Tariff and Trade Affairs
13th June 2018
All strategic goals with regard to Tariff and Trade Affairs (TTA) have been successfully accomplished over the past year. This was evidenced by the significant workload of the WCO Secretariat’s TTA Directorate in 2016, with 45 days of meetings held, more than 4,000 pages of documents prepared, more than 300 items examined, and more than 400 decisions taken. Sixty-nine TTA missions were also conducted during 2016/2017 for a total of 359 days, which is a few days short of a year.
Cross-cutting activities: the WCO Revenue Package and advance rulings
The WCO continued to assist its Members in the implementation of the Revenue Package, which provides guidance and best practices for improving the efficiency and effectiveness of revenue collection, as well as in the implementation of an advance ruling system for classification and origin, as required under the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO).
Botswana, Ethiopia, Jamaica, Jordan, Kenya, Madagascar and the United Arab Emirates received technical assistance on the above-mentioned topics during national seminars, as did the five Member States of the Southern African Customs Union – Botswana, Lesotho, Namibia, South Africa and Swaziland – during a sub-regional seminar.
Work on Phase III of the Revenue Package Action Plan is underway and will be completed by June 2018. It has two parts: (1) assisting WCO Members in using the tools developed in Phases I and II; and (2) developing new material and activities touching on Customs-tax cooperation, as well as assisting Least Developed Countries (LDCs) in origin certification, post clearance audit, fragile borders, control of mineral resources and regional Customs laboratories.
Nomenclature and classification
The WCO continued to carry out its work on the uniform application of the Harmonized System (HS), with the adoption of numerous classification decisions and intensified capacity building efforts devoted to the implementation of HS 2017, the harmonization and enhancement of the analytical methods used by Customs laboratories, and the implementation of advance ruling systems for classification.
HS Contracting Parties
The number of Contracting Parties to the HS Convention has reached 156, with the accession of Burundi (January 2017) and Palestine (March 2017). Thus, the HS convention continues to remain the WCO’s most successful global instrument to date.
Status on the implementation of HS 2017
The sixth edition of the HS, or HS 2017, entered into force on 1 January 2017. At present, 82 Contracting Parties have notified the WCO that they had implemented HS 2017 from 1 January 2017, and 23 Contracting Parties had advised that they would be implementing it in the course of 2017.
Speeding up the HS decision-making process
The HS Committee had re-opened its examination of a draft WCO Council Recommendation, which proposed an amendment to Article 8 of the HS Convention with a view to speeding up the decision-making process of the HS Committee by limiting the number of reservations to two in respect of its classification decisions.
At their Sessions in July 2017, the WCO Policy Commission and Council unanimously adopted the proposed draft Council Recommendation. The final resolution of this matter, which had been on the agenda for at least 15 years, while it might seem a small step, does in fact represent major progress.
Classification Decisions and Amendments to HS Publications
At its 58th and 59th Sessions, the WCO HS Committee took 334 classification decisions, of which 251 related to international nonproprietary name (INN) pharmaceutical products linked to the implementation of the WTO Agreement on Trade in Pharmaceutical Products.
The HS Committee also adopted 8 amendments to the HS Nomenclature, 42 amendments to the HS Explanatory Notes and 41 new Classification Opinions. Moreover, it revised 11 existing Classification Opinions and deleted 3 existing Classification Opinions.
The HS classification decisions, the amendments to the HS Explanatory Notes and the amendments to the Compendium of Classification Opinions, with the exception of those for which reservations have been entered, 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 modernization of Customs laboratories and their analysis methodology, and on the implementation of advance ruling systems for classification. The WCO Secretariat also provides advice on the classification of commodities following the submission of a request by a Member.
Technical assistance focusing on the HS and related matters, including Customs laboratory infrastructure and analysis methodology, was provided to officials from Albania, Azerbaijan, Bosnia and Herzegovina, Montenegro, Myanmar, Peru, Tajikistan, Tanzania, Zimbabwe, Samoa, Serbia, Sudan, Ukraine, Uruguay and Uzbekistan.
The WCO Secretariat also provided assistance to the Committee in charge of the nomenclature and tariff of the Central African Economic and Monetary Community (CEMAC) as it prepares to align the Community Common External Tariff to the 2017 edition of the HS.
A workshop, aimed at enabling Customs laboratories in the WCO Asia/Pacific region to share best practices on chemical analysis, took place in November 2016 at the Central Customs Laboratory in Kashiwa, Japan. Twenty-nine Customs laboratories representing 23 countries participated in the event.
In addition, a workshop, in May 2017, on the control of mineral resources gathered representatives from Customs and from institutions in charge of mineral resources in the Democratic Republic of the Congo, Nigeria, South Africa, Tanzania, Zambia and Zimbabwe, with the objective of:
- fostering cooperation and networking between the two main actors in each of the countries;
- establishing appropriate controls on minerals being traded, which entails proper analysis of the commodities to better value them in relation to revenue collection and better determine their origin in relation to the fight against illegal mining.
With the support of JICA, a workshop on the HS 2017 amendments and tools developed under the WCO Revenue Package was held in November 2016, in Nairobi, Kenya for master trainers from five Customs administrations in East Africa.
At the invitation of the Oceania Customs Organisation Secretariat, the WCO also delivered training on HS 2017 at a workshop for Customs officers, representing 15 Customs administrations in the region.
In addition, the Organisation for the Prohibition of Chemical Weapons (OPCW) invited the WCO to introduce the role played by the WCO in controlling the trade in chemical products to participants attending the OPCW’s Associate Programme – an annual programme for developing countries that aims to enhance their capacities by offering training in chemistry and chemical engineering.
Regarding classification advice to WCO Members, 127 responses were provided by the WCO Secretariat during the 2016/2017 financial year.
The WCO continued its efforts in assisting its Members with the uniform application of the WTO Agreement on Customs Valuation (the Agreement), in particular, by providing guidance on the management of Customs valuation in an increasingly complex trade landscape.
Examination of Customs valuation questions
The examination of a question related to 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 – led to the adoption of Advisory Opinion 4.17.
One technical question on “related party transactions as they pertain to the Agreement and transfer pricing” led to the drafting of a case study, which should be adopted in the autumn of 2017. The case study illustrates a specific scenario, where Customs took into account transfer pricing information in the course of verifying the Customs value.
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:
- international marketing fees – whether the payment of an international marketing fee is dutiable;
- interpretation of the term “to the port or place of importation” in Article 8.2 (a) and (b) of the Agreement.
The TCCV continued and will continue examining questions concerning:
- the circumstances surrounding a sale under the provisions of Article 1.2 (a) – goods produced in different countries;
- the valuation of imported goods purchased in ‘flash sales’ – which valuation method should be used for goods purchased during such sales when the price is significantly lower than the prevailing market price;
- the use of transfer pricing documentation to examine related party transactions according to Article 1.2 (a) of the Agreement – a situation where, in examining the circumstances surrounding the sale, Customs arrives at a different outcome from that of the transfer pricing study done based on the ‘transaction net margin’ method.
National workshops on valuation issues took place in Kazakhstan, Moldova, Thailand and Tanzania. Two regional workshops were organized respectively, for the WCO’s East and Southern Africa region and the Asia/Pacific region, and a sub-regional workshop was held for officials from the Dominican Republic and Haiti. In addition, a diagnostic mission on the valuation control system and assessment of related expertise was carried out in Burkina Faso, while train-the-trainer missions were held in Ghana and in Nigeria.
In cooperation with JICA, the WCO also delivered a workshop for 30 master trainers on Customs valuation from five Customs administrations in East Africa, which aimed at strengthening their understanding of Customs valuation and training delivery techniques, as well as at finalizing case studies to be used in future training activities for both Customs officials and Customs brokers.
As part of a series of joint regional workshops conducted by the WCO and the Organisation for Economic Co-operation and Development (OECD) on Customs valuation and transfer pricing, two workshops were organized for countries from the North of Africa, the Near and Middle East region, as well as the Europe and West and Central Africa regions. The workshops enabled officials from Customs and tax administrations to meet, understand each other’s domain, and discuss how they could cooperate to improve efficiencies in revenue collection.
The WCO also participated in a workshop on Customs valuation and valuation fraud, organized by the Agadir Technical Unit in Tunis for 25 officials from the Customs administrations of Egypt, Jordan, Morocco and Tunisia. Moreover, joint WTO-WCO workshops on Customs valuation were organized in Honduras and Saint Vincent and the Grenadines for participants from the public and private sectors.
Rules of origin
The WCO continued to support its Members with their understanding, management and implementation of rules of origin amid the ongoing proliferation of regional trade agreements.
Global Origin Conference
In collaboration with the African Union (AU), with funding from the Korea Customs Service, the WCO organized its first Global Origin Conference in Addis Ababa, Ethiopia on 3 and 4 May 2017. The event provided a platform for the exchange of knowledge between the public sector, the private sector and the academic community. The WCO Origin Compendium, which compiles all instruments and tools developed by the WCO into one publication, was launched at the conference.
Capacity building activities relating to the application of preferential rules included the organization of a regional workshop for Customs administrations in West and Central Africa, a sub-regional workshop for the Member States of the Caribbean Community (CARICOM), and national workshops in Cameroon, Palestine and Ukraine.
The WCO also conducted a workshop on the updating of preferential rules of origin following the 35th Session of the WCO Technical Committee on Rules of Origin and delivered assistance in this domain to Customs administrations of the Association of Southeast Asian Nations (ASEAN), specifically assisting them to technically update their ‘product specific rules’ to the latest edition of the WCO Harmonized System (HS), using the WCO Guide for the Technical Update of Preferential Rules of Origin. ASEAN Customs administrations also benefited from a workshop focusing on the development of an advance ruling system for origin and certification.
WCO experts also participated in the following events:
- A workshop for Arab countries organized in December 2016 by the United Nations Economic and Social Commission for Western Asia (ESCWA), dealing, among other things, with cumulation provisions, the evolution of the Pan-European rules of origin (Mediterranean Arab countries are parties to the Pan-Euro-Mediterranean Convention), and progress made on the Great Arab Free Trade Agreement (GAFTA);
- A meeting organized in September 2016 by the United Nations Conference on Trade and Development (UNCTAD) in relation to the proper implementation of the 2015 Nairobi Decision on preferential market access for least developed countries (LDCs);
- A workshop on the technical update of preferential rules of origin organized by the Japan International Cooperation Agency (JICA) for Thai officials from the country’s Customs Department, the Department of Foreign Trade, and the Department of Trade Negotiation.
In response to the growing demand for technical assistance linked to the building up of infrastructure for the application of advance rulings, the WCO Secretariat stepped up its efforts concerning the accreditation of origin experts. An accreditation event for experts coming from English-speaking countries in Africa was organized in March 2017. As soon as funding is available, a similar event for experts from French-speaking countries will be organized.
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, no specific negotiations were held in Geneva, Switzerland on the Harmonization Work Programme in 2016 and the first half of 2017.