United Nations Conference on Trade and Development

1
Article VFreedom of Transit
Workshop on Trade Facilitation
Chisinau, Moldova, 12-13 June 2006
United Nations Conference on Trade and Development
2
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.

3
Why is Transit Important ?
4
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 countrie
  s
• 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.

5
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

6
Inherent obstacles to Transit
7
Moving goods
8
Key agencies concerned
9
Interests controled by agencies
10
Crossing the border affects the movement of the
goods.
11
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?

12
Crossing the may create
BORDER
Discrepancies
Country Origin
13
What Article V says
14
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.

15
Traffic in transit
16
Roumania-(Moldova)-Ukraine
17
Kyrgy-(Uzbeki)-Kyrgy
18
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.

19
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.

20
Possible implications of Art.V

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

21
Simplification standardisationof 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.

22
Transit Customs procedures

• Limited inspections as per
• Article 10 of the Convention on Harmonisation of
  Border Management
• 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 in
  the course of transit, and non recoverable, as
  per Chapter 3 (norm 44) of the Revised Kyoto
  Convention
• Use of commercial documents for describing goods
  in Customs forms, as per Chapter 1 (norm 6) Annex
  E of the Revised Kyoto Convention
• No calculation of duties and taxes for goods in
  transit, as per Art. 8 of the TIR Convention

23
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.

24
Proposalsregarding Article V
25
Proposals regarding Article VM. Matters
Relating to Goods Transit
Measures
1
4
10
2
1
26
Article V (Proposals)

• Transit regime
• Based on international standards
• Adherence to international instruments
• Bonded transit
• International / regional guarantee systems
• Regional transit cooperation.

27
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.

28
Article V (Proposals)

• Technical assistance, capacity building, SD
• 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.

29
Two relevant TF toolsTransit arrangementsandN
ational/regionalCustoms Transit regimes.
30
Transit Arrangements
Corridor-based solutions

• 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.

31
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.

32
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).

33
IMPORTANTPromote cooperation mechanisms at
nationaland corridor levels
34
Cooperation mechanisms
Country A
Country B
Bilateral consultationson trade transport
issues
Government Authorities Min. Trade,Finances
(Customs), Transport, Interior, Foreign Affairs,
etc.
Government Authorities Min. Trade,Finances
(Customs), Transport, Interior, Foreign Affairs,
etc.
NTTFC, Clusters,Public-Private Partnerships
NTTFC, Clusters,Public-Private Partnerships
Regionalcoordination
Private sector Chambers of Commerce, professional
associations, corridor-based interests (around
projects such as ICD, Free Zones, etc.)
Private sector Chambers of Commerce, professional
associations, corridor-based interests (around
projects such as ICD, Free Zones, etc.)
Professional networks
35
Commonalitiesbetween 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

36
THANK YOU!
Peter Faust(peter.faust_at_unctad.org)
Maxence Orthlieb(maxence.orthlieb_at_unctad.org)
Jan Hoffmann(jan.hoffmann_at_unctad.org)
José Rubiato(jose.rubiato_at_unctad.org)
Trade Logistics Branch Division for Services
Infrastructure for Development and Trade
Efficiency