Part II Chapter 4 Tariffs

Chapter 4

TARIFFS
1. OVERVIEW OF RULES
Tariffs are the most common kind of barrier to trade; indeed, one purpose of the
WTO is to enable members to negotiate mutual tariff reductions. Before we consider
the legal framework that disciplines tariffs, we must understand the definition of tariffs,
their functions and their component elements (rates, classification, and valuation).

Definition of “Tariff”
1
Strictly defined, a tariff is a tax imposed on imported or exported goods. In
general parlance, however, it has come to mean “import duties” charged at the time
2
goods are imported.

Functions of Tariffs
Tariffs have three primary functions: (1) to serve as a source of revenue; (2) to
protect domestic industries; and (3) to remedy trade distortions (as a sanction).
The revenue function simply means that the income from tariffs provides
governments with a source of tax revenue. In the past, the revenue function was indeed
a major reason for applying tariffs, but economic development and the creation of
systematic domestic tax codes have reduced its importance in developed members. For
example, Japan generates about 731.9 billion yen in tariff revenue per year, which
represents approximately 1.8 percent of total tax revenue (based on Fiscal Year 2009).

1
With regard to the scope of general most-favoured-nation (MFN) treatment, GATT Article I prescribes
that MFN treatment includes “customs duties and charges of any kind imposed on or in connection with
importation or exportation . . . .” It thus deals with not only tariffs on importation but also those on
exportation.
2
In Article 3 of Japan’s Customs Tariff Law, a tariff is defined as “a tax based on the standard of
assessment of prices or volume of imported goods,” and explicitly limits tariffs to importation.

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In some developing members, however, revenue generation may still be an important

function of tariffs.
Tariffs are also a policy tool used to protect domestic industries by changing the
competitive conditions, placing otherwise competitive imports at a commercial
disadvantage. In fact, a cursory examination of the tariff rates employed by different
members suggests that they reflect, to a considerable extent, the state of competitiveness
of domestic industries. In some cases, “tariff quotas” are used to strike a balance
between market access and protecting the domestic industry. Tariff quotas work by
assigning low or no duties (in-quota duties) to imports up to a certain volume and then
higher rates (out-of-quota duties) are applied to imports that exceed the initial volume.
Although the WTO generally bans the use of quantitative restrictions as a means
3
of protecting domestic industries, it permits the use of tariffs for this purpose. The
reason for this is due to an understanding that tariffs are more favourable methods to
protect domestic industries than quantitative restrictions. (See “3. Economic Aspects
and Significance” below.)
Tariffs as sanctions may be used to remedy trade distortions resulting from
practices of companies or members found to injure the domestic industry. For example,
the Antidumping Agreement allows members to use “antidumping duties” to remedy
proven cases of injurious dumping; similarly, the Subsidies Agreement allows members
to impose countervailing duties when an exporting member provides its manufacturers
with subsidies that, while not specifically banned, nonetheless injure the domestic
industry of an importing member. (See Chapters 5 and 6 for further discussion.)

Tariff Rates
Obviously, one of the most important components of a tariff measure is the rate of
the tariff. As noted in the tariff function discussion, above, additional tariffs can reduce
the welfare of the world economy as a whole. Since 1947, the GATT has been the
standard bearer in an on-going process of reducing tariff levels. During tariff
negotiations (known as “rounds”, including the “Uruguay Round”, which finished in
1994), members set ceilings on their tariff rates for individual products and/or sectors.
This is known as the “bound rate” and refers to the highest allowable rate a member may
impose on imports of a specific product; the rate that is actually applied is referred to as
the “applied rate.” The GATT has been successful in encouraging mutual reduction of
these rates.
The Uruguay Round resulted in a final average bound rate for industrial goods
(weighted average by trade volume) of 1.5 percent for Japan, 3.6 percent for the United
States, 3.6 percent for the EU, and 4.8 percent for Canada. Japanese tariff rates are

3
GATT Article XI prescribes that “No prohibitions or restrictions other than duties, taxes or other
charges . . . shall be instituted or maintained by any Member”. Article XI, therefore, clearly bans
quantitative restrictions while leaving the door open for tariffs.

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therefore comparatively low. In addition, since the conclusion of the Uruguay Round,
there have been further efforts to reduce tariffs in specific sectors i.e., Information
Technology Agreement (ITA) and Duty-Free Treatment for Specified Pharmaceuticals.
Figure 4-1, below, provides a detailed comparison of average bound rates under the
Uruguay Round for major trading partners.
On the other hand, there are some items in the agricultural sector, for example,
the tariffs of which are maintained so high that they are called “tariff peaks”; examples
include peanuts in the United States, bananas in the EU, butter in Canada and manioc in
Republic of Korea.

Figure 4-1
Changes of Average Bound Tariff Rates (Non-agricultural Products)

Rep. of
Japan US EU Australia Indonesia Thailand Canada Malaysia Philippines India
Korea

Average Pre
3.8 5.4 5.7 18.0 20.0 20.4 37.3 9.0 10.2 23.9 72.2
Bound UR

Tariff Post
1.5 3.5 3.6 8.3 12.2 36.9 28.0 4.8 9.1 24.6 32.4
Rate (%) UR

Pre
98 99 100 24 36 30 12 100 2 9 12
Binding UR
ratio Post
100 100 100 89 96 92 70 100 79 66 68
(%) UR

Notes:
1. Japanese figures are based on Ministry of Economy, Trade and Industry calculations (excluding
petroleum and forestry and fishery products). Average bound tariff rates for industrial sectors
including forestry and fishery products are 1.7 percent.
2. GATT Secretariat calculations (excluding petroleum) are used for other members.
3. Average bound tariff rates are based on a trade-weighted average. The average bound tariff rate
is calculated as the sum over each tariff line of import value multiplied by the bound rate,
divided by the total import value of bound tariff lines multiplied by 100.
4. Scope of bindings rates is the trade-weighted average. Binding ratio equals total import value
of bound tariff line divided by total import value.
5. “Pre UR” and “Post UR” refer to tariffs before and after implementation of Uruguay Round
commitments.

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Figure 4-2
Tariff rates of major Members
Simple average bound Simple average
Names of Binding ratio (%)
rate (%) applied rate (%)
countries and Non- All Non- All Non- All
regions agricultural products agricultural products agricultural products
products products products
Hong Kong 0.0 0.0 0.0 0.0 37.3 45.6
Japan 2.5 5.1 2.5 4.9 99.6 99.7
USA 3.3 3.5 3.3 3.5 100.0 100.0
EU 3.9 5.2 4.0 5.3 100.0 100.0
Chinese, Taipei 4.7 6.4 4.5 6.1 100.0 100.0
Canada 5.3 6.7 3.5 4.5 99.7 99.7
Singapore 6.4 10.4 0.0 0.0 65.1 69.7
China 9.2 10.0 8.7 9.6 100.0 100.0
Korea 10.2 16.6 6.6 12.1 93.8 94.6
New Zealand 10.8 10.1 2.2 2.1 100.0 100.0
Australia 11.0 10.0 3.8 3.5 96.7 97.1
Malaysia 14.9 24.0 7.6 8.4 81.9 84.3
South Africa 15.8 19.0 7.5 7.7 95.8 96.4
Philippines 23.4 25.7 5.8 6.3 61.9 67.0
Chile 25.0 25.1 6.0 6.0 100.0 100.0
Thailand 25.5 28.2 8.0 9.9 71.2 75.0
Brazil 30.7 31.4 14.1 13.6 100.0 100.0
Argentine 31.8 31.9 13.0 12.6 100.0 100.0
Bangladesh 34.4 169.2 14.3 14.7 2.6 15.5
India 34.4 48.5 10.1 12.9 69.8 73.8
Mexico 34.9 36.1 9.9 11.5 100.0 100.0
Jamaica 42.4 49.6 5.9 7.5 100.0 100.0
Kenya 55.1 95.4 11.5 12.6 1.8 14.8
Lesotho 60.0 78.4 7.5 7.7 100.0 100.0
Barbados 73.0 78.1 0.0 0.0 97.5 97.8

Source: World Tariff Profiles 2010

Note: 1. Figures are defined at the tariff line level.
2. Non-agricultural products are products other than those subject to the Agreement on
Agriculture and include forest and fishery products.
The simple average applied rate of some countries exceeds the simple average bound
rate because the number of items used to calculate the simple average applied rate and the
simple average bound rate are different. The figures do not necessarily indicate that the
countries actually apply tariffs that exceed the bound rates.

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Figure 4- 3
Final bound rate of non-agricultural products
(simple average)
40

Simple Average Bound Rates [%] 34.4 34.9

31.8
30.7
30
25.0 25.5
23.4

20

14.9 15.8

11.0
10.2 10.8
10 9.2
6.4
4.7 5.3
3.3 3.9
2.5
0.0
0
Hong Kong, China Taipei, Chinese
China Malaysia Chile India
Japan Canada South Africa Brazil
New Zealand
United States Singapore Australia Philippines Thailand Argentina Mexico
Korea, Republic of
European Communities

Countries/Regions
Simple Average Bound Rate [%]

Prepared by the Ministry of Economy, Trade and Industry based on the data of World Tariff
Profiles 2010

Tariff Classification
Like tariff rates, tariff classification represents a basic component of the tariff
system. The tariff schedule, which is the standard of each member’s tariff system,
consists of the tariff classification numbers assigned to each product and the tariff rates
applicable to each of those products. The fair administration of this process is critical
for proper application of tariff rates. For example, by intentionally classifying a certain
product under a classification number with a higher tariff rate, tariff reduction
negotiations become practically ineffective. Therefore, tariff classification is extremely
significant for administering tariffs.
The GATT contains no rules regarding tariff classification. In the past, members
maintained their own systems. As trade expanded, however, members recognized the
need for a more uniform classification system, which resulted in the “Harmonized
Commodity Description and Coding System” or “HS” system under the auspices of the
Customs Co-operation Council (CCC; now known as the “World Customs
Organization” or “WCO”). The HS was implemented on January 1, 1988, by the
international HS Convention. The HS is maintained by the WCO Harmonized System
Committee which consists of the signatories to the HS Convention. Members of the HS

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Convention must harmonize the lists of items included in their tariff and statistical
tables with the list of items found in the annex to the Convention (the HS item list uses
a minimum 6 digits). The tariff schedules and the export/import statistical tables
attached to Japan’s Customs Tariff Law and Temporary Tariff Measures Law conform to
the Harmonized System.
Some 138 members and regions around the world, including Japan, the United
States, and the EU are Contracting Parties to the Convention; many other members
follow the Convention even though they are not Contracting Parties. In all, about 204
members and regions employ HS tables in their tariffs using the 6-digit HS codes,
providing uniform tariff classification for the majority of countries around the world (as
of February 2011) .
Although the HS nomenclature is created to reflect the current state of
international trade, technological advances continue to bring out new products and
change the nature of international trade. The Harmonized System has been revised four
times since 1988 (in 1992, 1996, 2002 and 2007) to accommodate these changes. In
June 2004, parties to the General Meeting of the WCO agreed to add and modify some
categories as part of the 2007 HS nomenclature revision, which includes, inter alia, IT-
related equipment where drastic technological innovations continue. (The new HS
nomenclature took effect in January 2007.)

Customs Valuation
The final component of tariffs is the valuation of goods for tariff purposes. If
members assign arbitrary values for tariff purposes, they render tariff rates meaningless.
GATT Article VII and the “Agreement on Implementation of Article VII” (Customs
4
Valuation Agreement) define international rules for valuation.

2. LEGAL FRAMEWORK
The WTO bans, in principle, all quantitative restrictions, but allows the imposition
of tariffs. It then attempts to reduce the barrier posed by tariffs in “tariff negotiations”
among Members, whereby they agree to “bind” themselves to maximum rates inscribed
in their tariff schedules (“bound rates”) for individual items (generally following the
tariff classification nomenclature) and negotiate their progressive reduction.

4
The Customs Valuation Agreement states that, “the primary basis for customs value under this
Agreement is ‘transaction value’ as defined in Article 1…together with Article 8…adjustments.” This is
an explicit affirmation that the price actually paid is to be used as the basis for customs valuation. Article
2 of the Agreement provides for the transaction prices of similar goods to be used in exceptional cases. In
addition, Article 7 of the Agreement bans certain determinations of customs value (e.g., the selling prices
in the member of importation of goods produced in such member and minimum customs values).

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GATT Disciplines
GATT Article II obligates members to apply tariff rates that are no higher than
their bound rates. GATT Article XXVIII specifies that when Members wish to raise
their bound rates or to withdraw tariff concessions, they must negotiate and reach
agreements with the Members with whom they had initially negotiated. In addition,
they must enter into consultations with major supplying members that have a substantial
interest in any change in the bound rate.

Disciplines on Tariff Classification

Article 3.1 of the International Convention on the HS stipulates that the
signatories “shall not modify the scope of the sections, chapters, headings, or
subheadings of the Harmonized System.” This language ensures uniform administration
of the HS. However, the HS Committee regularly reviews classifications in order to
keep pace with technological development. The principle is that revisions of
classification should not affect tariff bindings.. If the classification of a good changes in
such a way as to raise its bound rate, members must enter into negotiations under the
terms of GATT Article XXVIII.

The Importance of “Binding”

It should be obvious from the discussion so far that WTO rules do not prohibit
Members from setting high bound rates or not agreeing to be bound at all. The WTO
rules therefore allow Members to raise their applied tariff rates within the scope of their
bound rates and to raise tariff rates at will for unbound items. However, even if the
rules allow such measures, sudden hikes in tariffs will undoubtedly and inevitably cause
adverse effects on trade.
Moreover, non-binding tariff rates are also contrary to the spirit of the WTO,
which is based on the idea of using “binding” to reduce tariffs. Thus, the importance of
binding cannot be overemphasized. As a result of the Uruguay Round, binding coverage
(total number of bound tariff products / total number of products _~100) of Japan, the
United States, the EU, and Canada is now about 100 percent. The percentage of other
members and regions is somewhat lower, and in some cases substantially lower. For
example: the Republic of Korea (94 percent), Indonesia (95percent), Thailand (71
percent), Malaysia (82 percent), Singapore (65 percent), and Hong Kong, China (37
percent). 5
When making concessions, Members should coordinate bound tariff rates and
applied tariff rates wherever possible in order to improve predictability. The general
practice among developing members, however, is to maintain a large disparity between
bound and applied tariff rates. This practice allows a member to raise tariff rates at will
up to the level of the bound rates. In terms of predictability, this poses a problem. The

5 Source : World Tariff Profiles 2010

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practice of binding tariff rates at such higher levels over the applied tariff rates must be
corrected. Developed members seldom engage in this practice.

3. ECONOMIC ASPECTS AND SIGNIFICANCE

This section analyses some of the basic economic issues associated with tariffs.
Specifically, it examines why tariffs are preferable to quantitative restrictions and why it
is desirable that they be reduced. This section then considers the importance of
international tariff-reduction negotiations under the WTO.

The Effect of Tariffs

The most basic effect of an import tariff is to raise domestic prices in the country
imposing the tariff. In “small countries” (defined for our purposes as members that do
not have an influence on world prices), the rise in domestic prices is equivalent to the
amount of the tariff. In “large countries” (those that have an impact on world prices),
the price increase is somewhat less than the amount of the tariff because the tariff will
reduce demand, which reduces world prices.
The rise in domestic prices of the imported goods expands domestic production
while at the same time, decreasing demand. Tariffs benefit competing domestic
producers, but harm consumers. Obviously, the importing Member also generates tax
revenues from the tariff.
Tariffs have different benefits and costs to different groups within an economy;
the relative sizes of these benefits and costs create changes in the economic welfare of
the importing Member as a whole. For “small members” with no influence on world
prices, the imposition of a tariff necessarily reduces economic welfare, while for “large
members” a tariff can improve economic welfare because world prices are depressed,
improving the terms of trade. If tariffs are sufficiently low, the improvement in terms of
trade will always be greater than the costs of the tariff; there exists in theory an “optimal
tariff” that will maximize economic welfare. However, an improvement in one
Member’s terms of trade corresponds to a deterioration in the terms of trade of other
Members and, therefore, a reduction in the economic welfare of trading partners. This
may cause frustration among the trading partners.
When goods are produced using imported raw materials, the tariff rate on the
finished goods by itself does not generally constitute the level of protection that the
finished goods enjoy. Tariffs on the raw materials must also be considered in terms of
overall trade. If the tariff on the raw materials is lower than the tariff on the finished
product, the level of protection afforded the finished product is higher than the tariff rate
on the finished product would suggest (protection rates that take account of tariffs on
raw materials are called “effective protection rates”). It should be underscored,
therefore, that even low tariff rates can provide full-fledged protection for domestic
industries.

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The Effect of Quantitative Restrictions

Quantitative restrictions take many forms, the most common being import
quotas. Theoretically, the effect of quantitative restrictions is the same as that of import
tariffs, i.e., a reduction of the amount of goods imported and higher domestic prices for
those goods (the “equivalence theorem”).
Quotas differ from tariffs because the importing Member’s government gains no
revenue from quotas while the importers to whom the licenses are allocated obtain
excessive profits (“rents”). (However, the importing Member government could obtain
the same revenues as from tariffs if licenses were sold to importers by auction.)
It is generally understood that the “equivalence theorem” does not hold when the
domestic market is not under perfect competition (e.g., in the case of a monopoly), when
the market is growing, or when there are changes in the price of the merchandise. In
these cases, quantitative restrictions will usually have a more restrictive effect on the
market than will tariffs.

Why Tariffs are Preferable to Quantitative Restrictions

As we have noted, the WTO Agreement generally bans all quantitative
restrictions, but permits tariffs to be used to protect domestic industries. There are
several reasons for this. Quantitative restrictions tend to lack transparency in their
application (for example, decisions on license awards and their quantities may be
arbitrary) compared to tariffs. Similarly, quantitative restrictions impose flat restrictions
on imports regardless of changes in world prices and foreign-exchange rates. There is
also no guarantee that import quota allocation will be fair. Finally, where tariffs are
used, exporters can export by improving their efficiency.

Justifications for Tariff Reductions

The WTO Agreement permits tariffs as a means of industrial protection (unlike
quantitative restrictions, which are generally banned), but also seeks to gradually reduce
those tariffs through negotiations among members.
Reducing tariffs mitigates the “loss of efficiency” generated by the distortions to
the price system that the tariff causes (the “dead weight loss”). Reducing the degree of
market protection also expands the market, allowing producers and exporting members
to enjoy economies of scale, bringing benefits to the economy as a whole.
There are also arguments against reducing tariffs. Tariffs have certain benefits
because they improve the terms of trade for “large countries” (the “optimal tariffs”
argument). Similarly, when there are domestic market failures, tariffs might be seen as a
means of increasing welfare.
However, these arguments are not necessarily convincing. Any increase in
welfare through an “optimal tariff” is achieved at the expense of trading partners and
reduces worldwide economic welfare relative to potential results in a free trade context.

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Even the economic welfare of the Member imposing the tariff is uncertain because
retaliatory measures imposed by trading partners may ultimately result in reduced
economic welfare. Thus, domestic market failures would be better addressed directly of
domestic measures than through border measures such as tariffs.

Income Redistribution and the Importance of International Negotiations

From an economic standpoint, it would seem reasonable to conclude that tariff
reductions are basically beneficial because they increase economic efficiency and are
therefore indisputably desirable. It is rare, however, for Members to eliminate their
tariffs completely. In practice, Members often impose tariffs not to increase overall
welfare, but to redistribute income. This is a reflection of political will, as influenced by
the lobbying activities of interest groups and others.
When tariffs are imposed for politically motivated reasons, it is difficult to
achieve voluntary reductions merely because they will increase the economic welfare of
the society as a whole. This domestic political reality is what makes international
negotiations to reduce tariffs — the basic strategy of the WTO — so important. When
international negotiations are conditional upon mutual benefits, governments are more
likely to consent to tariff reductions and trade liberalization.

4. PREFERENTIAL TREATMENT FOR LDCS

History
During the Lyon Summit of June 1996, Renato Ruggiero, then Director-General
of the WTO, advocated a tariff waiver program for least-developed members (LDCs).
Subsequent Summits have also advanced declarations calling for studies on ways to
improve LDCs' access to markets.
It was against this background that an initiative to provide duty-free and quota-
free treatment to essentially all products from LDCs, was proposed during the third
WTO Ministerial Conference in December 1999 in Seattle. Unfortunately, an
agreement could not be reached at that time.
In February 2000, Director-General Mike Moore again proposed this initiative as
a confidence-building measure for developing members in preparation for the launch of
the new round of negotiations. At a United Nations Conference on Trade and
Development (UNCTAD) meeting in February 2000, then Japanese Prime Minister
Keizo Obuchi declared his intention to promote the LDCs initiative and encourage the
participation of other major members. By the end of March of that year, Japan, the EU,
the United States and Canada reached an agreement that developed Members would
provide least-developed Members with enhanced market access by according and
implementing duty-free and quota-free treatment consistent with domestic requirements
and international agreements for all essentially products originating in LDCs.

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After this agreement, the initiative was formally announced by Director-General

Moore at the WTO General Council in May 2000. At that time, Chile, the Czech
Republic, Hungary, Iceland, the Republic of Korea, New Zealand, Norway, Slovenia and
Switzerland expressed their intention to join.
The Chairman’s statement in June 2000 APEC Ministerial Meeting also urged
the participation of more APEC member economies in this LDC initiative. It was since
then confirmed that Hong Kong, Australia and Singapore would join.
In May 2001, the Brussels Declaration issued by the Third United Nations
Conference on LDCs noted that UN members “aim at improving preferential market
access for LDCs by working towards the objective of duty-free and quota-free market
access for all LDCs’ products in the markets of developed members.” A Programme of
Action for LDCs was also adopted. The same course was reaffirmed in the G8
Communiqué issued by the Genoa Summit in July and in the 2001 Doha WTO
Ministerial Declaration. The Brussels Declaration was also reaffirmed in: (i) the G8
Africa Action Plan adopted at the Kananaskis Summit held in Canada at the end of June
2002; (ii) the Plan of Implementation adopted at the WSSD (World Summit on the
Sustainable Development) in South Africa at the end of August 2002; (iii) the
Cooperative G8 Action on Trade committed at the Evian Summit in France in June
2003; and (iv) the G8 Official Document on Trade committed at the Gleneagles Summit
in UK in July 2005.
In Japan, the Council on Customs, Tariff Foreign Exchange and Other
Transactions submitted a recommendation in December 2002 on the revision of customs
duties for Fiscal Year 2003. For the GSP scheme (Generalized System of Preferences),
in particular, Japan recognizes the discussions in the UN LDC Conference and in
various summits and has substantially expanded duty-free treatment of agricultural
products for LDCs (adding 198 agricultural items to the duty-free and quota-free list).
Industrial products are already virtually 100 percent duty-free and quota-free for LDCs.
With respect to agricultural products, Japan provides duty-free and quota-free access for
93 percent of imports (by value) from LDCs.
In December 2005 the Council on Customs, Tariff and Foreign Exchange and
Other Transactions submitted a recommendation that East Timor, Djibouti, and
Comoros be added to Japan’s LDC preference system after Fiscal Year 2006.
Before the WTO Ministerial Conference in Hong Kong, Japanese Prime Minister
Junichiro Koizumi introduced “Japan's Development Initiative” which included duty-
free and quota-free market access for essentially all products from all LDCs, as well as
certain capacity building initiatives.
The Hong Kong Ministerial Declaration provides that developed Members shall
provide duty-free and quota-free market access on a lasting basis for all products
originating from least developed countries. In addition, Members reached an agreement
with respect to raw cotton and other S&D measures for LDCs. Accordingly, Japan
believes that the WTO Hong Kong Ministerial Conference achieved success in
advancing meaningful results for developing countries.

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In December 2006 the Council on Customs, Tariffs and Foreign Exchange and
Other Transactions issued a recommendation for the expansion of duty-free and quota-
free market access treatment for LDCs, as called for by the WTO Hong Kong
Ministerial Declaration for the further support of LDCs. Based on this recommendation,
the ratio of LDCs’ products treated as duty-free and quota-free increased to approx. 98%
from approx. 86% at number of products base since April 2007.

Column: Information Technology Agreement

History
The Information Technology Agreement (ITA) was concluded at the Singapore
Ministerial Conference in December 1996. At the conference, 29 countries and regions
agreed to eliminate tariffs on information technology (IT) products by the year 2000.

Summary and Overview of the ITA

• Current participants: 75 members and regions (see table below). These
members account for more than 97% of world trade in IT products; however,
major Latin American members such as Mexico and Brazil have not
participated (as of February 2011)
• Covered products: Semi-conductors, computers, communication equipment,
semi-conductor manufacturing equipment, etc.
• Tariff elimination schedule: Members were to eliminate tariffs beginning in
1997 and phase them out by 2000. (Japan also eliminated tariffs on
communication wires and Gallium-Arsenic wafers.) Developing members
were allowed to phase out tariffs on certain products by 2005. And new
participants on ITA were allowed to phase out tariffs in a certain period.
Example: Chinese Taipei (elimination by 2002), Korea (2004), Indonesia
(2005), Malaysia (2005), Thailand (2005), Philippines (2005), India (2005),
China (2005), Saudi Arabia (2008), UAE (2009) Viet Nam (2014) and
Peru(2013).
• Current issues being considered include addressing non-tariff measures,
adjusting divergences in customs classifications and transposition of covered
items to HS2002 and HS2007. Issues affecting individual items are also
becoming more prominent (see “Part I”).

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Part II Chapter 4 Tariffs
(72 in total; the EU represents 27 countries.)

Albania Guatemala Macao, China Saudi Arabia

Australia Honduras Malaysia Separate Customs Territory
Bahrain Hong Kong, China Mauritius of Taiwan, Penghu, Kinmen,
Canada Iceland Moldova and Matsu
China India Morocco Singapore
Costa Rica Indonesia New Zealand Switzerland
Croatia Israel Nicaragua Thailand
Dominican Republic Japan Norway Turkey
Egypt Jordan Oman Ukraine
El Salvador Korea Panama United Arab Emirates
European Union (EU) Kuwait Peru United Stated

Georgia Kyrgyz Republic Philippines Vietnam

Main Agenda
(1) Non tariff measures (NTM)
• A work program for examining NTM was proposed at the ITA committee
and EMC/EMI regulation (EMC: electromagnetic compatibility; EMI:
electromagnetic interference) was discussed as a pilot project.
Note: Discussions are not aimed at establishing a binding rule.
• At the ITA committee held in May 2005, guidelines for EMC/EMI
conformity assessment procedures for adopting self declaration were
formulated. In order to promote transparency the Secretariat produced a list
in March 2006 identifying by type the conformity assessment procedures
adopted by individual countries. Individual countries are being asked to
provide information on their conformity assessment procedures.

(2) Conforming the List of Covered Items to HS2002 and HS2007

The list of ITA covered products has not been revised since it went into effect in
December 1996. As such, clarity of coverage is being reduced due to remarkable
technological developments in the 10 years since the establishment of ITA, and
subsequent revisions to HS classifications (HS2002 and HS2007, following HS96).

It is necessary to maintain the clarity of items covered by ITA in order to ensure its
effectiveness. This is why it is desirable to base the list on the latest HS classifications.
In November 2006, Japan proposed to work technically for updating and clarifying the
list of covered products. Following the proposal, in March 2007, the WTO Secretariat
submitted to the ITA Committee a Technical Note, "HS 2007 Amendments in Relation
to ITA products and a model list in HS 2007". Since the formal meeting in November
2007, the ITA committee continues to discuss based on this.

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(3) Adjusting Divergences in Customs Classifications

The treatment of the items that are in Attachment B and those stipulated as “for
Attachment B” in the “Comments” column of Attachment A, Section 2 of the 1996 ITA
Ministerial Declaration is not correlated to the customs classification numbers of
covered items, and customs classification varies by country. Customs officials have met
since 1998 to develop a list of appropriate tariff codes for each item.

Consequently, in February 2005 customs classifications for 27 items, including

CD drives for computer systems, were developed and approved from the 55 items that
were discussed in the December 2004 meeting. Currently, there are 20 items under
discussion by the ITA Committee and debates are ongoing based on the opinions
presented by various countries.
Note: The items covered by ITA are listed in Attachment A (covered items are on
the list of items designated by HS96) and Attachment B (a list of items covered
regardless of classification).

Negotiation on expanding product coverage

A negotiating session for expanding product coverage was held prior to the
December 1999 WTO Ministerial Meeting in Seattle, but failed to reach agreement over
what items should be covered.
Note: Japan and other countries supported the November 1998 proposals for
product coverage, but Malaysia opposed the proposals because home electrical
appliances were not included in the list. India also voiced objections, claiming that
some items threatened its national security. Due to the disagreement among the
participants, the Meeting failed to reach a consensus.
In September 2008 EU suggested that expand proposals for products, but they
didn’t

Doha Development Agenda

Japan is seeking, in cooperation with other interested Members, comprehensive
elimination of tariffs on electronics and electrical products, such as digital home
electronic appliances, via the Doha Development Agenda negotiations on market access
for non-agricultural products.

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