The Administration of the Vocabulary of International Trade: The Adaptation of WTO Schedules to Changes in the Harmonized System

German Law Journal

Volumn 9, Issue 11, 2008, Pages 1481-1511

  Feichtner, Isabel ^a  

^a NONE

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EID: 77952621005     PISSN: None     EISSN: 20718322     Source Type: Journal    
DOI: 10.1017/S2071832200000559     Document Type: Article

References (136)

1. To be sure, even when the HS is used, classification of products will frequently be contentious. For example, the dispute between the European Communities on one side and Brazil and Thailand on the other concerning the classification of salted frozen boneless chicken cuts. See EC – Chicken Classification, WT/DS269, 286/R (panel report), WT/DS269, 286/AB/R (Appellate Body Report).
2. The metaphor of the HS as a vocabulary therefore seems more fitting than that of the HS as the language of international trade which is often used. For example, the WCO referring to the HS as a universal economic language. See http://www.wcoomd.org/home_wco_topics_hsoverviewboxes_overview_hsharmonizedsystem.htm; PETROS C. MAVROIDIS, TRADE IN GOODS. THE GATT AND THE OTHER AGREEMENTS REGULATING TRADE IN GOODS 73 (2007) (depicting the HS as supplying the common language to describe goods).
3. In the following when I speak of schedules of concessions I mean schedules of concessions with respect to goods which are annexed to the General Agreement on Tariffs and Trade (GATT) and according to Art. II:7 GATT form an integral part of the GATT.
4. For a study that aims at a conceptualization of horizontal cross-linkages, see Kal Raustiala & David G. Victor, The Regime Complex for Plant Genetic Resources, 58 INTERNATIONAL ORGANIZATION 277-309 (2004). Cross-linkages between international dispute settlement organs are relatively well-studied and there have been several attempts to conceptualize them in legal terms. See e.g. JASPER FINKE, DIE PARALLELITÄT INTERNATIONALER STREITBEILEGUNGSMECHANISMEN. UNTERSUCHUNG DER AUS DER STÄRKUNG DER INTERNATIONALEN GERICHTSBARKEIT RESULTIERENDEN KONFLIKTE (2004); HEIKO SAUER, JURISDIKTIONSKONFLIKTE IN MEHREBENENSYSTEMEN (2008).
5. Moreover institutional linkage seems to be a more plausible and also a more desirable solution to the perceived dangers of fragmentation than, for example, a hierarchy of norms which does not leave room for politics. For an approach that stresses inter-institutional cooperation, see Gunther Teubner & Andreas Fischer-Lescano, Regime Collisions: The Vain Search for Legal Unity in the Fragmentation of Global Law, 25 MICHIGAN JOURNAL OF INTERNATIONAL LAW 999-1046 (2004).
6. This could provide a principled answer to the question whether in the EC – Chicken Classification the WTO panel or rather the HS Committee of the WCO should have decided the classification question. See (note 1).
7. This could also be characterized as the exercise of public authority. See Armin von Bogdandy, Philipp Dann and Matthias Goldmann, Developing the Publicness of Public International law: Towards a Legal Framework for Global Governance Activities, in this issue (employing a wide definition). Administration as used and defined here, however, is a narrower term since it does not encompass acts taken by the highest political organs that are preceded by processes of inter-state diplomatic bargaining.
8. For example the recent draft guidelines to further the practical implementation of Art. 6 of the SPS which explicitly provide that they shall “not add to nor detract from the existing rights and obligations of Members under […] any […] WTO Agreement” G/SPS/W/218, para. 2 (25 February 2008); on the activities of the FTSC see Joseph Windsor, in this issue.
9. In the form of workshops organized by the secretariat for national administrators.
10. For other works which stress the role of secretariat or chairpersons, see Joseph H.H. Weiler, The Rule of Lawyers and the Ethos of Diplomats, 35 JOURNAL OF WORLD TRADE 191 (2001). On the secretariat’s role in dispute settlement, see Gregory Shaffer, The Role of the Director-General and Secretariat: Chapter IX of the Sutherland Report, 4 WORLD TRADE REVIEW 429 (2005); John S. Odell, Chairing a WTO Negotiation, 8 JOURNAL OF INTERNATIONAL ECONOMIC LAW 425 (2005).
11. On the different ways of modification and development of law under the GATT 1947 and the important role of institutional practices in this respect, see WOLFGANG BENEDEK, DIE RECHTSORDNUNG DES GATT AUS VÖLKERRECHTLICHER SICHT 115-130 (1990).
12. Art. 1(a) International Convention on the Harmonized Commodity Description and Coding System (HS Convention). The convention and nomenclature can be found on the WCO’s website, at: http://www.wcoomd.org/home_wco_topics_hsoverviewboxes.htm.
13. The classification under the residual position “Other” results from the fact that the only other subposition is titled “Chewing gum, whether or not sugar-coated.”
14. The Brussels Convention had replaced the so-called Geneva Nomenclature of 1937.
15. If a country wants to impose a specific customs duty on white chocolate, which according to the HS falls under the residual position “Other,” it needs to create a further (seventh) level of differentiation in order to separate white chocolate from the other products falling under this residual position.
16. The Combined nomenclature (a tariff and statistics nomenclature) of the European Community is established by Regulation 2658/87.
17. See http://www.wcoomd.org/home_wco_topics_hsoverviewboxes_hsharmonizedsystem.htm. WCO Members are not obliged to become parties to the HS Convention and at the same time parties to the Convention do not necessarily have to be Members of the WCO (Art. 11(c) HS Convention).
18. HS Convention preamble, first recital.
19. See http://www.wcoomd.org/home_wco_topics_hsoverviewboxes_hsharmonizedsystem.htm.
20. Monitoring is facilitated when the controlled items can be identified by reference to a HS position.
21. Examples are the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the Basel Convention, The United Nations Food and Agricultural Organization, or the Montreal Protocol. The trade statistical systems of the UN (e.g. the Standard International Trade Classification (SITC) and Central Product Classification (CPC)) are also based on the HS nomenclature.
22. According to the WTO preamble expansion of trade in goods is one of the objectives of the WTO.
23. With respect to rules of origin it is interesting to note that the Technical Committee on Rules of Origin which carries out the main technical work of harmonizing non-preferential rules of origin was established by the WTO and is a WTO body, but operates under the auspices of the WCO with the WCO Council exercising supervision over it (Art. 4:2 Agreement on Rules of Origin).
24. PETER VAN DEN BOSSCHE, THE LAW AND POLICY OF THE WORLD TRADE ORGANIZATION 379 (2005).
25. As of 31 March 2006, 78 WTO Members (counting the EC-25 as one) were contracting parties to the HS Convention, http://www.wto.org/English/thewto_e/coher_e/wto_wco_e.htm.
26. See http://www.wto.org/english/news_e/news07_e/tariff_sept07_e.htm.
27. VAN DEN BOSSCHE (note 24), at 401, 419.
28. WT/L/579, Annex B, paragraph 5. That tariff negotiations are conducted on the basis of the HS does not mean that WTO Members are limited by the product differentiations which the HS provides. They may further differentiate and negotiate tariff cuts with respect to only a subgroup of a product group subsumed under a subposition of the HS.
29. The relevance of the HS for the interpretation of concessions has been confirmed by the Appellate Body in EC—Computer Equipment, WT/DS62, 67, 68/AB/R, para. 89 and EC –Chicken Classification (note 1), para. 199.
30. Appellate Body Report in Japan – Alcoholic Beverages WT/DS 8, 10, 11/AB/R, at 21, 22.
31. The HS Convention recognizes in its preamble the “importance of ensuring that the Harmonized System is kept up to date in the light of changes in technology or in patterns of international trade,” recital 11.
32. In 1988 the WCO Council endorsed a conclusion by the HS Committee to review the HS at regular intervals of 3 to 4 years. So far revisions to the HS have entered into force in 1992, 1996, 2002 and 2007, they are referred to as the HS1992, HS1996, HS2002 and HS 2007 changes.
33. The 2007 HS amendments included changes due to technological progress, changes in trade patterns and amendments for social and environmental reasons. The latter entailed i.a. the inclusion of new subheadings to facilitate the monitoring and control of certain species of fish (FAO), pesticides (Rotterdam Convention) or ozone-depleting substances (Montreal Protocol). The HS 2007 changes further take into account the structure of other international agreements, e.g. the WTO’s Information Technology Agreement See for a summary of the HS2007 amendments the report of the representative of the WCO to the Committee on Market Access at its meeting on 30 March 2005, G/MA/M/39, paras. 4.9-4.19.
34. Proposals by national governments are often prompted by private sector initiatives that are addressed to the customs or trade ministry and are considered by all agencies which have an interest in the matter; as an example of an international institution proposing a HS change, see Decision 13.37 of the Conference of the Parties of CITES according to which the secretariat shall “liaise with the World Customs Organization to promote the establishment and use of specific headings within the standard classifications of the Harmonized System for tortoises and freshwater turtles and for products thereof.”
35. Rule 2(b) Rules of Procedure of the Review Sub-Committee.
36. The amendment proposals are drafted by the HS Working Party.
37. Art. 6 HS Convention and Rule 19 Rules of Procedure of the HS Committee.
38. Members of the Council are the contracting parties to the Convention establishing a Customs Cooperation Council. These are not necessarily also all parties to the HS Convention.
39. Up to the HS96 changes correlation tables were prepared by the CCC Secretariat without involvement of the HS Committee.
40. Explanatory notes, classification opinions and other advice on interpretation is presumed to be accepted by the WCO Council unless a contracting party to the HS Convention requests referral of the matter to the Council within a specified time period (Art. 8:2 HS Convention). Some contracting parties have put the explanatory notes into law, see statement of the representative of the WCO to the Committee on Market Access at its meeting on 30 March 2005 (note 33), para. 4.36.
41. Art. 6:4 HS Convention and Rule 19 Rules of Procedure of the HS Committee.
42. The HS nomenclature constitutes a public good in the economic meaning of the term since it is nonexcludable and its consumption is non-rivalrous.
43. In some countries tax laws make reference to HS classification of products.
44. In EC—Chicken Classification (note 1) the AB upheld the panel’s finding that the products in question are covered by the EC’s tariff commitment of heading 02.10 of its schedule which corresponds to heading 02.10 of the HS nomenclature. The WCO had taken the position that the settlement procedures provided for in the HS Convention should have been followed by the parties to the dispute before the panel took a decision on a violation of WTO law, in this case Art. II GATT (see panel report para. 7.53). Subsequent to the adoption of the AB report, the HS Committee adopted a classification decision with the same result (classification decision No 1, 40th Session, October 2007, available at: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Harmonized%20System/HS_COMM_Classifications_Decisions/CLHS40Eng.pdf. On this dispute and the question where it should have been adjudicated, see Hendrik Horn & Robert L. Howse, European Communities – Customs Classification of Frozen Boneless Chicken Cuts, 7 WORLD TRADE REVIEW 9, 32 et seq. (2008).
45. GATT panel report in Spain – Unroasted Coffee, BISD 28S/102, para 4.4.
46. A Developing Country contracting party may, according to Art. 4(1) HS convention delay the application of all or some subheadings. Only 45 and 58 % of contracting parties were able to implement the first and second set of amendments on time, http://www.wcoomd.org/home_wco_topics_hsoverviewboxes_amendinghs.htm.
47. According to Art. 12 regulation 2658/87 the EU Commission publishes annually the complete version of the combined tariff together with the duty rates in form of a regulation.
48. Concessions which are included in the schedules and which may be affected by adaptation to HS changes are not only tariff concessions. However the impact of HS changes is greatest with respect to tariff concessions which shall be the focus of the following observations.
49. For a more detailed analysis of how the adoption or changes of the HS nomenclature can affect tariff concessions, see Dayong Yu, the Harmonized System – Amendments and their Impact on WTO Members’ Schedules, WTO Staff Working Paper ERSD-2008-02, at 12, 13, available at: http://www.wto.org/english/res_e/reser_e/ersd200802_e.htm; see also WTO Procedures for Introduction of HS2002 Changes to Schedules of Concessions, WT/L/405, Attachment A, at 3, 4.
50. L/5470/Rev. 1, Annex 1, para 4.2.
51. Procedures for Modification and Rectification of Schedules of Tariff Concessions, Decision of 26 March 1980, L/4962, BISD 27S/25.
52. Decision of 10 November 1980, C/113 and Corr. 1, BISD 27S/26.
53. Members which may participate in Art. XXVIII GATT renegotiations are Members which have an initial negotiation right or a principal supplying interest. On principal supplying interest see also the Understanding on the Interpretation of Art. XXVIII of the General Agreement on Tariffs and Trade 1994.
54. BISD S 27, 26.
55. L/5470/ Rev. 1.
56. L/6905 (aimed at the incorporation of HS1992 changes into GATT schedules as well as any future changes and used for the incorporation of HS1992 and HS1996 changes); WT/L/407 and WT/L/605 (for HS2002 changes); WT/L/673 (for HS2007 changes).
57. WT/L/673, para. 17.
58. WT/L/673, para. 4 and Annex 1.
59. WT/L/673, para. 4.
60. WT/L/673, Annex 2, para. 4.
61. Preferably according to the methods set out above to avoid a negative impact on the value of concessions, see WT/L/673, Annex 2, para. 5.
62. L/5470 Rev. 1 Annex 1, para 1.
63. L/5470 Rev. 1 Annex 1, para 1.4.
64. See WT/L/673, preamble, recital 6.
65. Draft files are the electronic files with the transposed parts of the schedule (WT/L/673, Annex 1). For the timelines in the HS2007 procedure, see WT/L/673, paras. 2, 11, 12.
66. This cooperation is implicit in the procedures which foresee that schedule transposition and preparation of concordance tables by the WTO Secretariat shall be based on information provided by the WCO, WT/L/673, para. 7.
67. An attempt to increase efficiency through electronic verification of schedule changes by the secretariat foreseen in the HS 2002 procedures (WT/L/407) failed due to unforeseen difficulties the secretariat encountered with this exercise.
68. WT/L/673, paras. 13-15.
69. Id. at para. 16.
70. L/6905, para. 1; WT/L/673, Annex 2, para. 5.
71. WT/L/673, paras. 13, 14.
72. WT/L/673, para. 15.
73. L/5470, Rev. 1, Annex 1, para. 4.5.
74. WT/L/407, Attachment B, para. 8.
75. WT/L/605, para. 1; WT/L/673, para. 2 (these HS 2007 procedures foresee that developing country Members may opt for preparing their draft files themselves). The secretariat prepares this documentation by incorporating HS changes into the schedules in the Consolidated Tariff Schedules Database, an electronic database which is not legally binding (WT/L/673, preamble, recital 5). Regarding the transposition the secretariat has to follow a methodology laid out in an annex to the procedures, WT/L/673, para. 5 and Annex 2.
76. WT/L/673, paras. 8-12, 16.
77. For the distinction between the form of a legally binding decision and the mandatory nature of its content, see BENEDEK (note 11), at 118.
78. Benedek therefore seems to be mistaken when he groups the Procedures for negotiations under Art. XXVIII (note 52) with rules of procedures of the GATT organs and collectively qualifies them as internal rules. BENEDEK (note 11), at 122.
79. See introductory note to the GATT 1994, para. 1 (the so-called incorporation clause).
80. WT/L/407; WT/L/605; WT/L/673. The legal documents of the GATT 1947 to which the HS procedures are annexed neither refer to a legal basis in the GATT nor are they entitled “decision,” L/5470/Rev.1, L/6905.
81. It is sometimes discussed whether Art. IV:1, cl. 2 WTO Agreement entails a general competence to take legally binding decisions. Pieter J. Kuijper, Some Institutional Issues Presently Before the WTO, in THE POLITICAL ECONOMY OF INTERNATIONAL TRADE LAW 81, 82 (D. L. M. Kennedy & J. D. Southwick eds., 2002). On the broad decision-making power under Art. XXV:1 GATT, see Frieder Roessler, The Competence of GATT, 21 JOURNAL OF WORLD TRADE LAW 73 (1987).
82. Under the GATT 1947 the HS procedures were established by the Committee on Tariff Concessions which had been created in 1980 by the GATT Council; Minutes of the Council meeting on 29 January 1980, C/M/138, at 10.
83. WT/GC/M/1, 11, 12. The terms of reference of the committee are contained in document WT/L/47; the rules of procedure which the committee according to Art. IV:6 WTO Agreement may establish for itself, subject of approval of the Council for Trade in Goods, are based on the rules of procedure for meetings of the General Council and contained in G/L/148. It is interesting to note that it was stated by the chairman at the first committee meeting that until the committee had adopted its rules of procedure, it “would conduct its business on the basis of common sense and GATT practice” (G/MA/M/1, para. 1.1).
84. WT/L/47, para. C.
85. Rule 33 Rules of Procedure of the Committee on Market Access, G/L/148.
86. Rule 33 Rules of Procedure of the Council for Trade in Goods, WT/L/79.
87. Procedures for an Annual Overview of WTO Activities and for Reporting Under the WTO, adopted by the General Council on 15 November 1995, WT/L/105, para. 1.
88. Id. at para. 1.
89. According to the Procedures the Council for Trade in Goods and the General Council “take note of reports.” Id. at para. 4.
90. On customary law under the GATT 1947 and its importance for the evolution of the GATT, see BENEDEK (note 11), at 126-130.
91. The proposal by the Chairman of the Committee on Market Access with respect to the HS2007 procedures, G/MA/M42, para. 4.4.
92. G/MA/M/26, para. 3.1.
93. G/MA/M/38, Add. 1, para. 1.2.
94. While the first 2002 HS procedures and the 2007HS procedures were approved in formal meetings, the second procedures on the transposition of HS 2002 changes were only agreed upon by the committee during an informal meeting, see statement of the chairperson in the minutes of the meeting of 30 March 2005, G/MA/M/38, Add.1, para. 1.2. The first procedures for the introduction of HS2002 changes were approved by the committee ad referendum, G/MA/M/29, para. 2.18.
95. The second HS2002 procedures were directly submitted by the committee to the General Council, G/MA/M/38, Add.1, para. 1.2.
96. With respect to the first GATT HS procedures concerning the adoption by contracting parties of the HS nomenclature, there was some discussion in the Committee on Tariff Concessions on the procedure for adopting the procedures. It was finally proposed by the chairman that the committee adopt the procedures and that they would be transmitted to the Council for approval (TAR/M/10 paras. 3.1 et seq.).
97. The information notes of the GATT Secretariat, TAR/W/22, TAR/W/81, TAR/W/89.
98. G/MA/M/37, paras. 3.2-3.6 and G/MA/M/45, para. 6.4.
99. The chairperson of the committee is appointed for one year after informal consultations among Members on the distribution of chairperson posts for the different WTO organs; on the practice of chairperson appointments see: http://www.wto.org/english/thewto_e/secre_e/current_chairs_e.htm.
100. G/MA/M/37, para. 3.2.
101. See http://www.wto.org/english/thewto_e/igo_obs_e.htm.
102. G/MA/M/39, paras. 4.9-4.19.
103. The HS 2007 procedures have only been adopted by the General Council on 15 December 2006.
104. One example of the crucial role of the chairpersons in the implementation process has been the engagement of one chairman in getting Members to approve their HS2002 schedules after multilateral review. To induce Members to give their approval – which is a prerequisite for the certification of schedules - this chairman wrote letters to and successfully initiated bilateral meetings with the respective delegations, G/MA/M/44, para. 3.1.; G/MA/M/45, paras. 6.5., 6.6.
105. G/MA//TAR/2/Rev. 40 on the submission of HS96 documentation and G/MA/W/23/Rev. 4 on the situation of schedules.
106. G/MA/M/38 Add. 1, para. 1.1.
107. Procedures for Negotiations under Art. XXVIII, BISD 27S/26, 27, para. 4.
108. TAR/W/61.
109. TAR/M/21, para. 2.9.
110. C/M/205, P. 13 (see statements by the US and EC delegates).
111. An initiative by a group of developing countries for a formal amendment extending the 90 days time limit did not achieve consensus. Since there was no consensus in the committee the matter was taken to the Council and the CONTRACTING PARTIES where consensus could also not be reached due to objections by some contracting parties that such an amendment might delay the transposition process too much. The CONTRACTING PARTIES consequently referred the matter back to the Committee on Tariff Concessions for an appropriate solution (SR.42/5, at 5).
112. G/C/M/23, para. 2.5.
113. G/C/M/23, para. 2.9.
114. G/MA/M/14, para. 3.2.
115. G/M/MA/23, para. 2.5.
116. G/M//MA/26, para. 23. Due to capacity problems of the secretariat the informal meetings could not take place as often as intended, see e.g. G/M//MA/34, para. 3.2; G/M//MA/35, para. 2.2.
117. TAR/M/28, para. 2.1 referring to the function of HS waivers under the GATT; on WTO Members’ need for a waiver when they are implementing HS2002 changes domestically, but have not yet completed the procedures to introduce these changes into their schedules, see G/MA/M/31, para. 4.1.
118. WT/L/675.
119. According to footnote 4 to Art. IX:3 WTO Agreement, consensus is required for a decision to waive obligations subject to a transition period or a period for staged implementation.
120. On 15 November 1995 the General Council agreed that decisions concerning waivers and accessions would also be taken in accordance with Art. IX:1 WTO by consensus and that only when consensus could not be arrived at, should voting take place in accordance with the relevant provisions. Decision-Making Procedures under Arts. IX and XII of the WTO Agreement, Statement by the Chairman, as agreed by the General Council on 15 November 1995, WT/L/93. The statement also specifies that a Member may request a vote at the time the decision is taken.
121. The legal requirements that waivers may only be of a limited duration and have to be reviewed annually did not exist under the GATT 1947 and were negotiated during the Uruguay Round.
122. H. G. SCHERMERS & N. M. BLOKKER, INTERNATIONAL INSTITUTIONAL LAW § 811 (3rd revised ed., 1995).
123. A Member may however bring a non-violation complaint against a Member which received a waiver, this possibility is acknowledged in the Understanding.
124. This ability to change legal obligations established by primary law distinguishes waiver decisions from other acts of secondary law which usually establish a level of law beneath primary law and thus a hierarchy of norms. Due to these characteristics Benedek characterized the granting of waivers under GATT 1947 as a special form of lawmaking by secondary law (“sekundärrechtliche Rechtsfortbildung”) note 11, 141.
125. Of the 35 waiver decisions (including extension decisions) taken in 2001, 23 were HS waiver decisions; for the waivers granted in 2001 see Note by the WTO Secretariat, Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Information on Waivers, IP/C/W/387, at 13.
126. For the collective waivers granted by the General Council for the HS1996, HS2002 and HS2007 transposition exercises see G/MA/W/23/Rev. 4.
127. G/MA/M/6, para 2.1.9 (statement by the Swiss representative).
128. The first collective HS waiver concerning the transposition of HS2007 changes was drafted together with the HS2007 procedures by the Market Access Division with the help of the Legal Affairs Division, the draft waiver is contained in G/MA/W/82.
129. G/MA/M/42, para. 3.11.
130. The decision of 15 June 1999 extended the HS96 collective waiver and was granted with retroactive effect to 30 April 1999, WT/L/303, footnote 1.
131. WT/L/675, para. b(iii).
132. The latest report of 6 May 2008 is contained in G/MA/198.
133. Proposal by Sweden, TAR/W/88 (23 September 1993).
134. This proposal was based on proposals submitted by delegations; for the chairman’s proposal see TAR/M/36, Annex, at 3.
135. Developing country Members are further disadvantaged with respect to the renegotiation of concessions due to the transaction costs incurred in such renegotiations and their limited bargaining power.
136. The so-called TRIPS waiver (WT/L/540) was granted to facilitate the importation by Members of generic drugs in case of public health crises, or the Kimberley waiver (WT/L/518) which was granted to legalize trade restrictions implementing the Kimberley Process Certification Scheme to combat trade in so-called blood diamonds.