WCO - Knowledge Academy
Brussels, 2 July 2014
Customs Valuation and the
World Trade Organization
Roy Santana
Market Access Division
World Trade Organization
1
Organization
/ Market
Access
Division/ /154
154Rue
Rue de Lausanne,
Geneva
21, 21,
Switzerland
/ roy.santana@wto.org
WorldWorld
TradeTrade
Organization
/ Market
Access
Division
Lausanne,1211
1211
Geneva
Switzerland
/ roy.santana@wto.org
Structure of this presentation:
A. The CVA in the WTO context
B. The Committee on Customs Valuation and
ongoing issues
C. WTO disputes in general
D. Disputes on Customs Valuation
2
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
A. The CVA in the
WTO context
3
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Most WTO Agreements seek to regulate NTMs
GATT 1994
Understandings
Marrakesh Protocol
Multilateral Agreements on:
Annex
1A
Multilat.
Trade Agrs.
on Goods
Agriculture
Antidumping
Sanitary and Phytosanitary
measures
Customs Valuation
Safeguards
Rules of origin
Technical Barriers to Trade
Import Licensing Procedures
Trade-related investment
measures
Subsidies and countervailing
measures
Preshipment inspection
4
How much should I pay?
It is normally necessary to know at least 3 things:
5
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
B. The Committee on
Customs Valuation
6
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
The CVA established two Committees:
Committee
on Customs
Valuation
(CCV)
“Technical
Committee” on
Customs
Valuation
(TCCV)
7
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
WCO - Technical Committee
CVA, Article 18.2 and Annex II
Task: To ensure the uniform application of the agreement at the technical level
Instrument
Description
Advisory
opinion
Answers a question on a specific set of facts
(actual or theoretical)
No.*
Commentary A series of comments on part of the text of the
agreement; supplement with additional
guidance, including examples. Applies to a
number of situations.
46
25
Explanatory
note
Answers a question of a general nature arising
from one or more provisions in the Agreement;
may also examine trade practices.
6
Case study
Exposition of complex set of facts based on an
actual commercial transaction; used to
demonstrate practical application
17
Study
Result of an examination in some depth of any
question relating to the Agreement
2
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
8
WTO - Committee
CVA, Article 18.2 and Annex II
Tasks:
1. “Afford Members the opportunity to consult on
matters relating to the administration of the
customs valuation system by any Member”
(CVA, Art. 18.1)
2. Oversee the operation of the Agreement
3. Review of notifications, e.g. national legislation
All information is publicly available:
https://docs.wto.org (Document symbol: “G/VAL/”)
9
Notifications on Customs Valuation
#
1
Established in: Type
G/VAL/
G/VAL/5, B.2
One-off N/1
2
Notification
Copy of national
legislation
Changes in legislation
CVA, Art. 22.2
Ad hoc
N/1
3
Checklist of issues
G/VAL/5, B.3
One-off
N/2
4
Treatment of interest
charges
Para. 2 carrier media
(software)
G/VAL/5, A.3
One-off
N/3
G/VAL/5, A.4
Ad hoc
N/3
5
10
Treatment of Software and data?
• 1995 “Carrier Media” decision (“Decision 4.1”)
• Should it be amended to take account of
technological developments?
(Proposal by Uruguay: G/VAL/W/241/Rev.1)
ARTICLE 8.1(B)(IV) OF THE AGREEMENT
ON CUSTOMS VALUATION
Agreement to rectify a “serial comma” problem:
Article 8
1. In determining the customs value under the provisions of
Article 1, there shall be added to the price actually paid or payable
for the imported goods:
(b) the value, apportioned as appropriate, of the following goods
and services (… ):
(iv) engineering, development, artwork, design work, and plans
and sketches, undertaken elsewhere than in the country of
importation and necessary for the production of the
imported goods;
Workshop on the use of customs
valuation databases?
• Issue originally raised by the ICC
• Proposal by Australia, Canada, Chinese Taipei,
the European Union, and the United States
(G/VAL/W/231/Rev.1)
13
C. WTO Disputes in General
14
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
1. Introduction
Disputes in general
• A dispute arises when a Member
believes that another Member is not
complying with a covered Agreement
or a specific commitment made in the
WTO.
• The Dispute Settlement Body (DSB)
has the ultimate responsibility for
settling disputes.
•
The Dispute Settlement
Understanding (DSU) is the main
WTO agreement on settling
disputes. → One of the
cornerstones of the multilateral
trading system.
15
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
2. Interpretation of the WTO Agreements
Disputes in general
• Art. 3:2 of the DSU: “in accordance with customary rules of
interpretation of public international law.”
• Appellate Body (US – Gasoline): Vienna Convention on the Law of
Treaties (because it had attained the status of customary or general
international law).
VCLT: Article 31
(General Interpretation Rule)
1. Ordinary meaning of the terms
2. In their context
This includes the preamble, annexes, agreement between the parties to
the dispute. Should be taken together with any subsequent agreement,
subsequent practice, and relevant rules of international law.
3. in the light of its object and purpose
16
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
2. Interpretation of the Agreements (cont’)
Disputes in general
VCLT: Article 32
(Supplementary means of interpretation)
- Only used to:
1. Confirm the meaning resulting from Art. 31
2. Determine the meaning when Art. 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or
unreasonable
- Includes the preparatory work of the treaty and the
circumstances of its conclusion.
17
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
3. Steps of a WTO dispute
Disputes in general
Appeal
Panel
Report
Panel Composed
Establish.
of Panel
Req. to
establish Panel
Consultations
1
6
5
4
3
2
18
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
3. Steps of a WTO dispute (cont’)
Disputes in general
19
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Examples of recent cases
Disputes in general
Case
Canada – Renewable energy (feed-in tariffs)
China – Raw materials
US – Clove Cigarettes
US – Country of Origin Labelling
China – Electronic payment services
EU – Large Civil Aircraft (Airbus)
US – Large Civil Aircraft (Boeing)
EU – Seal Products
Australia – Plain Packaging of Cigarettes
20
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Example:
EC – Chicken Cuts
The facts: EU began reclassifying frozen boneless
chicken cuts impregnated with salt under:
- heading 02.07 ("Meat and edible offal, of the poultry of
heading 0105, fresh, chilled or frozen") → 02.4€/100kg/net , or
- heading 02.10 ("Meat and edible meat offal, salted, in brine,
dried or smoked…") → 15%
The issue: Whether the tariff classification under tariff
heading 02.10 resulted in treatment that is less
favourable than provided for in the EU’s tariff Schedule?
Warning!: The task of the Panel was to interpret the
EU’s Schedule, which is part of the WTO Agreement,
and not the Harmonized System!
21
21
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
1. “Ordinary meaning” (1)
Article 31(1) VCLT: Ordinary meaning
“[D]ictionaries are a ‘useful starting point’ for the
analysis of ‘ordinary meaning’ of a treaty term,
but they are not necessarily dispositive.”
“The ordinary meaning of a treaty term must be
ascertained
according
to
the
particular
circumstances of each case.”
“Importantly, the ordinary meaning of a treaty term
must be seen in the light of the intention of the
parties as expressed in the words used by them
against the light of the surrounding circumstances”
22
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
1. “Ordinary meaning” (2)
Article 31(1) VCLT: Ordinary meaning
“[W]e see no reason to disturb the Panel's conclusion
concerning the ordinary meaning of the term ‘salted’
(…)
‘in essence, the ordinary meaning of the term ‘salted’
when considered in its factual context indicates that the
character of a product has been altered through the
addition of salt’
(…)
"there is nothing in the range of meanings comprising the
ordinary meaning of the term ‘salted’ that indicates that
chicken to which salt has been added is not covered by
the concession contained in heading 02.10 of the EC
Schedule."
23
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
2. “Context” (1)
“It is clear from [Article 31 of the Vienna Convention] that the
context of the term ‘salted’ in heading 02.10 consists of the
immediate, as well as the broader, context of that term.”
Immediate context
• Other terms of the product description contained in
Heading 02.10 of the EC Schedule
Broader context
• Other headings in Chapter 02 of the EC Schedule
• Other WTO Member Schedules
• The Harmonized System, including GIRs, Chapter notes,
explanatory notes, etc.
24
24
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
2. “Context” (2)
What
is the
meaning
of
“salted”?
“… we need to determine whether the context of
the term ‘salted’ … require or permit a reading of
the term ‘salted’ in heading 02.10 of the EC
Schedule more narrowly than the ordinary
meaning of that term suggests…”
“… that is to say, that the customary rules of treaty
interpretation other than ‘ordinary meaning’
indicate that ‘salting’ under heading 02.10
contemplates exclusively the notion of
‘preservation’.”
25
25
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
2. “Context” (3)
Panel’s conclusion:
“the Harmonized System and the relevant Chapter and
Explanatory Notes thereto do not support the view that heading
02.10 is characterised exclusively by the concept of preservation”
… Specifically, for resolving this dispute, heading 02.10 does not
contain a requirement that salting must, by itself, ensure
‘preservation’”
26
26
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
3. “Object and purpose” (3)
• Of the treaty “on the whole” (i.e. the WTO Agreement)
• Not of specific provisions, paragraphs or subparagraphs of the
WTO agreements, or tariff headings in Schedules
What is the object and purpose of the WTO Agreement?
“the security and predictability of 'the reciprocal and mutually
advantageous arrangements directed to the substantial reduction of
tariffs and other barriers to trade' is an object and purpose of the
WTO Agreement, generally, as well as of the GATT 1994.”
27
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
D. Disputes on
Customs Valuation
28
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
1. The disputes
Disputes on Customs Valuation
• GATT 1947: 3 disputes involving valuation. Only one of them resulted in a
report (Exports of potatoes to Canada, BISD 11S/88)
• WTO: 15 disputes where the complainant mentioned a provision of the
Agreement on Customs Valuation
No.
DS
Short Name
1
DS9
EC - Cereals
2
DS13
EC – Grains (Withdrawn)
3
DS17
EC - Rice (Thailand)
4
DS56
Argentina - Textiles and Apparel
(Panel Report did not deal with CV claims)
5
DS134
EC - Import Duties on Rice
6
DS183
Brazil - Minimum Import Prices (EC)
7
DS197
Brazil - Minimum Import Prices (US)
29
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
1. The disputes (cont’)
No.
8
9
10
11
12
13
14
15
16
DS
Disputes on Customs Valuation
Short Name
DS198 Romania - Minimum Import Prices (MAS)
DS210 Belgium – Rice (MAS)
DS241 Argentina - Poultry Anti-Dumping Duties
(Panel Report did not deal with CV claims)
DS298 Mexico - Pricing Measures (MAS)
DS348 Colombia - Customs Measures (MAS)
DS366 Colombia - Ports of Entry (Panel Report)
DS370 Thailand - Customs Valuation
DS371 Thailand - Cigarettes (Philippines)
(Panel Report; Appeal did not look into CV)
DS457 Peru — Additional Duty on Imports of Certain
Agricultural Products
30
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
2. The provisions
Disputes on Customs Valuation
Article
31
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
D.1 Colombia – Ports of Entry
(DS366)
32
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Colombia – Ports of Entry (DS366)
Complainant:
Panama
Respondent:
Colombia
Timeline
Request for consultations:
12 July 2007
Request to establish panel:
Establishment of Panel:
14 September 2007
22 October 2007
Panel composition:
8 Feburary 2008
Circulation of panel Report:
Adoption:
27 April 2009
20 may 2009
33
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Colombia – Ports of Entry (DS366)
Measure: List of indicative prices
Indicative
Price (IP)
Declared
Price (DP)
Based on:
- past imports,
- AVG prod. Costs;
- lowest price for
import into
Colombia
If DP > IP → DP
If DP < IP:
Importer had 3 options:
1. To “correct” the
declaration
2. To re-ship goods
3. To abandon goods
34
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Colombia – Ports of Entry (DS366)
Panama alleged that :
1. Customs duties & other duties and charges: based on
indicative prices, rather than on the six valuation methods.
2. Sales tax:
 Imported products: Indicative prices
 Like domestic products: Transaction value
35
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Colombia – Ports of Entry (DS366)
Colombia’s defence:
• It is not the payment of a duty;
• It is rather a system for a guarantee allowed
by Article 13 of the CVA.
36
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Colombia – Ports of Entry (DS366)
Panel Findings:
1. It is a system to determine the payment of a duty, not do
determine a guarantee.
2. System is based on choosing the maximum of two values
(Prohibited by Article 7:2(b)+(f) CVA).
3. System does not reflect any of the 6 methods. Therefore,
in violation of Arts. 1, 2, 3, 5 and 6 CVA.
4. Recommended Colombia to bring its measures into
conformity with the CVA.
37
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
D.2 Thailand – Cigarettes
(Philippines) (DS371)
38
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Complainant:
Philippines
Respondent:
Thailand
Timeline
Request for consultations:
7 February 2008
Request to establish panel:
29 September 2008
Establishment of Panel:
17 November 2008
Panel composition:
16 February 2009
Circulation of panel Report:
15 November 2010
Appeal
22 February 2011
Appellate Body Report
17 June 2011
39
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Products at issue: Cigarettes
Complaint: The Philippines claimed that:
Alleged measure at issue:
A number of fiscal and customs
measures: customs valuation
practices, excise tax, health tax, TV
tax, VAT regime, retail licensing
requirements and import guarantees
Were in violation of:
CVA: Art. 3, 1.1, 1.2, 4, 5, 6,
7, 10, 13, 16
GATT: Art. II:1(b), III:2, III:3,
VII:1; VII:2, VII:5, X
40
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
The Philippines argued that (1):
1. Systematic rejection of transaction value just because
importer and seller were “related”, in violation of Art 1.1
and 1.2(a) of the CVA.
2. Failed to follow the procedural steps:
• To examine the circumstances of the transaction
• To follow the sequential order of the methods
• To inform the importer of the grounds for rejecting the
transaction value
41
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
The Philippines argued that (2):
2. Thai Customs applied the deductive method inconsistently
with Articles 5 (failed to make deductions for sales allowances,
internal transpor-tation costs, and provincial taxes) and 7 of
the CVA.
3. Thailand violated obligations under Article 10 (not to
disclose confidential information) and Article 16 (to provide an
explanation for the determination of the final customs value)
42
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Thailand replied that :
• The burden of establishing that the relationship did not
influence the price is on the importer.
• Thai Customs act consistently with the CVA, because the
importer failed to provide sufficient information to prove that
the relationship did not influence the price.
• Explanation was provided
43
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Panel Findings: (1)
Procedural steps to determine Transaction Value
1.Importer declares a transaction value
2.Customs examines the circumstances of the sale
(only if it has doubts about the validity)
3.Customs examines information provided by importer;
obligation to communicate grounds for doubts
4.Customs gives reasonable opportunity to respond;
importer submits further information
5.Customs makes a final decision on the value; provides
written explanation if importer requires (it is not only a
formal, but also a substantive obligation)
44
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Panel Findings : (2)
• Thai Customs failed to “examine” the circumstances of
sale (Art. 1.2(a))
• Thai Customs did not “consult with the importer” for any
further relevant information as required under article 7
of the CVA.
• Thai Customs “explanation” was insufficient to reject the
importer’s declared transaction value and to give a
different customs value to the transaction.
45
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Panel Findings : (3)
Article 5 of the CVA
Thailand failed to deduct certain expenses (sales allowances,
provincial taxes and transportation costs) that should have
been deducted in accordance with
46
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thailand – Cigarettes (Philippines) (DS371)
Appeal:
Thailand appealed to the Appellate Body. However the reason
they appeal did not concern with the panel's conclusion on
valuation matters. Therefore the Panel's conclusion would be
accepted by the WTO.
47
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org
Thank you!
Roy Santana
Market Access Division
World Trade Organization
roy.santana@wto.org
48
World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / roy.santana@wto.org