Article V: Freedom of Transit

Workshop on Trade Facilitation

Chisinau, Moldova, 12-13 June 2006

24/04/2020

United Nations Conference on Trade and Development

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Key points

1. Why is transit important?; 2. What Article V says… 3. Proposals regarding Article V; 4. Relevant Trade Facilitation tools; 5. Cooperation mechanisms.

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Why is Transit Important ?

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Why is transit important?

• Transit is

vital

to provide access to most efficient & least costly trade routes. It should warrant the provision of required supplies at a fair cost.

• Transit is

profitable

to the « transited »countries: – Transit traffic requires provision of services; – Transit generates revenues from applicable users’ charges; – Transit generates induced economic activities: restaurants & hotels, repairs & workshops, trade of petroleum products; – Transit creates opportunities for investment in facilities and equipment supporting transit services.

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Specific obstacles include

• Different standards and regulations • Inadequate transport/transfer infrastruc.

• Insufficient use of ICTs • Requirements for drivers and crew • Protection of national operators • Inadequate transport documentation • Inadequate legal framework • No Customs transit system • Border crossing formalities and delays 24/04/2020 Workshop on Trade Facilitation Article V 5

Inherent obstacles to Transit

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Moving goods…

Services Operations Vehicles Infrastructure

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Key agencies concerned

Goods Services Operations Vehicles Infrastructure

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Interests controled by agencies

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National Interests Elements Traditional Revenues Entry Controls

Duties; Taxes; Fees

X X

Quotas; Dumping; Immigration

X X Supplemental Revenue Generation Environmental Protection Health and Safety Communications Systems Labor Protection

Additional special taxes & fees; Highway use & border fees Insect/pest control; Toxic wastes; Production inputs/processes; Manufacturing emissions; Endangered species Food safety; Drug & Medical device safety; Consumer goods safety; Animal disease; Plant disease; Generic safety; Vehicle safety Frequency & radio emission controls; Radio wave compliance Children; Prisoners

X X Prohibited Transactions

Drugs, narcotics & controlled substances; Child pornography; Money laundering; Fraud

X X X X X X X X X X X X X X X X International Safety Intellectual Property

Anti-terrorism; Gun controls; Arm trafficking; Weapons of mass destruction (nuclear, chemical & biological) Patent; Trademark; Copyright

X X X X

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Crossing the border affects the movement of the goods….

Country A Country B

S Movement B

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The concept of “border”

• A border is where the

status

of the goods, vehicles, or persons transporting/driving them is assessed.

• Are goods, vehicles, or persons transporting/driving them in conformity with the

national interests

of the country in which they pretend to enter?

• Do they comply with local laws and regulations?

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Discrepancies GOODS SERVICES OPERATIONS VEHICLES INFRASTRUCTURE

24/04/2020 Products conformity, standards & regulations Commercial regulations and practices Traffic regulations and operational practices Vehicle standards and regulations Design, construction, maintenance and inter-operability Country Origin Country Destination Workshop on Trade Facilitation Article V 12

What Article V says…

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Article V – Freedom of Transit

1.

Goods (including baggage), and also vessels and other means of transport, shall be deemed to be in transit across the territory of a contracting party when the passage across such territory , with or without trans shipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes. Traffic of this nature is termed in this article “traffic in transit”.

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A

Traffic in transit

B A B

Territory of contracting party Transit 24/04/2020

A

Workshop on Trade Facilitation Article V

B

15

Roumania-(Moldova)-Ukraine

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Article V – Transit

• • •

Goods and transport means crossing territory

– Non-discriminatory treatment of vehicles in transit and of goods transported by them;

Routes most convenient for international transit; Prohibition to:

– Make transit traffic subject to unnecessary delays or restrictions; – Impose Customs duties, transit duties or other transit charges, except for: • (1) charges for transportation, (2) charges commensurate with administrative expenses entailed by transit, or (3) with cost of services.

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Article V – Charges

• All charges and regulations imposed on transit shall be reasonable, having regard to the conditions of traffic.

• MFN treatment with respect to all charges, regulations and formalities.

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Possible implications of Art.V

• • • Simplification and standardisation of procedures; Transit Customs procedures; Transit fees and charges.

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Simplification & standardisation of procedures

• Limiting formalities at entry points, « en route » (within the national territory), or at exit points; • Reducing the number of controls (as no taxation is at stake); • Applying risk management techniques; • Standardizing required documents and data.

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Transit Customs procedures

• • • • • •

Limited inspections

Management’; as per – Article 10 of the ‘Convention on Harmonisation of Border – Article 5 of the TIR Convention;

No Customs escort

as per Art. 23 of the TIR Convention;

No imposed itinerary

as per Chapter 1 (norm 15), Annex E of the Revised Kyoto Convention;

No levy of duties on goods lost by accident

Convention; in the course of transit, and non recoverable, as per Chapter 3 (norm 44) of the Revised Kyoto

Use of commercial documents

Convention; for describing goods in Customs forms, as per Chapter 1 (norm 6) Annex E of the Revised Kyoto

No calculation of duties and taxes

of the TIR Convention for goods in transit, as per Art. 8 24/04/2020 Workshop on Trade Facilitation Article V 22

Transit fees & charges

• Transit fees and charges – Often suffer from lack of transparency • May be discriminatory in nature on common-user infrastructure – Transit charges on foreign trucks – Financial impact questionable • Bilateral agreements/Reciprocity – Fees for use of dedicated infrastructure • High budgetary impact – Pipelines, canals,etc.

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Proposals regarding Article V

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Proposals regarding Article V:

M. Matters Relating to Goods Transit

Measures

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Article V (Proposals)

•

Transit regime

– Based on international standards; – Adherence to international instruments; – Bonded transit; – International / regional guarantee systems; – Regional transit cooperation.

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Article V (Proposals)

•

Procedures

– Reasonable and non-discriminatory; – Non-discriminating modes, carriers, routes, goods; – Simplified prodedures for perishable goods; – Authorized traders; – Risk management to limit physical inspections; – Automated systems: – Cross border vehicle regulations.

•

Fees and charges

– Publication and periodic review.

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•

Article V (Proposals)

Technical assistance, capacity building, S&D

–

Technical assistance

• Impartial implementation of provisions; • Combat illicit trade; • Best practices to minimize transit cost; • Technology applications; • Upgrading customs systems; • Risk management; • Put in place guarantee system; • Collaborative efforts by international organizations.

–

Capacity building

• Training on procedures, systems, etc.

–

Special & Differential treatment

• Based on implementing capacities, particularly relating to IT and banking systems ..TA, FA and time frame.

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Two relevant TF tools:

Transit arrangements; and National/regional Customs Transit regimes.

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Goods

Transit Arrangements

Corridor-based solutions

Services Operations Vehicles Infrastructure

• • • • •

Customs transit issues:

– Documentation; – Guarantees

Provision of transport services

(market access; traffic quotas; freight rates);

Transport operation issues:

– Modes, routes, time, etc.; – Visa for crew/drivers;

Traffic management issues;

– Conformity of vehicles & loading units; – Driver license;

Use of specific transport mode & interface facilities.

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Customs Transit Regime

• To allow the temporary suspension of customs duties, excise and VAT payable on goods originating from and/or destined for a third country while under transport across the territory of a defined customs area. • This suspension of duties and taxes remains in place until the goods either: – exit the customs territory concerned; – are transferred to an alternative customs regime; or – the duties and taxes are paid and the goods enter free circulation.

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Customs guarantees & bonds

• Customs authorities may require guarantees for the crossing of a given Customs territory, meant to avoid fraudulous transfers; • Those guarantees (or bonds) shall not penalise transit operations by the amounts claimed, their nature (e,g.

a deposit

), their duration and the formalities that apply thereto; • Bonds shall be acknowledged by both parties (thus bringing justification to transit agreements, be they bilateral or multilateral).

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IMPORTANT: Promote cooperation mechanisms at national and corridor levels

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Cooperation mechanisms

BORDER Country A Government Authorities

Min. Trade, Finances (Customs), Transport, Interior, Foreign Affairs, etc .

Bilateral consultations on trade & transport issues Country B Government Authorities

Min. Trade, Finances (Customs), Transport, Interior, Foreign Affairs, etc .

NTTFC, Clusters, Public-Private Partnerships

Regional coordination

NTTFC, Clusters, Public-Private Partnerships

Private sector

Chambers of Commerce, professional associations, corridor-based interests (around projects such as: ICD, Free Zones, etc.) 24/04/2020

Professional networks

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Private sector

Chambers of Commerce, professional associations, corridor-based interests (around projects such as: ICD, Free Zones, etc.) 34

• •

Commonalities between Articles V & VIII

Simplification of procedures:

– Risk assessment; – Use of international standards (e.g. Kyoto Conv.); – Automation; – Time limit for Customs release; – Cooperation between traders & Customs (e.g. authorized traders);

Simplification of documentation requirements:

– One-stop clearance/release facilities (e.g. Single window); – Adoption of basic international standards: • Simplified, standardized documentation (e.g. SAD; UNLK); • Agreement on a reduced trade/Customs data set ; 24/04/2020 Workshop on Trade Facilitation Article V 35

THANK YOU!

Peter

Faust

([email protected]) Maxence

Orthlieb

([email protected]) Jan

Hoffmann

([email protected]) José

Rubiato

([email protected])

Trade Logistics Branch Division for Services Infrastructure for Development and Trade Efficiency