Theme 2

TARIFF REGULATION

International Customs
Law
National University Odesa Law Academy

Borys Kormych
 Average import duty rates
(manufactured goods)
State / Year 1925 1931 1950 1980 1990 2018

France 21 30 18
Germany 20 21 26 8,3 5,9
1,79
UK 5 17 23
Sweden 16 21 9 6,2 4,4
Canada 11 16,6 8,5 7 4,6 1,52
USA 37 48 14 7 4,8 1,66

2
 Liberalization of the International Trade
• The US Secretary of State Cordell Hull sponsored the 1934 Reciprocal
Trade Agreements Act, which entitled the US President to reduce duty
rates by 50% over a three-year period through mutual trade
agreements with other countries (The Act was extended in 1937, 1940,
1943 & 1945);

• The Great Britain proposed a total reduction of customs tariffs at the

level of at least 50% for all developed countries, with a safeguard that
no rate should be lower than 10%;

• The US & GB Atlantic Charter (Aug. 14, 1941) «Fourth, they will
endeavour, with due respect for their existing obligations, to further the
enjoyment by all States, great or small, victor of vanquished, of access,
on equal terms, to the trade and to the raw materials of the world which
are needed for their economic prosperity»

3
 GATT Negotiations
• December 1945 - US & GB Proposals for consideration of
the UN Conference on Trade and Employment
• February 18, 1946 - The First Session of the Economic
and Social Council - the call for UN Conference on Trade
and Employment, the Preparatory Committee was created;
• October 15 to November 20, 1946 - The First Session of
Preparatory Committee (London) - Drafting Committee &
Tariff Agreement Committee were created;
• January 20 to February 25, 1947 - Drafting Committee
meeting (New York) - the ITO Charter Drafted;

4
GATT Negotiations
• April 10 to August 15, 1947 -
Second Session of the Preparatory
Committee (Geneva):
ü Tariff Negotiations Completed
ü Draft ITO Charted Agreed
• October 30, 1947, the signing of:
ü Final Act
ü GATT 1947
ü Tariff Negotiations Protocols
ü Protocol on Provisional Application

5
 Basic GATT Principles towards Tariff Barriers

q General Most-Favoured-Nation Treatment (Art. I GATT);

q Binding Tariffs (Art. II GATT);
q National Treatment (ART. III GATT);
q Elimination of Quantitative Restrictions (ART. XI GATT);
q Transparency in Trade Rules Application (ART. Х GATT).

6
Art. I: General Most-Favoured-Nation Treatment
With respect to customs duties and charges of any kind imposed on
or in connection with importation or exportation… the method of
levying such duties and charges, and with respect to all rules and
formalities in connection with importation and exportation…
ü any advantage, favour, privilege or immunity granted by any
contracting party to any product originating in or destined for any
other country,
ü shall be accorded immediately and unconditionally to the like
product originating in or destined for the territories of all other
contracting parties.
Exceptions:
ü Art. XXIV Customs Unions & Free Trade Areas
ü More favorable treatment for developing countries

7
 Article III: National Treatment
ü internal taxes and other internal charges,
ü laws, regulations, and requirements affecting the internal
sale, offering for sale, purchase, transportation, distribution
or use of products,
ü internal quantitative regulations requiring the mixture,
processing, or use of products in specified amounts or
proportions,
should not be applied to imported or domestic products so as to
afford protection to domestic production

Cases:
ü Japan – Alcoholic Beverages II 1995
ü Korea — Various Measures on Beef 2000
8
 Art. II GATT Schedules of Concessions
q Each contracting party shall accord to the commerce of
the other contracting parties treatment no less favorable
than that provided for in the appropriate Schedule
annexed to this Agreement.

ü збір, еквівалентний внутрішньому

податку на подібний товар вітчизняного
виробництва;
ü будь-яке антидемпінгове чи
компенсаційне мито;
ü збори, що відповідають вартості наданих
послуг.
9
 Art. II GATT Schedules of Consessions
q Part I: Most-favoured-nation concessions (maximum
tariffs to goods from other WTO members);
ü Section 1A — tariffs on agricultural products
ü Section 1B — tariff quotas on agricultural products
ü Section II — Other products
q Part II: Preferential concessions (tariffs relating to
trade arrangements listed in GATT Article I);
q Part III: Concessions on non-tariff measures (NTM);
q Part IV: Specific commitments on domestic support
and export subsidies on agricultural products.

10
 Article X: Publication and Administration of
Trade Regulations
• Customs legislation shall be published promptly in such a
manner as to enable governments and traders to become
acquainted with it;
• Agreements affecting international trade policy shall be
published;
• No measures on advance in a rate of duty or restriction or
prohibition on imports shall be enforced before has been
officially published;
• Laws, regulations, decisions and rulings are administered
in a uniform, impartial and reasonable manner;
• Procedures for the prompt review and correction of
administrative action relating to customs matters.

11
Generalized System of Preferences (GSP)
• 1964 - Inclusion of Part IV "Trade and Development" in the
GATT - recognition of the special needs of developing countries;
• 1968 - UNCTAD Resolution 21(II) - "agreement to establish... a
mutually acceptable system of generalized, non-reciprocal, non-
discriminatory preferences in favor of developing countries";
• 1971 - GATT decision on GSP L/3545 - withdrawal of GSP from
the requirements of Art. I GATT for 10 years;
• 1979 - GATT decision "Differential and More Favorable
Treatment" L/4903 - permission to apply GSP on a permanent
basis.

12
 Generalized System of Preferences (GSP)
Donor Country Type of Preferences

Australia, Belarus, Canada,

Iceland, Japan, Kazakhstan, New
GSP
Zealand, Russia, Switzerland,
Turkey

European Union GSP GSP+ EBA

Norway GSP GSP+
USA GSP AGOA

13
The EU Generalized System of Preferences
Council Regulation (EC) No. 732/2008

q Standard GSP – for low- and middle-income countries that do not

have free trade agreements with the EU (15 countries);
q Sustainable Development and Good Governance (GSP+) – for
vulnerable countries (7 items – 75% of exports to the EU, no
more than 2% of all GSP EU imports) in exchange for the
ratification of 27 conventions on human rights, environment, and
good governance (8 countries);
q Everything but Arms (EBA) – for the least developed countries
according to the UN classification (48 countries).

14
 The EU Generalized System of Preferences
Council Regulation (EC) No. 732/2008

EBA (Everything
Goods GSP GSP Plus
But the Arms)
All goods 1 – 97
6,350 goods 6,400 goods
Chapter HS
- 3,5 points % Duty free (if % +
Sensitive - 30% specific specific = specific Duty free
- 20% textile only)

Non-sensitive Duty-free Duty-free Duty free

15
 Generalized System of Preferences

1. Verification of compliance of the country and

product;
2. Determining the correct GSP rate;
3. Check for additional preferences;
4. Verification of product origin criteria;
5. Check the terms of delivery;
6. Certificate of origin "Form A".

Handbooks on the GSP schemes

16
 Harmonized System Convention
Brussels, June 14, 1983 / Amended June 24, 1986

Ст. 3 … Customs tariff and statistical nomenclatures shall

be in conformity with the Harmonized System …
ü use all HS headings and subheadings without addition or
modification, together with their related numerical codes;
ü apply HS General Rules for the interpretation and
Subheading Notes, not modify the scope of the Sections,
Chapters, headings, or subheadings;
ü follow HS numerical sequence;
ü 158 parties (157 States + EU);
ü Current 2022 Edition;

17
 УКТЗЕД
Structure

Tariff Code Name

1 2 HS Chapter

HS 1 2 3 4 HS Heading

1 2 3 4 5 6 HS Subheading

CN 1 2 4 4 5 6 7 8 CN Subheading

UA 1 2 5 4 5 6 7 8 9 10 Good Code

18
 УКТЗЕД
Chapter 18
Cocoa and Cocoa preparations
Code

1801 00 00 00 Cocoa beans, whole or broken, raw or roasted

1806 Chocolate and other food preparations containing cocoa:

– Other, in blocks, slabs or bars:

1806 31 00 00 – – Filled

1806 32 – – Not filled:

1806 32 10 00 ––– With added cereal, fruit or nuts

1806 32 90 00 ––– Other ü Production principle;

ü Material condition;
ü Function or usage.
19
 Rules of Origin
Art. 4 CCU
q Ukrainian goods:
a) which are wholly obtained (produced) in the customs territory
of Ukraine and which do not contain goods imported from
outside the customs territory of Ukraine
b) imported into the customs territory of Ukraine and released
for free circulation
c) received (produced) in the customs territory of Ukraine
exclusively from goods а) та b)
q Non-Ukrainian goods

20
 Rules of Origin

Art. 36 CCU
q The country of origin of the goods is the country where the
goods were wholly obtained or undergone sufficient processing
q The country of origin:
• Group of Countries
• Customs Union
• Region or part of the Country
q Non-preferential Origin – CCU
q Preferential Origin – International agreements

21
 Sufficient Processing Criteria

Art. 40 CCU
q processing or technological operations with a change of the
UKTZD code at the level of any of the first 4 characters
q change in the value of the product as a result of its processing
(rule of ad valorem share)
q specified processing and/or technological operations

22
 Certificate of Origin
Name Description
Certificate of to obtain preferential access to the EU market within the
transportation (origin) of framework of free trade agreements with the EU, Montenegro,
goods EUR.1 EFTA
Preferential certificate of for export to the Republic of Macedonia in accordance with the
form EUR-1, series M provisions of the Free Trade Agreement between the Republic
of Macedonia and Ukraine
Preferential certificate of for goods subject to a preferential regime when exported to the
origin of goods form A markets of donor countries within the framework of the
General System of Preferences (Japan, USA, Canada, EU)
Certificate of origin for for the export to the United Mexican States of goods to which
goods exported to preferences are granted in the territory of Mexico
Mexico

23
 Customs Value
Art. VII:2 GATT
q The value for customs purposes of imported merchandise
should be based on [its] actual value… or of like merchandise
q should not be based on the value of merchandise of national
origin or on arbitrary or fictitious values.
Agreement on implementation of Art. VII GATT
q The customs value of imported goods shall be the transaction
value, that is the price actually paid or payable for the goods…

24
 Methods of Customs Valuation

1) Main:
- transaction value ;
2) Additional:
а) transaction value of identical goods
b) transaction value of similar goods
c) deductive method
d) computed method
e) fall-back method

25
26
The price actually paid or payable for the goods
+ Commissions and brokerage
⛔ Subject to
+ Cost of containers & packing
condition or
+ goods and services supplied for production consideration
+ Royalties and license fees ⛔ Buyer and seller
+ value of any subsequent resale accrues to the seller are related
+ Transport, handling, insurance
- Transport after importation
- Construction, assembly, and maintenance after
importation
- Taxes in country of importation

27
 Identical goods
Calculated in same manner as transactional value

Art. 2 Valuation agreement

q Exported at or about the same time;
q Same commercial level and quantity;
q Same in all respects:
1) physical characteristics
2) quality and reputation
3) produced in the same country
4) Produced by the same person

28
 Similar goods
Calculated in same manner as transactional value

Art. 3 Valuation agreement

q Exported at or about the same time;
q Same commercial level and quantity;
q Similarity:
1) like characteristics
2) like component materials
3) perform the same functions
4) commercially interchangeable

29
 Deduction method
Based on the unit price at which the imported
goods or identical or similar are sold in the
greatest aggregate quantity… to not related
person, …subject to deduction of following

Art. 5 Valuation Agreement

- commissions usually paid
- additions usually made for profit and general expenses
- costs of transport and insurance
- customs duties and other national taxes

30
 Computed value
Information voluntary supplied by the producer

Art. 6 Valuation Agreement

+ cost or value of materials and fabrication

+ amount for profit and general expenses
+ other expenses (as for transactional value)

31
 Fall-back method
On the basis of data available in the country of importation

Art. 7 VA no customs value should be determined on the basis:

ü selling price in the country of importation of goods produced in such
country
ü system which provides for the acceptance the higher of two
alternative values
ü price of goods on the domestic market of the country of exportation
ü price of the goods for export to a country other than the country of
importation
ü minimum customs values
ü arbitrary or fictitious values
32
Thanks!
National University Odesa Law Academy

Borys Kormych