IMPLEMENTING THE WTO VALUATION AGREEMENT IN DEVELOPING COUNTRIES

1
IMPLEMENTING THE WTO VALUATION AGREEMENT IN
DEVELOPING COUNTRIES
Luc De Wulf The World Bank Geneva, 6 7 Nov 2002
2
1. Introduction

• The World Banks interest in trade and customs
  reform stems from
• Trade liberalization
• Revenue enhancement
• Trade facilitation concerns

3
2. Trade Facilitation and the WTO Valuation
Agreement

• Valuation is a crucial aspect of customs work
• Brief recap of history of the ACV
• 1947 GATT Principles
• 1950 Brussels Definition
• 1980 ACV Special and Differential Treatment
  Provision
• 1994 Uruguay Round Shifting Burden of Proof

4
3. Implementation Issues

• After 1994, 58 WTO members asked for a 5 year
  delay 25 asked for further delay and 23
  countries did not ask for delay nor notified the
  WTO
• Reluctance does not stem from principled
  resistance to transparent valuation system

5
Reluctance to implementation of ACV

• Lack of ownership. Commitment was made by
  Ministries of Commerce not by Ministries of
  Finance, sometimes against advise from Ministry
  of Finance
• Concerns about revenue loss. Frequency of
  fraudulent invoices and budget dependency on
  import taxation (customs and VAT)
• Trading environment. Informal sector, second
  hand goods, fraud

6

• Administrative limitations. Valuation is a very
  demanding activity hampered by
• Poor information and communications
• Weakness of customs training, low salaries,
  corrupt social environment
• Poorly managed IT systems
• Inadequate management absence of manuals and
  internal audit and management information systems

7

• ACV is not well suited to deal with specific
  developing country valuation needs. ACV
  procedures are lengthy in cases of reasonable
  doubt and the application of alternative methods
  in the correct order is a challenge

8
4. Where from Here? Partial Solutions
Premises for ACV are honest importers and
workable self-assessment, etc. This is not
realized in many LDCs. Awaiting that these
conditions are realized it is possible to
implement partial solutions that respond to the
objectives of transparency and objectivity, while
assisting Customs to fulfill its revenue,
protection objectives without excessively
hampering trade facilitation.
9

• Simplify the tariff system. A simple and low
  tariff facilitates valuation work. But there are
  limits as importance of VAT increases pari
  passu.
• Address the ownership issue. Ensure that LDCs
  can air their concerns in WTO and other fora, so
  that the rules are appropriate for them.
• Technical assistance can explain to the rules of
  the ACV . Needs to be done but has limits as
  application of the new understanding is
  constrained by administrative limitations in the
  customs.
• Use of PSI or PSI like services. Used by 41
  members of the WCO. WTO compatible if done
  correctly. A 1994 World Bank publication
  discussed the details and explains the modalities
  under which these services can efficiently be
  used. In many countries these services are not
  effectively used. Not the place here for a
  detailed discussion/debate on the issue. New
  services are being rolled out that focus on
  support PSI companies can provide to implement
  risk-based post approach to pre-shipment
  inspections and post-release inspections.

10

• Exchange of information between customs agencies.
  Conform to the Doha Declaration. Was the focus
  of a WCO in September in Pretoria. Exporting
  countries are reluctant data are confidential,
  are not checked, their customs organizations are
  not equipped. Potential of customs exchange may
  be greatest in regional context. Declaration of
  several OECD countries that are favorable to this
  approach should be tested.
• Single trade document that could be used for both
  export and import. At times proposed. In an
  ideal world this could work, However need to
  consider the data that are needed in such
  document, the validity such document would have
  for the respective authorities as export and
  import authorities have different objectives and
  attention to detail. Does not seem top point in
  the direction of trade facilitation.

11

• Commercial data bases and price lists. Preparing
  a good data base in good practice in any
  Valuation Department in Customs. These can be
  based on previous imports and other commercial
  information available to the customs departments.
  In some countries PSI companies are assisting
  customs in the preparation of these data bases.
  Some commercial firms propose data bases and
  innovative ways and means are being investigated
  on how to use modern technology to obtain such
  data.
• Major issue how to use these data
• Raise reasonable doubt and a challenge invoice
• Use them for valuation purposes. Already done in
  many countries-conflicts with ACV commitment.
  Progress would be if price lists were prepared in
  a transparent manner and communicated to the
  traders community. Avoid outdated minimum values
  (hence updating is important) or use for
  protective purposes.

12
5.  Efficient Customs Services are Needed to
Implement ACV

• Many weak links in customs operations make the
  implementation of ACV often problematic.
• Solution is to build a strong chain. This
  requires attention to all links, not only the
  valuation link. Examples of OECD and successful
  developing countries exist. Are being summed up.
  Rules abound (e.g. Kyoto Convention, ACV).
•  

13

• Necessary Condition
•  Political commitment that forces Customs
  efficiency. May require change in management,
  management procedures, staff renewal.
• Private Sector (i) demands better service from
  customs performance standards periodically
  published (ii) commits to honesty.
• May be helpful
• TA and funding from development partners.
• Private sector consultants, service providers and
  subcontractors.