WTO Trade Facilitation Deal Includes Provisions for Trusted Traders, Expedited Release, Single Window

Ministers from World Trade Organization member countries reached agreement on measures to simplify customs procedures, as part of a package of deals announced at the Bali Ministerial Conference on Dec. 7 (see 13120903). The Agreement on Trade Facilitation aims to reduce costs and improve the speed and efficiency of customs procedures. The agreement will be legally binding, but will be a “multilateral” deal that only applies to WTO members that sign on to the deal. The WTO’s announcement of the deal lauded it as “one of the biggest reforms of the WTO since its establishment in 1995” (here).

The WTO is currently aiming for adoption of the Agreement on Trade Facilitation by the General Council by July 31, 2014. The agreement would then be open for WTO members to accept it until July 31, 2015. It will only apply to WTO members that accept the trade facilitation deal, and will take effect upon acceptance of two-thirds of WTO members (with the remaining WTO members able to sign up after it takes effect should they so choose).

According to the WTO, the objectives of the trade facilitation deal are to speed up customs procedures; make trade easier, faster, and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption; and use technological advances. Highlights of the Agreement on Trade Facilitation are as follows:

Clarity and Transparency

The Agreement on Trade Facilitation would require signatories to publish certain types of information in an easily accessible manner. Required information would include:

• Import, export, and transit procedures
• Applied duty rates and taxes, fees, and charges imposed in connection with importation or exportation
• Rules on valuation and classification
• Laws, regulations, and administrative rulings on rules of origin
• Import, export, or transit restrictions or prohibitions
• Penalty provisions and appeal procedures
• Trade agreements with other countries
• Procedures on administration of tariff quotas

In addition, signatories would have to post certain information on the internet including a description of their import, export, and transit procedures; forms and documents required for importation, exportation and transit; and contact information for enquiry points.

Notice and comment required for trade laws and regulations. Signatories to the deal would also have to provide for notice and comment on changes to laws and regulations related to the movement, release and clearance of goods. Such laws and regulations would also have to be published or otherwise made publicly available as early as possible before their effective date. Changes to duty rates would be exempt from these notice and comment and prior publication requirements.

Customs rulings. The agreement includes requirements for customs rulings issued by parties to the deal. Each signatory would have to issue advance rulings on tariff classification and origin “in a reasonable, time bound manner” upon receipt of a written request. The rulings may only be revoked or modified if written notice is provided. Retroactive revocation or modification of rulings would only be possible where the ruling was based on incomplete, incorrect, or false or misleading information.

(The agreement also includes provisions on the right to appeal customs decisions, as well as nondiscrimination and transparency in guidance, detention, and test procedures.)

Fees, Charges and Penalties

The Agreement on Trade Facilitation would set limits on fees and charges and penalties that signatories would be able to charge importers and exporters. Fees and charges would be limited to the “approximate cost of the services rendered in connection with the specific import or export operation in question,” although they would not have to be directly linked to a specific operation as long as they are “closely connected to the customs processing of goods.”

Similarly, the agreement would require that penalties only be imposed on the person responsible for the breach in customs law, regulations, or procedures. That penalty would have to be “commensurate with the degree and severity of the breach."

Prior disclosures. Although the agreement doesn’t require them, it encourages signatories to consider prior disclosures of customs violations. When a violation is voluntary disclosed to a signatory’s customs authority, that signatory is “encouraged to, where appropriate, consider this fact as a potential mitigating factor when establishing a penalty for that person.”

Trusted Trader Programs Required

Each country would have to put in place a trusted trader program to give customs facilitation benefits to authorized operators. Criteria for acceptance into the program would include compliance record, internal controls, financial solvency, and supply chain security. Benefits would have to include three of the following:

• Low documentary and data requirements
• Low rate of physical inspections and exams
• Rapid release
• Deferred payment of duties, taxes, fees and charges
• Use of comprehensive or reduced bonds
• A single customs declaration for all imports or exports in a given period
• Clearance of goods on the premises of the authorized operator or another place authorized by customs

Alternatively, signatories to the agreement would be able to offer facilitation measures through procedures available to all importers and exporters, in which case they would not have to establish a separate trusted trader program.

Expedited Release for Air Cargo

Customs authorities from signatory countries would be required to have procedures in place allowing for the expedited release of goods entered "at least" through air cargo facilities to persons who apply for such treatment. Under the deal’s expedited air cargo release provisions, countries would have to minimize documentation required for release, provide for release as quickly as possible; and provide for a de minimis shipment value or dutiable amount for which customs duties and taxes will not be collected. In return, customs authorities would be able to require advance submission of customs documentation and extra fees to cover their expenses.

Perishables Released in ‘Shortest Possible Time’

Each country that signs the agreement would have to provide for the release of perishable goods within the “shortest possible time” to avoid loss and deterioration of perishables. Customs authorities would have to provide for release of perishable goods outside of normal business hours “in exceptional circumstances.”

Before release, signatories would have to allow importers to arrange for proper storage of perishable shipments. Customs authorities would be able to require that such storage facilities be approved by relevant authorities.

Other Provisions on Release and Clearance

The trade facilitation deal would impose other requirements related to release and clearance of goods on signatories. The agreement includes provisions on pre-arrival processing; electronic payment of duties; separation of release from payment of duties, fees, and taxes; a risk-based approach to customs controls; and a system of post-clearance audits.

Pre-arrival processing. Signatories would have to adopt procedures allowing for submission of import documentation, including manifests, before arrival of the goods in order to begin processing.

Electronic payment. Each country would have to allow for electronic payment of duties, taxes, fees, and charges collected by customs that are incurred upon importation and exportation.

Separation of release from payment. Procedures would have to be in place to release goods before the final determination of duties, taxes, and fees owed, if that determination isn’t done pre-release or “as rapidly as possible after arrival.” Countries would be able to require bonds or deposits to cover estimated duties, as long as the amount isn’t greater than what is required to ensure payment.

Risk management. Countries that sign the agreement would have to use a risk-based approach to customs controls. They would have to concentrate border controls on high-risk consignments, and expedite the release of low-risk consignments. Criteria for judging the risk of a shipment would include the product involved, country of origin, value of the goods, and the compliance record of the importer/exporter.

Post-clearance audits. Signatories would have to adopt post-clearance audit systems to expedite release of goods. The decision on who to audit would have to be based on risk.

Customs Brokers

The Agreement on Trade Facilitation makes little mention of customs brokers beyond saying that the deal does not make customs brokers mandatory. It also says signatories must notify the WTO of any changes to their requirements for use of customs brokers, and must have a transparent and objective broker licensing system.

Single Window

Signatories to the Agreement on Trade Facilitation would have to work toward establishment of a single window to allow importers and exporters to submit documentation and data to participating government agencies through a single entry point. Although the agreement doesn’t specify that the single window be electronic, it says countries must “to the extent possible and practical use information technology to support the single window.”

Other Documentation and Procedural Requirements

Under the Agreement on Trade Facilitation, signatories would have to work toward minimizing and simplifying import, export, and transit documentation and procedures.

Copies accepted. Countries would have to accept copies of required documentation when any government agency already holds the original.

Export declarations not required for imports. Requirements for submission of export declarations as a condition of importation would be prohibited.

Pre-shipment inspections. Signatories would also be prohibited from requiring pre-shipment inspections related to tariff classification and customs valuation.

Uniform border procedures. Customs procedures and documentation requirements would have to be uniform for release and clearance of goods throughout a given country.

Rejected goods. When imported goods are rejected by a signatory for failure to meet sanitary or phytosanitary requirements or technical regulations, that country would have to allow the importer to reexport the goods in question.

Freedom of Goods in Transit

The Agreement on Trade Facilitation sets prohibitions on restrictions on goods in transit. Signatories would not be able to regulate transit goods in a way that would constitute a “disguised restriction on traffic in transit.” Fees and charges on transit goods would be prohibited except to recoup administrative expenses. Transit goods would have to be treated no less favorably than if they were sent directly from their origin to their destination, without transiting any other countries.

Application to Developing Countries

The second part of the Trade Facilitation text outlines the procedure to bring WTO developing and least developed countries members to a customs capacity level where those countries are able to fulfill the agreement’s requirements. The deal mandates developed countries provide targeted assistance and support to developing and least developed countries. Least developed countries are only required to fulfill requirements that are consistent with respective administrative and institutional capabilities. Developing or least developed countries would have to adhere to one of three different types of implementation schedule and formally request resources. The deal provides those countries a mechanism to delay implementation and a grace period for non-compliance.

(See the agreement for more provisions, including on border agency cooperation; customs cooperation, including exchanges of information and verifications; movement of goods in-bond; use of international standards; the establishment of a committee on trade facilitation; etc.)