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My Course series OBJECTIVE Get acquainted with disciplines related to Import Licensing procedures in the WTO. WTO E-LEARNING COPYRIGHT © 12 Detailed Presentation of Import Licensing Procedures in the WTO

WTO E-LEARNING COPYRIGHT © 12 · 3 II. GATT NEGOTIATIONS ON NON-TARIFF MEASURES IN BRIEF While the GATT 1947 already contained some provisions on non-tariff measures (NTMs), it was

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Page 1: WTO E-LEARNING COPYRIGHT © 12 · 3 II. GATT NEGOTIATIONS ON NON-TARIFF MEASURES IN BRIEF While the GATT 1947 already contained some provisions on non-tariff measures (NTMs), it was

08 Autom

ne

M y C o u r s e s e r i e s

OBJECTIVE

Get acquainted with disciplines related to Import Licensing

procedures in the WTO.

WTO E-LEARNING COPYRIGHT © 12

Detailed Presentation of Import Licensing Procedures in the WTO

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I. INTRODUCTION

Besides tariffs, several non-tariff measures could also restrict or even impede market access of goods, some of

which can be legitimately introduced and maintained by WTO Members, as long as they are applied in a WTO

consistent manner.

There is no agreed definition in the WTO of what constitutes a "non-tariff measure" nor a "non-tariff barrier"

neither is there consistency in the way both terms have been used in the past. Although both terms are often

used interchangeably, the term "non-tariff measure" (NTM) has been preferred throughout this course1. While

the application of NTMs does not always restrict trade, they often result in unnecessary restrictions or undue

barriers, which explains the utilisation of the term "non-tariff barrier" (NTBs).

The type of measures covered by these terms varies significantly and includes all measures other than tariffs

which can have an impact on trade in goods. Measures covered by WTO Agreements include: quantitative

restrictions (e.g. quotas), and other NTMs (e.g. lack of transparency in trade regulation, arbitrary application of

trade regulations, customs formalities, technical barriers to trade, practices of customs valuation, etc.).

During the last GATT Rounds of negotiations, Contracting Parties made considerable efforts to eliminate NTBs

that were used solely for protectionist purposes or, in those cases where they were applied to pursue a

legitimate objective (e.g. to protect health or the environment), to minimize their trade distorting effects.

1 The term "non-tariff barrier" (NTB) is, nevertheless, used whenever this course cites GATT/WTO texts or

refers to specific occasions where the term NTB was originally employed.

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II. GATT NEGOTIATIONS ON NON-TARIFF

MEASURES

IN BRIEF

While the GATT 1947 already contained some provisions on non-tariff measures (NTMs), it was not until the

Kennedy Round (1964 - 1967) that GATT Contracting Parties decided to go beyond tariffs and address NTMs in

the context of a multilateral round. In the following GATT Rounds (the Tokyo Round and the Uruguay Round),

NTMs remained on the agenda of negotiations and received extensive attention. The most important

achievement resulting from these negotiations and in particular from the Uruguay Round, was the conclusion of

a number of multilateral agreements, which set out specific disciplines on different types of NTMs.

THE ''KENNEDY ROUND''

With the progressive reduction of tariffs brought about by the early GATT Tariff Conferences, it was perceived

that governments were gradually shifting to other forms of measures to restrict market access for goods and

protect their domestic industries. GATT Contracting Parties recognized that the benefits resulting from tariff

reductions and tariff bindings would only be effective if they could not be undermined by the application of

other measures. Therefore, effective trade liberalization required that not only tariff barriers had to be

reduced, but that there was a growing necessity to agree on multilateral disciplines to address NTMs.

The Kennedy Round was the first GATT Round where NTMs were addressed as part of the multilateral

negotiations in addition to tariffs. However, the results in this Round were rather modest due to the

considerable reluctance of some negotiating parties to assume new commitments in this new field. At the end

of this Round, Contracting Parties were only able to produce an Anti-dumping Code (the 1967 International

Anti-Dumping Code), which, however, applied only to those parties which agreed to be bound by it.

Contracting Parties also made efforts to identify NTMs through an exercise of notification of the barriers they

encountered in their trade relations. The result was a non-exhaustive list including 18 categories of measures

involving issues such as escape clauses, anti-dumping, customs valuation, government procurement policies,

residual quantitative restrictions, administrative and technical regulations, subsidies, etc. On the basis of that

list, an inventory of quantitative restrictions and other non-tariff barriers (NTBs) was drawn up shortly after the

Kennedy Round.

THE ''TOKYO ROUND''

Compared to the modest results on NTBs during the Kennedy Round, the Tokyo Round took a broader look at

trade rules and focused on addressing what was considered the most important NTBs facing exports at that

time.

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The results of this round were considered to be one of the major accomplishments in trade negotiations since

the creation of the GATT. The Tokyo Round negotiations on NTMs led to:

the amendment of the Anti-dumping Code that had originally been negotiated during the Kennedy

Round; and,

the conclusion of new "Codes", including the Code on Customs Valuation, the Code on Import Licensing

Procedures, the Code on Government Procurement, the Code on Subsidies and Countervailing

Measures, and the Code on Technical Barriers to Trade.

Instead of providing legal disciplines applicable to all Contracting Parties, these Codes were drafted as stand-

alone agreements that obliged only those Contracting Parties that became party to them. In most cases, only

a relatively small number of GATT Contracting Parties (mainly developed countries) subscribed to these Codes.

However, the operation of the MFN principle meant that even those GATT Contracting Parties who had not

signed the Codes generally enjoyed the same benefits of the Codes as those Parties who had signed them.

This diminished the incentives for joining the Codes, creating a "free-rider" problem. 2

Furthermore, the Tokyo Round did not tackle some NTBs that impeded considerably the exports of developing

countries, such as NTBs on textiles and clothing products, consumer electronics, agricultural goods and

foodstuffs, etc.

Despite these limitations, the result of the negotiations during the Tokyo Round injected an important impetus

for the further negotiation of NTMs during the Uruguay Round.

TO KNOW MORE... THE TOKYO ROUND CODES

Some of the most relevant codes included:

The Code on Customs Valuation

The Valuation Code established a positive system of Customs Valuation based on the price actually paid or

payable for the imported goods. It was signed by more than 40 Contracting Parties. The Code was

replaced by the WTO Agreement on Implementation of Article VII of the GATT 1994 (explained in the next

section of this Module) after the conclusion of the Uruguay Round.

Import Licensing Code

The Code was aimed at preventing import licensing procedures from unnecessarily hindering international

trade. During the Uruguay Round, it was revised to strengthen the disciplines on transparency and

notifications. The WTO Agreement on Import Licensing will be introduced later on in this Module.

2 In this context, the term "free-rider" is used to describe a situation in which a country who does not make

any trade concessions, enjoys, nonetheless from the concessions made by other countries owing to the MFN

principle. From an economic perspective, free riders do themselves harm because they deny themselves the

benefits of trade liberalization (Goode Walter, Dictionary of Trade Policy Terms (2007), Fifth Edition, p. 181).

The Code on Government Procurement, however, remained a plurilateral instrument and its benefits were not

extended to non-signatory Members.

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TBT Code or "Standards Code"

The Standards Code laid down the rules for preparation, adoption and application of technical regulations,

standards and conformity assessment procedures. Only 32 GATT Contracting Parties signed the Code.

The WTO Agreement on Technical Barriers to Trade (TBT Agreement) – explained in the second part of

this Module - has strengthened and clarified the provisions of the Standards Code.

Anti-Dumping Code

The Anti-Dumping Code provided more guidance about the determination of dumping and of injury than

did Article VI of the GATT 1947. It also set out in detail certain procedural and due process requirements

that must be fulfilled in the conduct of investigations. Nevertheless, the Code represented only a general

framework for countries to follow in conducting investigations and imposing duties. The Code was later

replaced by the WTO Agreement on Anti-Dumping (introduced in Module 2 – see section on trade

remedies).

THE ''URUGUAY ROUND''

One of the motivations behind the decision to launch the Uruguay Round was the GATT Contracting Parties'

awareness that NTMs were becoming increasingly important. In the Uruguay Round Ministerial Declaration,

negotiating parties set out as one of the objectives to reduce or eliminate NTBs, including quantitative

restrictions (paragraph D of the Ministerial Declaration). The Uruguay Round brought several significant

achievements on addressing NTMs, including:

the amendment of the Codes adopted during the Tokyo Round;

the conclusion of several new Agreements to deal with other forms of NTMs, including the ''Agreement

on Preshipment Inspection'', the ''Agreement on Rules of Origin'', the ''Agreement on Trade-related

Investment Measures'', the ''Agreement on the Application of Sanitary and Phytosanitary Measures'',

the ''Agreement on Textiles and Clothing'', and the ''Agreement on Safeguards''; and,

A new "Part III" was included in the Schedules of concessions to record commitments in respect of

NTMs. Eleven Members made concessions by including specific commitments on areas such as the

removal of import licensing requirements, elimination of quantitative restrictions and tendering

requirements, reform of import licensing systems, eliminate import bans and phase out tariff-rate

quotas, etc.

A major innovation of the Uruguay Round was the introduction of the principle of ''single undertaking''.

According to this principle (explained in Module 1), all Members were required to accept the Multilateral Trade

Agreements concluded during the Uruguay Round as a whole, that is, as a single package. In other words, no

Member had the possibility to opt out of some Agreements. Thus, while the Tokyo Round Codes were

applicable to signatories only, all of the Uruguay Round Multilateral Trade Agreements were binding on all WTO

Members.

EXERCISES:

1. What is the main difference between the Tokyo Round Codes and the Multilateral Trade Agreements

resulting from the Uruguay Round, besides the differences in substantive content?

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III. QUANTITATIVE RESTRICTIONS

IN BRIEF

Quantitative restrictions (QRs), which are one of the best-known NTBs, can be defined as specific limits on the

quantity or value of goods that can be imported (or exported) during a specific time period. The most common

QRs are prohibitions and quotas.

As explained in Module 3, under the GATT/WTO framework, tariffs are allowed as a form of protection as long

as they do not exceed the bound levels and are applied on an MFN basis. However, Members are generally

prohibited from applying QRs. The rationale of favouring tariffs over quantitative restrictions and other forms

of NTBs is because tariffs are considered to be more transparent and less trade distorting.

Article XI:1 of the GATT 1994 provides the general elimination of quantitative restrictions and "other

measures" instituted or maintained by a Member on the importation, exportation or sale for export of products

(other than duties, taxes or other charges consistent with GATT/WTO rules).

Despite the general rule prohibiting QRs, there are exceptions which allow the imposition of QRs in certain

circumstances and subject to certain conditions. Whenever authorized under WTO rules, QRs must be imposed

on a non-discriminatory basis according to Article XIII of the GATT.

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IV. OTHER NON-TARIFF BARRIERS

IN BRIEF

In addition to quantitative restrictions, several other non-tariff measures (NTMs) could also have the effect of

restricting market access of goods and therefore become trade barriers. Some of the measures covered by

WTO Agreements include, for example, technical barriers to trade, lack of transparency in trade regulations,

customs formalities and arbitrary practices of customs valuation. As mentioned at the beginning of this

Module, in those cases where NTMs are based on a legitimate goal (i.e. measures to protect the environment

or health), Members need to meet specific conditions set out in the WTO Agreements to ensure the application

of these measures do not result in barriers to trade.

A number of NTMs are currently subject to WTO multilateral disciplines applicable to all Members, including

inter alia the following:

Agreement on Sanitary and Phytosanitary Measures

Agreement on Technical Barriers to Trade

Article V of the GATT 1994 on Freedom of Transit

Article VII of the GATT 1994 and the Agreement on Customs Valuation

Article VIII of the GATT 1994 on Fees and Formalities connected with Importation and Exportation

Article X of the GATT on Publication and Administration of Trade Regulations;

Agreement on Rules of Origin

Agreement on Preshipment Inspection

Agreement on Import Licensing Procedures

Agreement on Trade Related Investment Measures

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V. IMPORT LICENSING PROCEDURES

IMPORT LICENSING: KEEPING PROCEDURES CLEAR

Although less widely used now than in the past, import licensing systems are subject to disciplines in the WTO.

The Agreement on Import Licensing Procedures says import licensing should be simple, transparent and

predictable. For example, the agreement requires governments to publish sufficient information for traders to

know how and why the licences are granted. It also describes how countries should notify the WTO when they

introduce new import licensing procedures or change existing procedures. The agreement offers guidance on

how governments should assess applications for licences.

Some licences are issued automatically if certain conditions are met. The agreement sets criteria for automatic

licensing so that the procedures used do not restrict trade.

Other licences are not issued automatically. Here, the agreement tries to minimize the importers’ burden in

applying for licences, so that the administrative work does not in itself restrict or distort imports. The

agreement says the agencies handling licensing should not normally take more than 30 days to deal with an

application — 60 days when all applications are considered at the same time.

DEFINITION OF IMPORT LICENSING

Import licensing can be defined as administrative procedures requiring the submission of an application or

other documentation (other than those required for customs purposes) to the relevant administrative body as a

prior condition for importation of goods.

BASIC OBLIGATIONS

GATT Article VIII

Article VIII of GATT (entitled Fees and Formalities Connected with Importation and Exportation) deals with

import licensing procedures in a non-specific manner.

Paragraph 1(c) establishes a general obligation concerning formalities whereby Members recognize

the need for minimizing the incidence and complexity of import and export formalities and for

decreasing and simplifying import and export documentation requirements.

Paragraph 2 requires each Member “to review the operation of its laws and regulations in the light of

the provisions of this Article” upon request by another Member.

Paragraph 3 prohibits Members from imposing “substantial penalties for minor breaches of customs

regulations or procedural requirements.”

GATT Article X

Article X requires Members to publish promptly laws, regulations, judicial decisions and administrative rulings

of general application, including those pertaining to requirements on imports or exports and to administer them

in a uniform, impartial and reasonable manner.

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FROM THE TOKYO ROUND CODE TO THE URUGUAY ROUND AGREEMENT

The Tokyo Round Import Licensing Code was one of the agreements covering non-tariff measures concluded

during the multilateral trade negotiations held between 1973 and 1979. It entered into force on 1 January

1980 with the objective of preventing import licensing procedures from unnecessarily hindering international

trade. As a stand—alone agreement, it obligated only those countries which had signed and ratified it. During

the Uruguay Round, it was revised to strengthen the disciplines on transparency and notifications. The revised

Agreement entered into force on 1 January 1995. It is binding on all WTO Members.

MAIN OBJECTIVES

The main objectives of the Agreement are to simplify, and bring transparency to, import licensing procedures,

to ensure their fair and equitable application and administration, and to prevent procedures applied for

granting import licences for having in themselves, restrictive or distortive effects on imports.

GENERAL PROVISIONS

Neutral application, fair and equitable administration

Members are to apply import licensing procedures neutrally, and administer them in a fair and equitable

manner (Article 1.3). Applications are not to be refused for minor documentation errors, not to be penalized

heavily for any omissions or mistakes in documentation or procedures obviously made without fraudulent

intent or gross negligence (Article 1.7). Licensed imports are to not be refused for minor variations in value,

quantity or weight from the amount shown on the licence for reasons consistent with normal commercial

practices (Article 1.8).

Publication of rules and procedures

Rules and all information concerning procedures for the submission of applications, including the eligibility

criteria for applicants, the administrative bodies to be approached and lists of products subject to import

licensing are to be published, whenever practicable, 21 days prior to the effective date of the requirement but

in all events not later than the effective date (Article 1.4 (a)).

Simple forms and procedures

Applications forms and renewal forms are to be simple (Article 1.5). Application procedures and renewal

procedures are to be simple. Applicants are to be allowed a reasonable period to submit licence applications.

Where there is a closing date for applications, this period should be at least 21 days. The number of

administrative bodies which an applicant has to approach in connection with an applications is not to exceed to

a maximum of three (Article 1.6).

Other principles

Foreign exchange for licensed imports is to be allocated on the same basis as for goods not requiring

import licences (Article 1.9).

The security exception provisions of Article XXI of GATT 1994 apply (Article 1.10).

Members are not required to disclose confidential information contrary to the public interest or which

would prejudice the legitimate commercial interests of particular enterprises (Article 1.11).

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AUTOMATIC IMPORT LICENSING

Definition

Automatic import licensing (licensing maintained to collect statistical and other factual information on imports)

is defined as import licensing where the approval of the application is granted in all cases (Article 2.1).

Conditions

Automatic licensing procedures are not to be administered in such a way as to have restrictive effects on

imports; there should be no discrimination among those applying for automatic licenses. Any person fulfilling

the legal requirements should be equally eligible to apply for and obtain import licenses.

Main provision for automatic import licensing

Approval of application within 10 working days

Licence applications may be submitted on any working day before customs clearance; they shall be approved

immediately on receipt but in any case within 10 working days (Article 2.2 (a)). Developing country Members

which were not a Party to the Tokyo Round Code may, upon notification to the Committee, delay the

application of those two requirements for two years from their date of WTO Membership (footnote 5 to

Article 2.2).

Use

Automatic import licensing may be necessary whenever other appropriate procedures are not available. It is to

be removed as soon as the circumstances which have given rise to its introduction no longer prevail

(Article 2.2 (b)).

NON-AUTOMATIC IMPORT LICENSING

Definition

Non-automatic import licensing is defined as licensing not falling within the definition of automatic import

licensing (Article 3.1).

Non-automatic licensing is used to administer trade restrictions such as quantitative restrictions which are

justified within the WTO legal framework.

Main provisions applicable to non-automatic import licensing

No additional restrictive or distortive effects

Non-automatic import licensing must not have restrictive or distortive effects on imports additional to those

caused by the imposition of the restriction, and is to correspond in scope and duration to the measure it is

used to implement (Article 3.2).

All relevant information to be published

Members are to publish all relevant information, including purposes other than the implementation of

quantitative restrictions, exceptions or derogations, quota amounts, opening and closing dates of quotas and

country-specific quota allocations. Whenever practicable, the information should be published 21 days prior to

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the effective date of the requirement, and in all events should be published not later than the effective date

(Articles 3.3, 3.4, 3.5 (b)— (d)).

No discrimination among applicants

There may be no discrimination among applicants. If a licence is refused, the applicant, on request, shall be

given the reason for refusal, and shall have a right of appeal or review of the decision (Article 3.5 (e)).

Time limits for processing applications

The period for processing applications shall not be longer than 30 days if applications are considered as and

when received, and not longer than 60 days if applications are considered simultaneously (Article 3.5 (f)).

Validity of a licence

The validity of a licence is to be of reasonable duration and not be so short as to preclude imports, including

those from distant sources (Article 3.5 (g)). Full utilization of quotas is not to be discouraged (Article 3.5 (h)).

Licences are to be issued in economic quantities (Article 3.5 (i)).

Other provisions

Members are to provide, upon the request of any Member having an interest in the trade in the

product concerned, all relevant information (Article 3.5 (a)).

In allocating licences, Members should consider the import performance of an applicant and are to

ensure a reasonable distribution of licences to new importers, particularly to those importers

importing products originating in developing and least-developed country Members (Article 3.5 (j)).

If quotas are not allocated by country, licence holders are to be free to choose the sources of imports;

if they are allocated among supplying countries, the licence must clearly stipulate the countries

(Article 3.5 (k)).

Compensating adjustments may be made in future licence allocations, under Article 1.8, where

imports exceeded a previous licence level (Article 3.5 (l)).

NOTIFICATIONS

Copies of publications and full text of laws and regulations

Members are required to submit copies of publications containing information on import licensing procedures

and the full text of relevant laws and regulations (Articles 1.4 (a) and 8.2 (b)). In cases where the publications

and legislation are not in a WTO official language, such notifications should be accompanied by a summary in

one of the WTO official languages (G/LIC/3).

Notification of changes

Members which institute licensing procedures or changes in these procedures are required to notify the

Committee of them within 60 days of publication. Such notifications should include information on: products

subject to licensing; contact point for information on eligibility; administrative bodies for submission of

applications; date and name of publications where licensing procedures are published, together with copies of

such publications; whether licensing is automatic or non-automatic; the administrative purpose of automatic

import licensing procedures; measure implemented through non-automatic import licensing procedure; and

expected duration of the licensing procedures (Articles 5.1-5.4).

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Reverse notification

Members have the possibility of making reverse notifications of non-notified import licensing procedures

maintained by other Members (Article 5.5).

Annual questionnaire (by 30 September each year)

Members are to complete the Questionnaire on Import Licensing Procedures by 30 September each year

(Article 7.3, and appendix).

COMMITTEE ON IMPORT LICENSING

The Committee on Import Licensing, open to all Members, has been established under Article 4. It meets as

necessary to consult on matters relating to the operation of the Agreement or the furtherance of its objectives.

EXERCISES:

2. What is the Agreement on Import Licensing Procedures aimed at?

3. What are the main disciplines in the Agreement?

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PROPOSED ANSWERS:

1. Compared to the Tokyo Round, a major change in the Uruguay Round was the introduction of the

principle of ''single undertaking''. According to this principle, all Members were required to accept the

Multilateral Trade Agreements concluded during the Uruguay Round as a whole (as a single package): no

Member had the possibility to opt out of some Agreements. Thus, while the Tokyo Round Codes were

applicable to signatories only, the Uruguay Round Multilateral Trade Agreements are binding on all WTO

Members.

2. The Agreement on Import Licensing Procedures is aimed at ensuring that the procedures applied for

granting import licensing do not constitute unnecessary barriers to trade in goods.

3. The disciplines contained in the Agreement include publication and notification of import licensing

procedures, fair and equitable application and administration, simplification of procedures, as well as the

provision that foreign exchange necessary to pay for licensed imports shall be made available to licence

holders on the same basis as to importers of goods not requiring import licences. It also provides time

limits for processing licence applications, publication of information concerning licensing procedures and

notification. In addition, the Agreement establishes the Committee on Import Licensing which meets as

necessary to afford Members the opportunity to consult on any matters related to the operation of the

Agreement or the furtherance of its objectives; and, to seek clarification on import licensing procedures

maintained by other Members and/or on the notifications submitted.

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