Catalog

	Table of Contents
p. 12 of 40 BACK | NEXT The WTO Tariff Concessions Non-Discrimination Principles Non-Tariff Barriers to Trade Prohibition of Quantitative Restrictions Customs Administration Customs Classification Customs Valuation Rules of Origin Standards and Technical Regulations Investment Services Trade-Related Aspects of Intellectual Property Rights Textiles and Clothing Agriculture Trade Remedies Dispute Settlement System Regional Arrangements WTO Application Process

World Trade Organization Toolkit : Non-Tariff Barriers to Trade

---

Customs Administration

Administration of customs may potentially create important obstacles to trade. Indeed, upon importation, in order to correctly and properly apply the customs treatment to an imported good, it is necessary to determine the classification, the origin and the value of that product. Without harmonisation, each of these steps may potentially constitute an obstacle to trade. First, since duties are applicable to specific products, administering customs requires the classification of the products which are imported or exported. Secondly, given that duties are generally ad valorem, it is necessary to evaluate the imported goods in order to determine the appropriate customs duty applicable. Finally, as duties vary depending on the origin of the product, it is also necessary to determine the customs origin of the product. In absence of harmonisation of those steps, each of these may create an obstacle to trade.

First of all, to determine which duty or customs treatment applies to a good upon importation, it is necessary to determine in which category of products it is classified. Indeed, duties apply to specific categories of products. The way to classify goods may therefore potentially create obstacles to trade.

Learn more about customs classification and the Harmonised System

Second, duties may vary depending on the origin of the goods. It is indeed frequent that countries apply different duties for a given product. For example, a lower duty is applied with respect to products imported from developing countries. In order to apply the correct duty, it is therefore necessary to properly determine the origin of the goods. This is often a complex operation in view of the fact that the manufacturing of the product may take place in various countries: one part of the production process takes place in country A, another in country B and the assembly of the various parts still in country C. Currently, there are no harmonised rules for the determination of the origin. However, WTO Members agreed during the Uruguay Round on an Agreement on Rules of Origin which constitutes the framework for the negotiations of harmonised rules of origin.

Learn more about the Agreement on Rules of Origin

Thirdly, since most duties are ad valorem (i.e. expressed as a percentage of the value of the goods), the determination of the value of the goods which is subject to duties is a central operation as it is determinant of the ultimate duty applied. Originally, the GATT only contained very brief and general principles on customs valuation included in Article VII of the GATT. Article VII of the GATT requires that Contracting Parties base the value for customs purposes of imported merchandise on the actual value of the imported merchandise and not on value of merchandise of national origin or on arbitrary or fictitious values. Actual value is defined as the "price at which … such or like merchandise is sold or offered for sale in the ordinary course of trade under fully competitive conditions." The general principles included in Article VII of the GATT were further detailed in a specific Agreement on Customs Valuation negotiated during the Uruguay Round. The Agreement on Customs Valuation details precisely the valuation methods which may be used for the determination of the value of goods for customs purposes. This Agreement is a great achievement as it ensures predictability and certainty in the way customs valuation operates.

Learn more about the Agreement on Customs Valuation

Back Prohibition of Quantitative Restrictions	Next Customs Classification