The WTO Trade Facilitation Agreement

The World Trade Organisation (WTO) Trade Facilitation Agreement finally came into force on 22nd February 2017. Is it really a big deal and what does it mean for UK business. The answer to the first question is an unequivocal ‘yes’. The Trade Facilitation Agreement is the first Agreement concluded at the WTO by all of its Members. It is a big deal in the context of the evolution of international trade law as it obliges WTO member countries to adopt, either as mandatory or as best efforts, recognised international best practice into national law concerning the control and regulation of trade across borders. The Agreement will help improve transparency, consistency and predictability of treatment for traders. It should also increase possibilities for traders, particularly the world’s SMEs) to participate in global value chains and reduce the scope for corruption in countries where this is rife, thereby reducing to final landed cost of imports.

The Trade Facilitation Agreement (TFA) contains provisions for:

  1. Expediting the movement, release and clearance of goods, including goods in transit
  2. Promoting effective cooperation between customs and other appropriate authorities
  3. Recognising and facilitating compliant traders through the application of risk management principles
  4. Developed countries and donor organisations to provide technical assistance and capacity building in this area

The Agreement is all about reducing non-tariff barriers (NTBs) to international trade and, arguably, if the world is heading towards an increasingly protectionist environment, this will become increasingly important if trade is to flourish. Whilst it s true to say that low income and lower middle income countries are likely to see the largest impact from the TFA it is also estimated that OECD countries will gain significantly from measures such as streamlining border procedures, leading to 1% transactional cost reduction and automating trade and customs procedures, leading to 2.1% transactional cost reduction. For lower middle income countries it is estimated that the harmonisation and simplification of trade documents alone will lead to an impressive 2.7% reduction in transactional cost.     

Exporters in the UK are thus likely to benefit in two areas.  Firstly, although the EU Union Customs Code, and the UK implementation of its provisions, largely comply with the requirements of the TFA there are areas which will need to be addressed and improved – such as faster migration to electronic, paperless, processes, trader consultation and co-operation between border and other regulatory authorities.   Secondly, importing costs will reduce in many of the UK’s key export markets and this should free up capital for increased trading volumes. In the post Brexit era this may be extremely important. For example, current discussions on revitalising trade between Commonwealth countries could lead to increased opportunities for exports to countries such as Kenya, Zambia and Nigeria, all of which will enjoy huge benefits from implementing the various TFA measures. There will be similar benefits in relation to non-Commonwealth emerging and developing markets. The removal of Pre Shipment Inspection will also be welcomed.

The Trade Facilitation Agreement has three sections:

•       Section I contains the technical provisions for expediting the movement, release and clearance of goods, including goods in transit. It clarifies and improves the relevant articles (V, VIII and X) of the General Agreement on Tariffs and Trade (GATT) 1994. It also sets out provisions for customs cooperation. Around 80% of the measures relate to customs processes.

•       Section II contains provisions that allow developing and least-developed countries (LDCs) to determine when they will implement individual provisions of the Agreement. Such countries are required to categorise the measures as:

Category A          Currently implemented

Category B          Will be implemented within a defined timescale

Category C          Will be implemented within a defined timescale but technical assistance will

                                be required to achieve this.    

•       Section III contains provisions that establish a permanent committee on trade facilitation at the WTO, require members to have a national committee to facilitate domestic coordination and implementation of the provisions of the Agreement. It is generally agreed that such national committees must have full stakeholder membership to be effective with good private sector (traders, trade associations, freight forwarders, banks, carriers) participation.

The technical content of Section 1 provides full details of the measures that must be implemented, these can be summarised as:

Article 1: publication and availability of information

•       ICT / Trade Information Portals

•       trade procedures

•        common enquiry points

•       Capacity building for enquiry points

Article 2: opportunity to comment, information before entry into force and consultation

•       Stakeholder consultation mechanisms

•       Communication strategies

Article 3: advance rulings

•       Customs valuations, classifications and requirements for relief and exemptions

Article 4: appeal and review procedures

•       Customs law

Article 5: other measures to enhance impartiality, non-discrimination and transparency

•       SPS (Sanitary and Phyto-sanitary) requirements, customs laboratories, testing

•       Customs warehousing

Article 6: disciplines on fees and charges imposed on or in connection with importation and exportation

•       Publication of fees and charges by customs and border agencies, other than duties and taxes, for imports and exports.

Article 7: release and clearance of goods

•       ICT / Single Window

–      pre-arrival processing

–      electronic payments

–      MIS & statistics (for average release times)

•       Guarantee systems

•       Risk Management

•       Post Clearance Audit

•       Trusted trader regimes, such as Authorised Economic Operators

•       Trade facilitation measures:

–      Reduce documents /data

–      Reduce physical inspections

–      Rapid release times

–      Deferred payments

–      Comprehensive / reduced guarantees

–      Single customs declaration

Article 8: border agency cooperation

•       Regional Integration

•       One Stop Border Posts

  Article 9: movement of goods under customs control intended for import

•       Transit

Article 10: formalities connected with importation and exportation and transit

•       Process reviews

•       Removal of Pre-shipment Inspection

•       ICT

–      dematerialisation of documents

–      Single Window

Article 11: freedom of transit

•       Transit procedures and guarantee mechanisms

Article 12: customs cooperation

•       Regional Integration

•       Single Window interoperability

•       Globally Networked Customs

In summary, the WTO TFA is a big deal and will have significant impact and benefit for UK Importers and exporters. Implementation has started in most countries and Category B and C timelines, for developing countries, tend to be 1-5 years. Globally, this means there should be a gradual reduction in NTBs, and improvement in trade facilitation, over this period leading to the consequential opportunities and benefits discussed.

 

Article written by Jon Walden - Associate of Strong & Herd LLP

 

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