States Parties to the CWC; and the second one brought together countries from East and Southern Africa.
The WCO was also invited by the OPCW to introduce the role played by the WCO in controlling the trade in chemical products to participants of the OPCW’s Associate Programme, an annual programme conducted for participants from developing countries which aims to enhance their capacities by offering training in chemistry and chemical engineering.
The HS 2017 amendments relating to the chemicals area were also presented to participants attending the Seminar of European Customs Chemists (SECC) which took place in the Netherlands in June 2016, gathering around 300 chemists and officials from 55 countries. The Seminar has become a regular event that is organized every three years with the objective of enhancing cooperation and networking among Customs laboratories in order to improve the accuracy and effectiveness of Customs analysis work.
The WCO was also invited by the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf and the United Nations Statistical Division (UNSD) to present the HS and its 2017 amendments at the Regional Workshop on International Merchandise Trade Statistics held in February 2016 in Oman.
As for classification advice to WCO Members, 117 responses were provided by the WCO Secretariat during the 2015/2016 period.
Amendments to HS-related recommendations
Acceptance by HS Contracting Parties of the amendments to the 2017 edition of the HS impacted on three HS-related WCO Council recommendations:
- The Recommendation of 24 June 2011 on the use of standard units of quantity to facilitate the collection, comparison and analysis of international statistics based on the Harmonized System was completely revised. The amended version adopted by the Council is dated 14 July 2016;
- The Recommendation of 26 June 2009 on the insertion in national statistical nomenclatures of subheadings for substances controlled under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (as amended in 2011) was revoked as 33 of the 34 chemicals covered by the recommendation have been inserted in the HS 2017 edition. It should be noted that this recommendation is a simplified version of the recommendation of 18 June 1996 (mentioned below) which covers 76 chemicals, and was deemed by some Members to be too complex to implement;
- The Recommendation of 18 June 1996 on the insertion in national statistical nomenclatures of subheadings for substances controlled under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (as amended in 1999, 2006 and 2011) was modified by, on the one hand, deleting the chemicals which have been included in the HS 2017 Nomenclature and, on the other hand, incorporating “Mixtures consisting mainly of dimethyl methyl phosphonate, oxirane and phosphorus oxide (P2O5),” currently listed in the Council Recommendation of 26 June 2009 which was revoked, but not included in the HS 2017 edition. The amended recommendation adopted by the Council is dated 14 July 2016.
In support of Programme Global Shield, a Council Recommendation concerning the insertion in national statistical nomenclatures of subheadings to facilitate the monitoring of the international movement of goods required for the production and use of improvised explosive devices (IED) was adopted. Under the terms of the Recommendation, WCO Members and Contracting Parties to the HS Convention are requested to insert in their statistical nomenclatures, as soon as possible, additional subdivisions for products covered by HS heading 36.03.