Tariff and Trade Affairs
WCO Revenue Package and advance rulings
The WCO continued to assist its Members in implementing the Revenue Package, which provides guidance and best practices for improving the efficiency and effectiveness of revenue collection, as well as in implementing an advance ruling system for classification and origin, as required under the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA).
Assistance was provided to Azerbaijan, Bahamas, Eswatini, Lesotho, Liberia, Mauritius and Niger to assist them in developing or expanding their advance ruling systems.
As part of the programme “Harmonizing the classification of goods based on WCO standards to enhance African trade,” a regional accreditation workshop for Technical and Operational Advisors (TOAs) on the cross-cutting tools for classification, origin and valuation was conducted for French-speaking African officers.
Secretariat staff also supported Customs administrations who themselves provide training to foreign colleagues. In addition, they participated in various events, including the First Workshop of the African Union Technical Customs Working Group on Pre-Shipment Inspections.
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, including the harmonization and enhancement of analytical methods used by Customs laboratories as well as the work on the implementation of advance ruling systems mentioned earlier.
HS Contracting Parties and status on the implementation of HS 2017
The number of Contracting Parties to the HS Convention has reached 158, with the accession of The Gambia (June 2019). At present, 120 Contracting Parties have notified the WCO that they had implemented HS 2017, and a further 14 had indicated that they would have implemented it by January 2019.
Speeding up the HS decision-making process
The Recommendation of 30 June 2018 amending Article 8 of the HS Convention with a view to speeding up the HS decision-making process by placing a two-reservation limit on classification decisions taken by the HS Committee was unanimously adopted and will enter into force on 1 January 2021.
Classification decisions and amendments to HS publications
At its 62nd and 63rd Sessions, the WCO HS Committee took 304 classification decisions, including 242 classifications of international nonproprietary name (INN) pharmaceutical products linked to the WTO Agreement on Trade in Pharmaceutical Products.
The HS Committee, at these two sessions, also adopted 58 amendments to the HS Nomenclature, 6 sets of amendments to the HS Explanatory Notes (Article 16 procedure / effective on 1 January 2022), 8 draft corrigendum amendments to the Explanatory Notes (Article 8 / HS 2017), and 53 new Classification Opinions. With the exception of those for which reservations have been entered, the decisions and amendments are available on the WCO website and via the WCO bookstore.
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, at the request of a Member, advice on the classification of commodities.
Assistance aimed at increasing institutional capacity to carry out classification work was provided to the Bahamas, Georgia, Vietnam and Palestine Customs. A diagnostic mission to assess the existing infrastructure in respect of work undertaken with regard to the HS and tariff classification was held in Niger. Regarding the accreditation of experts, a regional workshop for expert trainers on the HS in the West and Central Africa region was conducted in Burkina Faso.
National Workshops on the development of an advance ruling system for classification were organized in Bhutan, Malawi, Nepal, Papua New Guinea, Vietnam and Zimbabwe.
Technical assistance related to Customs laboratory infrastructure and analysis methodology, was provided to Albania, Colombia, and 14 countries in the MENA region. Moreover, experienced Customs chemists and classification officers from six countries participated in the 6th Customs Laboratory Programme, which was funded by Japan Customs. Participants spent one week studying WCO HS tools at the WCO Secretariat before going to Japan for six weeks’ practical training on chemical analysis methods.
In addition, the Organisation for the Prohibition of Chemical Weapons (OPCW) invited the WCO to introduce the role played by the Organization 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.
During the 2018/2019 financial year, 97 classification advice responses, covering 109 products, were provided to WCO Members by the WCO Secretariat.
Review of the HS
The potential for a strategic review of the HS was raised with the WCO Policy Commission, which led to a Conference on the review of the HS being held in May 2019. After reporting the discussions back to the Policy Commission, the Secretariat has been tasked to prepare a business case, for submission to the WCO Finance Committee in the first instance, covering the scope of a possible review, the initial impact and feasibility studies, possible governance mechanisms for the change process, and the expected financial and human resource costs.
The WCO Council adopted an Article 16 Recommendation concerning the amendment of the HS for HS 2022. It contained 351 sets of amendments. Some notable amendments include new headings or defining Notes for:
- new or major technologies (3D printers, smartphones, drones and novel tobacco products):
- electronic waste (e-waste);
- various gases with high global warming potential;
- rapid diagnostic kits for the Zika virus and other mosquito-borne diseases;
- new fentanyl opioid derivatives;
- cultural articles;
- edible oils produced by microbes;
- edible insect products;
- minimally processed quinoa.
HS 2022 will enter into force on 1 January 2022 for all HS Contracting Parties, but will exclude any amendments objected to during the six month time-frame, during which Parties can notify the WCO of an objection to a recommended amendment.
The Council adopted the Recommendation on the insertion in national statistical nomenclatures of subheadings to facilitate the monitoring of the international movement of substances that deplete the ozone layer, controlled by virtue of the Kigali amendments to the Montreal Protocol.
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 matters.
Examination of Customs valuation questions
The WCO Technical Committee on Customs Valuation (TCCV) completed the examination of the “Valuation of imported goods purchased in flash sales” case that was submitted by Mauritius, and which led to the adoption of Advisory Opinion 23.1 at its 48th Session in May 2019.
During 2018/2019 the TCCV had examined questions concerning:
- the valuation of imported chip cards relating to transportation service and tourist admission tickets;
- the use of transfer pricing documentation to examine related party transactions, according to Article 1.2 (a) of the Agreement;
- the sale for export to the country of importation under Article 1;
- the interpretation of the value of adjustments under Article 8.1 (b) of the Agreement;
- the payment of royalties and licence fees, calculated by reference to the sales price of products manufactured in the country of importation from imported inputs, and their relevance to the Customs value of the imported inputs necessary for the manufacture of the finished goods;
- the treatment of income tax paid on royalties payable to a licensor in a foreign country;
- the valuation of imported inputs for which a “commission” is paid by the buyer to a promoter under a Promotion and Marketing Service Agreement;
- the valuation of an imported product bearing the importer’s own trademark when, at the same time, the same product with another trademark is presented for importation at a different price;
- the valuation of imported goods sold at discounted prices to accredited buyers;
- the valuation treatment of amounts paid for access rights to a TV bouquet under Article 8.1 (c) of the Agreement;
- the situation involving intra-group transactions, where two invoices with different prices for the same consignment were found during the examination of documents submitted by an importer.
The first question has been put in Part III of the Conspectus of Technical Valuation Questions, and the remaining questions will be examined by the TCCV at its next session.
National workshops on valuation issues took place in the Bahamas, Bhutan, Colombia, Lesotho, Rwanda, Senegal, Sierra Leone, Thailand, Togo and Montenegro. A Sub-regional workshop was organized for countries of the pacific. In addition, diagnostic missions on the valuation control system and assessment of related expertise were carried out in Côte d’Ivoire, Bhutan, Liberia and Niger.
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, a workshop was organized for countries in the Asia/Pacific region.
For the 2018/2019 financial year, the WCO Secretariat responded to nine requests for advice received from WCO Members in relation to Customs valuation.
WCO valuation experts participated in a private sector conference series focusing on transfer pricing called the “TP Minds Conference,” which was organized in Australia, Singapore, South Africa and the United Kingdom with the objective of promoting WCO valuation work. They also participated in a WTO workshop entitled “Experience sharing on the implementation of the Customs Valuation Agreement, and ensuring that the Trade Facilitation Agreement supports implementation of the CVA including technical assistance and capacity building.”
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.
The Technical Committee on Rules of Origin (TCRO) met to report on the technical aspects of the WTO Agreement on Rules of Origin. The work on the harmonization of non-preferential rules of origin at the WTO has remained stagnant for some years, but discussions have taken place on issues linked to notifications and transparency.
Back to back with the TCRO, a workshop was organized to address preferential market access for LDCs, origin procedures including certification and verification, and e-learning opportunities for public and private representatives. The review of the Revised Kyoto Convention (RKC) was also discussed, with the inputs being reported to the Working Group on the Comprehensive Review of the RKC.
Capacity building activities included the organization of eight training workshops:
- In Sri Lanka, WCO Secretariat staff partnered with the WTO to deliver presentations related to the operational aspects of origin.
- In Angola, Indonesia and the Lao People’s Democratic Republic, they assisted Customs officers in enhancing their knowledge of preferential rules of origin and their ability to correctly apply the rules related to origin.
- In the Bahamas, they delivered a train-the-trainer workshop for eight officials.
WCO Secretariat staff also participated in several external events:
- A workshop on electronic certificates of origin, gathering the four Members of the Agadir Agreement (Egypt, Jordan, Morocco and Tunisia).
- A roundtable on the future of rules of origin and utilization rates organized by the European University Institute in cooperation with UNCTAD, aimed at providing a platform for origin experts, researchers, government officials and the private sector to discuss developments in the area of rules of origin.
- A workshop on the implementation of the APEC Customs Transit Guidelines that were adopted in 2014.
A number of origin tools have been updated or translated into new languages:
- The WCO Origin Compendium, a compilation of all origin related tools and instruments, is now available in Spanish.
- The Database on Preferential Rules of Origin, and the Comparative Study on Preferential Rules of Origin have been updated, with the Study now translated into French and Spanish.
Specific Annex K of the Kyoto Convention
The WCO Secretariat believes that there is a need to update Specific Annex K of the Revised Kyoto Convention (RKC) that deals with rules of origin as part of the current RKC review. The Annex was not part of the revision of the original Kyoto Convention, and, as such, there is a need to update the text to ensure that it matches modern Customs and trade procedures and practices.
Moreover, the WCO Secretariat is advocating for binding and enforceable provisions, thereby promoting that the WCO and Customs take the lead in relation to international standards on the administrative procedures regarding rules of origin.