Law

International Trade Law

Trade Facilitation and the WTO

Role Name Affiliation

Principal Investigator Dr. Ranbir Singh Vice Chancellor, National
Law University, Delhi
Co.P.I Dr. G.S. Bajpai Registrar, National Law
University, Delhi
Paper Coordinator Dr. Saloni Khanderia-Yadav National Law University,
Delhi
Content Writer/Author Ms. Geetanjali Sharma University of Cambridge
Content Reviewer Advocate Anuradha R.V Clarus Law Associates,
Delhi
Language Editor Dr. Saloni Khanderia-Yadav National Law University,
Delhi
 I. Description of Module

Items Description of Module

Subject Name Law
Paper Name International Trade Law
Module Name/Title Trade Facilitation and the WTO
Module Id 21
Pre-requisites  Understanding of Article V, VIII & X of GATT,
1947
 Understanding of Singapore Issues, July Package,
Uruguay Round of Negotiations & the Bali Package
 Understanding of the special and differential regime
within the WTO framework

Objectives To understand the following:

 The need for a special framework for trade

facilitation under the WTO
 The provisions under the Trade Facilitation
Agreements and the nature in which they supplement
the existing GATT rules
 The approaches of developed v. developing countries
towards the final round of ratification of the Trade
Facilitation Agreement

Keywords Consumer welfare, supply change, capacity building, advance

rulings, transparency, food security

II. E-text

Introduction

The terms of the Trade Facilitation Agreement (TF Agreement) of the World Trade
Organisation were negotiated during the 9th Ministerial Conference in Bali, Indonesia.
The TF Agreement would into force by way of an amendment into the Annex 1A of
the WTO Agreement, after two-thirds of WTO members complete their domestic
ratification process. However at present, the WTO members witness an impasse in the
final adoption of the protocol on the TF Agreement.

It is apt to note that it was only after the Uruguay Rounds of negotiations concluded
20 years ago, that the issue of trade facilitation gained momentum. The reasons for
this were several- the uncertainty over the time taken to clear borders tends to create
unpredictability which adds to the cost of trade and makes goods unaffordable for the
consumers. Since the issue of trade facilitation is directly linked to both consumer
welfare and investor’s gains, it became a relevant issue for the developing and
developed countries.

This module discusses the various provisions under the concluded TF Agreement
which facilitates the goal of simplifying trade and investment. Yet some developing
countries including India have been concerned about issues, inter-alia the potential
costs of implementing the trade facilitation commitments, and the bargain involved
due to the intermingling of the TF Agreement with other issues under the Bali
Package that have at present delayed the adoption process of the TF Agreement.

Learning Outcome

 Understanding the need for a separate framework for trade facilitation agreement
 Tracing the evolution of the trade facilitation agreement
 An insight into the nature and scope of the concluded trade agreement framework
under the WTO
 The issues within the implementation of the trade facilitation agreement and the
approaches of various countries.

Topics & Sub-Topics covered

 Trade Facilitation- Evolution & Meaning

 Existing WTO Framework and rules on trade facilitation

 Legal Developments in the adoption of the Trade Facilitation Agreement

 Trade Facilitation Agreement- Key provisions

o Publication & Availability of information

o Advance Rulings & Other formalities
o Appeal/Review
o Impartiality, Non-Discrimination & Transparency
o Transit of Goods
o Customs Co-operation & Institutional Arrangements
o Special & Differential Treatment Principle

 Predicted Benefits of Trade Facilitation

  Trade Facilitation: Developing v. Developed countries

 Summary

Text

1. Trade Facilitation- Evolution & Meaning

Traders from both developing and developed countries have long pointed to the vast
amount of ‘red tape’ that still exists in movement of goods across borders.
International stakeholders of cross-border trade often complaint that documentation
requirements in countries lack transparency and are vastly duplicated in many places.
This problem is often compounded by a lack of cooperation between traders and
official agencies. 1 These situations tend to have several adverse implications on
international trade. For instance, the uncertainty over how long it will take to clear a
border crossing creates unpredictability and adds cost to business, costs which are
eventually passed onto consumers in countries where consumers are least able to
afford them. Uncertainty in supply chains also acts as a disincentive to potential
business investors, who rely on efficient supply chains to minimise inventory costs.
Therefore, a need for a regulatory framework to tackle these issues was felt after the
conclusion of the Uruguay rounds of Agreement.2
The existing WTO legal framework lacked specific provisions in areas of customs
procedures, documentation and transparency; though a few Articles concluded during
the Uruguay rounds touch upon these aspects. The increase in the volume of trade
coupled with advances in technology and computerisation of business transactions
added a sense of urgency for the WTO members to negotiate on more uniform, user-
friendly and efficient rules.3
It is vital to note that with the conclusion of this agreement, WTO would embrace
rules relevant for the actual conduct and practice of international trade. So far, the
WTO discipline has been primarily considered as the public regime for international
trade law. The actual trade practice is conducted in the private realm of international
trade law, wherein the merchants and international enterprises have developed rules
governing their day to day trade transactions. The Trade Facilitation Agreement is a
breakthrough effort in this regard as it aims to strengthen and govern the practical
aspects of conducting international trade.
2. Existing WTO Framework and rules on trade facilitation
Before we analyse the key features and negotiation history of the trade facilitation
agreement, let us take an overview of the existing WTO rules pertaining to trade
facilitation. Articles V, VIII and X of GATT 1994 are relevant provisions which form
the basis for the new Trade Facilitation Agreement. Article V deals with the freedom
of transit of goods from another member, and states that all charges imposed on goods

1
WTO Website, Trade Facilitation, available at:
http://www.wto.org/english/thewto_e/minist_e/mc9_e/brief_tradfa_e.htm
2
WTO Trade Facilitation Agreement: A Business Guide for Developing Countries, Doc No. BTP-13-
239.E, International Trade Centre, Geneva, Switzerland (2013) page 1 [hereinafter, WTO TFA: A
Business Guide].
3
ibid.
in transit must be ‘reasonable’. Article VIII says that fees and formalities connected
with importation and exportation must be about equal to the cost of the services
rendered, so that they do not constitute a form of indirect protection. The provision
also calls for reducing the number and diversity of such fees. GATT Article X is a
vital provision requiring trade regulations to be clearly published and fairly
administered.4 Let us examine each of these provisions in more detail.
Freedom of transit (Article V)

The aim of Article V is to ensure that WTO Member States allow freedom of transit
through their territory for transportation to or from the territory of other WTO
Member States. It does this by setting out two main obligations:
 Not to hinder traffic in transit by imposing unnecessary delays or restrictions or by
imposing unreasonable charges;
 To grant Most-Favoured-Nation (MFN) treatment to all transit goods of WTO
Member States.

WTO has interpreted this to mean that Member States may only impose charges on
traffic in transit in only two ways: charges for transportation and charges for
administrative expenses arising from transit or related services. Such charges must be
reasonable (undefined) and non-discriminatory. In this regard, each Member State is
obliged to treat products which have been in transit through the territory of any other
Member State no less favourably than would have been the case if such products had
been transported from their place of origin to their destination without going through
the territory of the Member State concerned.5

Fees and formalities (Article VIII)

The aim of Article VIII is to limit the costs and complexity of the import and export
process. It imposes specific legal obligations on Member States with respect to the
fees and charges that may be charged in connection with importation and exportation,
and the penalties that may be imposed for minor breaches of customs procedures. It
also explicitly recognizes the need to reduce the number and complexity of import
and export-related fees and formalities, although it provides no legal requirement to
do so.6 The lack of a mandatory nature of this provision should be borne in mind,
while comparing the existing WTO rules with the proposed new rules under the Trade
Facilitation Agreement.

Transparency (Article X)

The main obligations arising from Article X are for Member States to publish their
trade laws in a prompt and accessible manner, to refrain from enforcing measures
prior to publication, and to administer such measures in a uniform, impartial and
reasonable manner. Member States are also required to institute or maintain tribunals

4
Trade Facilitation, Doha Round Briefing Series, ICTSD and IISD (November 2005) available at:
http://www.ictsd.org/downloads/2013/08/6-tr_facilitation.pdf
5
WTO TFA: A Business Guide, p. 6
6
WTO TFA: A Business Guide, p. 7
or other procedures for prompt review and correction of administrative action relating
to customs matters.7

Though wide in its coverage, Article X lacks practical provisions setting out rules for
publicizing laws and regulations, establishment of inquiry points and advance rulings
or appeal procedures to strengthen the mandate of transparency, predictability and
uniformity within the WTO.

This aspect should further be kept in mind, while understanding the advancements
made through the new Trade Facilitation Agreement.

3. Legal Developments in the adoption of the Trade Facilitation Agreement

Barely was the ink dry on the Uruguay Round of multilateral trade negotiations
concluded in 1993 than some WTO Member States were already thinking about the
next round. Amongst the issues that featured in this thinking was trade facilitation.8
As a separate discipline of international trade, Trade Facilitation is relatively new to
the GATT/WTO regime. The birth of Trade Facilitation can be traced to the
Singapore Ministerial Conference in December 1996, when WTO members directed
the Council for Trade in Goods “to undertake exploratory and analytical work…on
the simplification of trade procedures in order to assess the scope of WTO rules in
this area”.9
The mandate for these negotiations was set out in Annex D (‘Modalities for
Negotiations on Trade Facilitation’) of the ‘July Package’ of 2004, as:

GATT rules: The negotiations ‘shall aim to clarify and improve relevant aspects of
Articles V, VIII and X of the GATT 1994 with a view to further expediting the
movement, release and clearance of goods, including goods in transit’;

Technical assistance and capacity building: The negotiations also aim at ‘enhancing
technical assistance and support for capacity building in this area,’ and at developing
‘provisions for effective cooperation between customs or any other appropriate
authorities on trade facilitation and customs compliance issues’. The results ‘shall
take fully into account the principle of special and differential treatment for
developing and least developed countries’;

Infrastructure: Developing and least developed countries would not be obliged ‘to
undertake investments in infrastructure projects beyond their means’.

In October 2004, a WTO Negotiating Group on Trade Facilitation (NGTF) was

established. In December 2013, WTO members concluded negotiations on a Trade
Facilitation Agreement at the Bali Ministerial Conference (9th Ministerial Conference,
WTO), as part of a wider “Bali Package”. Since then, WTO members have
undertaken a legal review of the text. The decision was to be adopted in Bali pursuant

7
WTO TFA: A Business Guide, p. 7
8
WTO TFA: A Business Guide, p.1
9
Singapore WTO Ministerial 1996: Ministerial Declaration, WT/MIN(96)/DEC, 18 December 1996,
Paragraph 21.
to which the WTO members would draft a Protocol of Amendment to insert the new
Agreement into Annex 1A of the WTO Agreement. Therefore, the TF Agreement
would become a part of the existing WTO regime by way of an amendment. The TF
Agreement will enter into force once two-thirds of members have completed their
domestic ratification process. 10

Post the negotiations in December, 2013, the WTO members had set a deadline of
July 31, 2014 for the adoption of the protocol on the Trade Facilitation Agreement.
However, this deadline was missed as Member states including India, backed by Cuba,
Venezuela and Bolivia, declined to sign the agreement. India’s main opposition with
the TF Agreement arose as the Agreement caps the yearly subsidies in developing
countries at 10 percent of the value of agricultural production. India, both during and
since the Bali round of negotiations, had opposed this limit and demanded a parallel
pact, which would allow developing countries to continue subsidizing and stockpiling
food. While a temporary truce was reached in Bali last year in 2013 as the WTO
members agreed to not file complaints against India’s food-subsidy program until a
permanent solution is worked out by December 2017, India demanded a more
immediate solution, preferably by the end of 2014, in exchange for signing the TF
Agreement. Therefore was an evident failure to achieve consensus on this issue,
which led to the stall of the enforcement of the TF Agreement.
Since entry into force of the TF Agreement would require an amendment to the WTO,
it was not viable for the WTO members to proceed with the TF Agreement, given the
fact that India’s dissent could become problematic during the amendment process.
The present status of the TF Agreement thus demonstrates a dead-lock. While India
demands concrete changes to the cap on subsidy, WTO Director General, Roberto
Azevedo has mentioned that “no workable solution on the table” has been reached so
far.11 The entry into force of the TF Agreement thus creates uncertainty with respect
to its future. However, the terms that have been negotiated during the Bali Ministerial
Conference remain vital. Even though the international politics has detracted the
conclusion of the TF Agreement, the legal provisions finalised would get
implemented at some stage. Therefore, understanding of these provisions becomes
useful for scholars of international trade.
4. Trade Facilitation Agreement- Key provisions
Interestingly, there is no commonly-used definition of trade facilitation. Former
United States Trade Representative Robert Zoellick was once quoted as describing
trade facilitation measures as ‘basically an extension of market access procedures that
lower transaction costs and increase timeliness of transit.’12 The WTO’s definition,
which has formed the basis for the new WTO agreement, defines trade facilitation as:
“The simplification and harmonization of international trade procedures, with trade
procedures being the activities, practices and formalities involved in collecting,

10
Article X:3, Marrakesh Agreement Establishing the World Trade Organisation, 15 April 1994, 1867
U.N.T.S. 154, 33 I.L.M. 746 (2002).
11
WTO Trade Agreement Falls Through As India Toughens Stand, International Business Times, 1
August, 2014, available at: http://www.ibtimes.com/wto-trade-agreement-falls-through-india-toughens-
stand-1645698
12
WTO TFA: A Business Guide, p. 1.
presenting, communications and processing data required for the movement of goods
in international trade.”13
The TF Agreement as concluded during Bali negotiations provides for two sections:
 As discussed above, Section I contains provisions for expediting the movement,
release and clearance of goods. It clarifies and improves the relevant articles (V, VIII
and X) of GATT, 1994.
 Further, Section II contains special and differential treatment provisions for
developing and least-developed countries aimed at helping them implement the
provisions of the agreement.
A brief overview of the entire TF agreement shows its expansive nature and coverage.
The agreement entails provisions covering:
 Internet Publication of Practical Steps to Import, Export and Transit Goods
 Enquiry Point for Trade Information
 Information on New Laws & Regulations Before their Implementation
 Provision of Advance Rulings
 Enhanced Right of Appeal
 Notification of Detained Goods
 Disciplines on Fees and Charges
 Penalty Disciplines to Prevent Conflicts of Interest
 Pre-Arrival Processing of Goods
 Use of Electronic Payment
 Use of Guarantees to Allow Rapid Release
 Promoting Risk Management
 Creation of Authorized Operator Schemes
 Procedures for Expedited Shipments
 Quick Release of Perishable Goods
 Reduced Documents and Formalities
 Utilizing Common Customs Standards
 Promoting use of Single Window
 Uniformity in Border Procedures & Documents
 Temporary Admission of Goods
 Simplified Transit Procedures
 Customs Cooperation
 Facilitate Developing Country Implementation

13
ibid.
 Publication&
Consultation
Advance
Rulings, Fees,
Customs
Transit
Cooperation &
Formalities,
Institutional
Release &
Arrangements
Clearance of
Goods

Section I

Freedom of Appeal,
Transit Review

Impartiality,
Non-
Discrimination
Transparency

Figure 1- A Representation of various provisions under Section I, Trade

Facilitation Agreement

A few of these provisions of the Trade Facilitation Agreement have been discussed
below:
3.1 Publication & Availability of information- Under this provision, members are
obligated to publish information in a non-discriminatory manner which is accessible
to different stakeholders including government, traders and other interested parties.
The provision is couched in mandatory terms, indicated by the use of the term ‘shall’
which obligates members to publish the following:
 importation, exportation, transit procedures,
 applied rates of duties and taxes,
 other fees and charges imposed in connection with importation, exportation or transit,
 rules for classification or valuation of products
 laws, regulations and administrative rulings relating to rules of origin
 import, export or transit restrictions,
 penalty provisions against breaches of such formalities,
 appeal procedures,
 agreements with countries relating to such procedures
 procedures relating to administration of tariff quotas.14
Similarly, the updated description of importation, exportation and transit procedures
as well as forms and documents necessary for these procedures must be made
available through the internet, to the extent possible and appropriate by the members
and the official places of publications as well as the URL of websites must be notified
to the WTO Committee.15 Furthermore, members must ensure the establishment and
maintenance of one or more enquiry points to answer reasonable enquiries of
governments, traders and other interested parties pertaining to importation,
14
Article 1.1, Trade Facilitation Agreement.
15
Article 1.2, Trade Facilitation Agreement.
exportation and transit procedures. Such information must be provided without
charging fees or charging limited fees within a reasonable time period.16
The Agreement also provides for regular consultations between borer agencies,
traders and other stakeholders.17
It must be noted that previously, GATT Article X had referred specifically to only
some of these requirements (such as customs valuation and classification, rates of
duty, taxes and other charges), as referred under Article 1 of the TF Agreement. These
additional specific transparency requirements further aims to assist business in
obtaining up-to-date information about all import and export procedures and
requirements.18

3.2 Advance Rulings & Other formalities- Advance rulings are binding decisions
by customs, at the request of the person concerned, on specific aspects of goods, in
particular the classification and origin of the goods in preparation for importation or
exportation. Advance rulings facilitate the declaration, and consequently ease the
release and clearance process, as the classification of the goods has already been
determined in the advance ruling, and is binding on all customs offices for the
specified period of its validity – which may be three months or a year.19

The TF agreement defines advance rulings as: ‘written decision provided by a

Member to an applicant prior to the importation of a good covered by the application
that sets forth the treatment that the member shall provide to the good at the time of
importation with regards to the good’s classification and origin’.20
The TF Agreement regulates the issuance and effect of such advance rulings.21 The
Agreement also lays out a general discipline on fees and charges imposed in
connection with importation and exportation.22
The penalties for breaches of custom law, regulation or procedural requirements have
also been described. Upon imposition of penalty, a written explanation specifying the
nature of the breach and applicable law under which the penalty has been drawn must
be specified.23
The Agreement further strengthens electronic payment (to the extent practicable) and
trade facilitation measures for authorized operators defining the specified criteria for
compliance based on international standards. These international standards should
also be used a basis for importation, exportation and other transit formalities. It is
vital to note that the use of international standards is couched in the language of ‘best
endeavours’ and is thus not mandatory.24
Special provisions have also been made for preventing the loss to perishable goods
provided all regulatory requirements have been met.25

16
Article 1.3, Trade Facilitation Agreement.
17
Article 2, Trade Facilitation Agreement .
18
WTO TFA: A Business Guide, p. 10.
19
WTO TFA: A Business Guide, p. 11.
20
Article 3.9(a), Trade Facilitation Agreement.
21
Article 3, Trade Facilitation Agreement.
22
Article 6.1, Trade Facilitation Agreement.
23
Article 6.2, Trade Facilitation Agreement.
24
Article 7, Trade Facilitation Agreement.
25
Article 9, Trade Facilitation Agreement.
The TF Agreement requires members to endeavour towards establishment of a single
window to enable traders to submit documentation for importation, exportation or
transit of goods through a single entry point to the participating authorities or
agencies.26 It further introduces the use of customs broker in the countries, as long as
it does not prejudice member’s policy concerns.27

Figure 2- Single Window Model of Trade Facilitation

Source- UNECE, UN/CEFACT28

The new agreement is therefore a major advance for trade facilitation. The obligations
imposed on Member States include:

 To issue an advance ruling in a reasonable, time-bound manner to an applicant that

has submitted a request in writing containing the necessary information; or to explain
in writing the relevant facts as to why an advance ruling has been declined (some
examples are contained in the article);
 To guarantee the advance ruling for a reasonable period of time and to be bound by it;
 To publish requirements for how an applicant may apply for an advance ruling and
for how long it shall be valid; and how an applicant may request a review of an
advance ruling;
 To publish such advance rulings as may be of interest to other traders.29
3.3 Appeal/Review- The TF Agreement provides for the setting up of an
administrative and judicial mechanism of appeal or review which must be carried out
in a non-discriminatory manner.30

26
Article 10.4, Trade Facilitation Agreement.
27
Article 10.6, Trade Facilitation Agreement.
28
WTO TFA: A Business Guide, p. 18.
29
WTO TFA: A Business Guide, p. 11.
30
Article 4, Trade Facilitation Agreement.
3.4 Impartiality, Non-Discrimination & Transparency- The TF Agreement
strengthens the control and inspection mechanism in place and test procedures
involved in the release and clearance of goods.31
The provision entails vital policy considerations. For example, traders that import
goods must know that the goods are subject to health controls that aim to protect
consumers from products that may be unfit for consumption being placed on the
market. Where any food which is unsafe is part of a batch, lot or consignment, control
authorities often assume that the whole batch, lot or consignment is unsafe. This also
applies to animal feed, which are subject to controls preventing the placement of
unsafe feed on the market or being fed to any food-producing animals. Health risk
analysis should be based on the available scientific evidence and is carried out in an
independent, objective and transparent manner. Given the costs to traders of losing
consignments deemed to be unsafe, they may wish to seek a second opinion. This
article provides for such an opportunity to be provided to the Member States.32

3.5 Transit of Goods- The article repeats the provision in GATT Article V that each
Member State is to treat products in transit no less favourably than if they were being
transported to their destination without going through the territory of that Member
State. Member States are also required to remove any regulations or formalities on
traffic in transit that are either no longer needed or whose obligations can be
addressed in a less trade-restrictive way. Further the TF Agreement provides for the
following:

 Encouraging Member States to provide physical separation between traffic in transit

and other imports (e.g. by the use of special lanes, berths or similar infrastructure);
 Ensuring that formalities, documentation requirements and customs controls on
traffic in transit are no more burdensome than necessary to identify the goods and
ensure fulfilment of transit requirements;
 Ensuring that once goods have been put under a transit procedure they will not be
subject to further customs controls until they conclude their transit within a Member
State’s territory, nor will they be subject to technical regulations and conformity
assessment while in transit;
 Requiring Member States to allow advance filing and processing of transit
documents;
 Requiring Member States to terminate the transit operation promptly once the traffic
in transit has reached the destination where it exits the territory of the Member State;
 Requiring Member States to discharge any guarantees without delay.
 Obligation on Member States to cooperate with each other to enhance freedom of
transit.33

The Agreement specifies that regulations or formalities in connection with traffic in

transit shall not constitute a disguised restriction on traffic in transit and may give
away if a reasonably available less trade restrictive method exist.34 This provision

31
Article 5, Trade Facilitation Agreement.
32
WTO TFA: A Business Guide, p. 12.
33
WTO TFA: A Business Guide, p. 20.
34
Article 11.1, Trade Facilitation Agreement.
may have vital implications for trade in goods, especially pharmaceutical drugs which
have been subjected to seizure during transit.35
3.6 Customs Co-operation & Institutional Arrangements- The TF Agreement
provides for both borders and customs cooperation. For instance, it seeks for
alignment of working days and hours,36 in-order to overcome the problems that arise
when border authorities on either side of a border open at different times.37

The TF Agreement encourages members to share information on best practices in

managing customs compliance, through the Committee on Trade Facilitation. 38 It
must be noted that WTO members countries over years have entered into such
cooperation agreements at a bilateral and plurilateral levels. The TF Agreement
recognises the value of these bilateral/plurilateral efforts of members and does not
prevent a member from entering into such agreements or alter their rights or
obligations under such agreements. 39
The TF Agreement establishes a Committee on Trade Facilitation which may
establish its own subsidiary bodies as may be required. The Committee shall develop
the procedures for sharing information and best practices amongst members. The TF
Agreement provides that the Committee shall maintain close contact with other
international organisations, such as the World Customs Organisation, for better
implementation and administration of the TF Agreement. Members shall in-turn
establish and/or maintain a national committee on trade facilitation or designate an
existing mechanism to facilitate both domestic coordination and implementation of
the provisions of the TF Agreement.
3.7 Special & Differential Treatment Principles- Apart from these basic obligations,
Section II of the TF Agreement provides special provisions for developing countries
and least developed country members. The countries have been classified in different
groups and specific rules govern each category of countries. The focus of these
provisions is to build capacity of these members and provide them some time to
implement the provisions of this Agreement.
In-order to accommodate the needs of developing countries and LDCs, the proposed
Agreement provides for staged implementation, over long periods where necessary.
The Agreement provides for assessment of national needs in-order to determine the
assistance needs and costs, and a scheduling of commitments at individual Member
State level. The Agreement enables the developing countries and LDCs to link their
commitments to the receipt of technical assistance and support for capacity building,
monitored by WTO.
The flexibility provisions in the implementation provided to the developing countries
and LDCs is far-reaching. Although the agreement is binding in its entirety on all
developed countries from its entry into force, it recognizes that some Member States
will require technical assistance before they can implement some or all of the
obligations to which it binds them. Consequently, it has been agreed that

35
India wants EU to stop seizure of generic drugs, The Financial Express, May 3, 2013 at:
http://www.financialexpress.com/news/india-wants-eu-to-stop-seizure-of-generic-drugs/1110796 (last
accessed on 12 October, 2014)
36
Article 8.2, Trade Facilitation Agreement.
37
WTO TFA: A Business Guide, p. 15.
38
Article 12.1, Trade Facilitation Agreement.
39
Article 12.12, Trade Facilitation Agreement.
commitments by developing and least developed country members will be
implemented according to different categories of commitments.
The Agreement provides the flexibility to each developing and least developed
Member State to determine the timing and entry into force of its commitments,
according to the following categories:
 Category A commitments are those that a Member State has designated for
implementation upon entry into force of the agreement;
 Category B commitments are those that a Member State has designated for
implementation on a date after a transitional period;
 Category C commitments are those that a Member State has designated for
implementation on a date after a transitional period and the acquisition of
implementation capacity through the provision of technical assistance and support for
capacity building.40
The rules provide that each developing country and least-developed country Member
shall self-designate, on an individual basis, the provisions it is including under each of
the Categories A, B and C.41
This will be done on a 'negative list' basis, in that a country will specifically identify
and notify to WTO its category B and C commitments. Any commitments not notified
will be deemed to fall under Category A. For Category C commitments, each country
concerned will seek from donor agencies the technical assistance and/or capacity
building that it requires, with a view to securing an agreement to provide it.
Once such agreements have been reached, each country concerned would notify the
WTO of its expected implementation date. Developing countries have to notify at
entry into force their B and C commitments and they have to provide indicative dates
and, for the C commitments, the relative technical assistance needs. Only after 12
months do they notify the definitive dates for implementation of their B commitments.
Definitive dates are only notified after a period of bilateral negotiations with donors
over technical assistance arrangements and progress in the TA delivery. Least
developed countries only have to notify the B and C commitments 1 year after the
entry into force of the Agreement. They have another 2 years to notify the definite
dates for the B commitments and only notify the final dates for implementation after a
period of max. 4, 5 years during which they submit information on technical
assistance needs, conduct bilateral negotiations with donors and start implementing
the reform and technical assistance projects.42
Similarly, a complex early-warning procedure has been established to cover situations
where a country experiences difficulty in obtaining the support required, or where it
experiences difficulty in implementation without technical assistance, and needs to
transfer certain commitments from Category B to Category C. In such cases,
notification to the Committee on Trade Facilitation is envisaged.
The S&D provisions recognize technical assistance delivery as a precondition for the
mandatory implementation and compliance with obligations assigned to category C. It
is vital to note that while the Agreement is subject to the Dispute Settlement Rules,
different grace periods are defined for the different category of commitments. Finally,

40
Article 14.1, Trade Facilitation Agreement
41
Article 14.2, Trade Facilitation Agreement
42
Special and Differential Treatment (S&DT), Trade Facilitation Implementation Guide,
http://tfig.unece.org/contents/sdt.htm
the Agreement formulates a notification procedure for technical assistance delivery by
donor country members and other countries providing technical assistance for the
implementation of the Agreement.
Furthermore, the Agreement provides that commitments would form part of the
agreement. Individual schedules of commitments will therefore be published. Overall,
the Agreement becomes business-friendly as the publication of these details would aid
private traders and business communities in the following manner:
 Understanding when a country intends to implement a commitment gives business an
indication of when to expect trade facilitation improvements, and avoids creating
unrealistic expectations;
 The publication of schedules exposes a country’s plans to stakeholder scrutiny – for
example, business may know of existing reforms in the country that are not reflected
in the scheduled implementation timetables;
 It may be possible to implement the consultation and dialogue obligations earlier than
other commitments that are more technical or that require changes in national laws or
regulations. This would enable business to discuss implementation within national
committees, and raise the possibility for business to contribute technical assistance or
capacity-building support.43

5. Predicted Benefits of Trade Facilitation

It is predicted that the cost savings of trade facilitation would pay real dividends. The
OECD estimates indicate that for every 1% reduction in global trade costs, global
incomes go up by $40 billion. The TF Agreement has the potential to cut trade costs
by almost 14.5% for low-income countries, 10 % for high-income countries. Other
studies estimate that significant trade facilitation like that supported in this agreement
could increase global GDP by almost $1 trillion.44
6. Trade Facilitation: Developing v. Developed countries
As discussed in the section above, whilst all countries acknowledge the utility of the
binding guidelines to facilitate trade, some countries, especially the developing
countries have been apprehensive of this agreement. Their reasons for apprehension
emanate from the huge expenses involved in the implementing this agreement and the
likely increase of imports in their countries, especially for the lower-income
developing countries. Further, they are apprehensive that they might be pressured into
implementing the commitments on a permanent basis when they may not have the
sustained implementation capacity and when they have more pressing national
priorities to deal with.
Furthermore, the fact that the Trade Facilitation agreement will come into force as a
part of a package agreement, i.e. Bali Package also raises some concerns on part of
the developing countries, especially India. It must be noted that the Bali round of
negotiations involved within its scope issues including- public stockholding for food
security purposes, list of general services (Agreement on Agriculture), Tariff Rate
Quota Administration, Export Competition and the two sections of Trade Facilitation.
The developing countries including India have not been in consonance with respect to
the rule on public stockholding for food security. This rule as present in the

43
WTO TFA: A Business Guide, p. 22-23.
44
USTR Fact Sheet on WTO Trade Facilitation Agreement, 9 December 2013, available at:
http://iipdigital.usembassy.gov/st/english/texttrans/2013/12/20131209288675.html#ixzz3DBmchEF8
Agreement on Agriculture considers the differences between price and historical low
price of 1986-88 as a subsidy, even if the purchase is made at market prices. The new
WTO agreement limits the value of food subsidies at 10% of the total food grain
production. India has raised its concerns that because subsidies have been calculated
by WTO taking 1986 as base year into account, it would largely affect food
procurement programme through Minimum Support Price.
This in the views of the developing countries affects their domestic food security
concerns when the developed countries continue to maintain different forms of
subsidy, as per the negotiations in Uruguay Rounds of negotiations. Several legal and
political commentaries indicate that during the Uruguay round of negotiations,
developing countries could not receive an equivalent deal as that of the developed
countries, especially on issues such as agriculture, subsidy, intellectual property rights
etc.45 Therefore, the same apprehensions arise in their approach towards accepting
the TF agreement which is to be implemented as a part of a package agreement.
Therefore, amidst these complex issues, the TF agreement as on date has achieved an
impasse. The deadline of July 31, 2014 set for the adoption of the protocol for
amendment of WTO to accept the TF has unsuccessfully passed as certain members
including India raised demands for re-negotiation of certain terms in the Bali Package.
While some have chided India’s conduct as it has led to a ‘missed opportunity’ in
international trade negotiations, others hold it as a strong negotiating tactic to achieve
a long term permanent solution. Thus the future of these negotiations given the
intense political turmoil remains uncertain.
7. Summary
The TF Agreement concluded its negotiations during the 9th Ministerial Conference of
WTO held in Bali in December, 2013. The Agreement is yet to enter into force, as it
waits the necessary voting required for the amendment into the WTO along with
internal ratification of member states. The TF Agreement is a broad framework which
extends the basic GATT rules entailed in Article V, VIII and X of GATT, 1947. The
TF Agreement has introduced innovations in terms of advance rulings, single window
clearance mechanism, organising the penalty structure and other fees formalities. Yet
some issues of conflict persist in the implementation of this Agreement. The success
of TF Agreement thus depends on the consonance of approaches between the
developed and developing countries.

45
See generally, J. Michael Finger, Implementing the Uruguay Round Agreements: Problems for
Developing Countries, Blackwell Publishers, 2001, available at:
http://policydialogue.org/files/publications/Implementing_Uruguay_Round_Finger.pdf (last accessed
on 12 October, 2014)