UNIVERSITY OF ECONOMICS & LAW

HO CHI MINH CITY CAMPUS

_______________

ASSIGNMENT 2
MODULE: INTERNATIONAL TRADE LAW (231LU0205)
Lecturers: PhD Dao Gia Phuc

GROUP MELON - CLASS: K21408CA

Group of authors Student ID

Nguyễn Đặng Khánh Linh K214081857

Võ Ngọc Anh K214080590

Phạm Như Mẫn Khương K214081854

HCMC, 22th Dec 2023

ISSUE 1.
Issue: Can Utopia’s Customs Department apply a 15% ad valorem customs duty $3 import surcharge
and a special customs-handling fee of 2% ad valorem on Carlie, based on the sales price in Richland?

Determinations that need to be identified to answer this issue include:

1.1. Is Utopia’s Customs Department right when classifying Carlie as a toy according to Rule 3(a) of
the GRI?

1.2. Did Utopia’s Customs Department’s determination of custom duty based on Richland’s sales
price of the national market violate Article VII: 2(a) of the GATT 1994 and Article 1.1 of the
Customs Valuation Agreement?

1.3. Is Utopia’s Customs Department right when identifying Richland as the country of origin for
Carlie?

1.4. Did Utopia’s Customs Department violate Article II:1(b) of the GATT 1994 when applying the
15% ad valorem customs duty $3 import surcharge and a special customs-handling fee of 2% ad
valorem, on Carlie?

Rule:

1.1. Rule 3(a) of the GRI executes standards for classifying goods like Carlie: Does the HS Code for
Toys provide sufficiently specific details about Carlie?

1.2. To comply with Article VII: 2(a) of the GATT 1994 and Article 1.1 of the Customs Valuation
Agreement, these questions must be satisfied:

a. Did Utopia’s Customs Department rely on the actual value of imported merchandise,
excluding national origin or arbitrary values, as the basis for customs value?

b. Did Utopia’s Customs Department consider the transaction value as the customs value for
imported goods?

1.3. To comply with Articles 8 and 9 of Decree No. 31/2018/ND-CP: Is Richland where the final key
transformation of the goods happens, and does its assembly and packaging factor into the origin
determination?

1.4. To comply with Article II of the GATT 1994, the question must be satisfied: Did Utopica's Act
imposing a customs duty of 15% ad valorem $3 import surcharge on each doll and a custom-handling
fee of 2% ad valorem surpass tariff limits committed in Utopia’s Tariff Schedule?

Application:

1.1. Does the HS Code for Toys provide sufficiently specific details about Carlie?

Yes. Chapter 95, specifically HS Code 9503.00.21, categorizes 'Dolls, with or without outfits' 1,
aligning more closely with Carlie's description as a ‘Barbie-like doll’ accompanied by apparel. Thus,
Carlie aligns more specifically with the toy classification. Conversely, when considering the

1 General Department of Vietnam Customs - HS code classification

9503.00.21: Dolls, whether or not dressed; Parts and accessories.
description of the HS Code relating to the Collectors’ item (9705) 2, Carlie is far different from
‘archaeological, ethnological, historical, zoological, botanical, mineralogical, anatomical,
paleontological or numismatic’ things, which does not align with Carlie’s characteristics.

1.2.

a. Did Utopia’s Customs Department rely on the actual value of imported merchandise,
excluding national origin or arbitrary values, as the basis for customs value?

No. Utopia's Customs Department violated the obligation by applying the sales price in Richland's
domestic market as the customs value instead of the actual value of the imported merchandise. This
action clearly contradicts the stipulation.

b. Did Utopia’s Customs Department consider the transaction value as the customs value for
imported goods?

No. The Customs Department's decision to use the sales price in Richland's domestic market, rather
than the actual price paid during export, directly contradicts the rule. Moreover, Articles 2 to 7 of the
Customs Valuation Agreement present five alternative methods for ascertaining the customs value
when it cannot be determined under Article 1, emphasizing the appropriateness of the transaction
value method over-reliance on the Richland market price.

1.3. Is Richland where the final key transformation of the goods happens, and does its assembly and
packaging factor into the origin determination?

No. Carlie is produced through multiple stages, with its plastic body parts made in Newland, while the
hair and clothes are produced in Farawayland, and assembly and packaging occur in Richland. As per
Clause 1, Article 8 of Decree No. 31/2018/ND-CP, the focus is on the location of the last substantial
transformation3. Clause 3, 4 and 6, Article 9 of Decree No. 31/2018/ND-CP specify that simple
operations like packaging or assembly do not count as substantial transformations 4. Since the body
parts made in Newland contribute significantly to Carlie's transformation, while the assembly and
packaging in Richland are considered simple processes, Newland is identified as the country of origin.

1.4. Did Utopica's Act imposing a customs duty of 15% ad valorem $3 import surcharge on each doll
and a custom-handling fee of 2% ad valorem surpass tariff concession committed in Utopia’s Tariff
Schedule?

Yes. In Utopia, Carlie dolls are expected to sell at $10 each, incurring an import surcharge of $3 per
doll, equating to 33.33% ad valorem, a 2% custom-handling fee, and a 15% customs duty,
cumulatively amounting to a 50.33% duty, exceeding the 10% ad valorem bound rate outlined in
Utopia's Schedule. Similarly, for Dolls R bearing the HS code 9503.00.21 5, the Preferential Import
Tariffs Schedule of Decree No. 26/2023/ND-CP dictates a 10% preferential customs duty 6. However,
Utopia's Customs Department is charging a 15% ad valorem duty, surpassing the stipulated rate and
2 General Department of Vietnam Customs - HS code classification
9705: Collections and collectibles of animal, vegetable, mineralogical, anatomical, historical, archaeological,
paleontological, ethnographic or numismatic nature.
3 Decree No. 31/2018/ND-CP on Guidelines for the Law on foreign trade management in terms of origin of
goods
4 Ibid.
5 Ibid.
6 Decree No. 26/2023/ND-CP on Schedule of Export Tariffs, Schedule of Preferential Import Tariffs, Tariff
Nomenclature, and fixed duties, mixed duties, out-of-quota import duties
thereby contravening Article II:1(b) of the GATT 1994 7. This overcharge, combined with additional
surcharges and fees, significantly exceeds Utopia's committed tariff concession under WTO
agreements.

Conclusion:

1.1. Considering the specificity of descriptions under Rule 3(a) of the GRI, HS Code 95030021 is the
most fitting classification for Carlie and Carlie should be considered as a toy.

1.2. Whether Carlie is imported into Utopia in the form of finished goods or is imported into
separated parts remains the same customs classification.

1.3. The substantial transformation in Newland, as opposed to the simple assembly in Richland,
designates Newland as the country of origin for Carlie.

1.4. Utopia's import surcharge, custom-handling fee and customs duty on Dolls R exceed WTO
commitments, violating Article II:1(b) of the GATT 1994.

Following these determinations, it is concluded that: Utopia’s Customs Department can not apply a
15% ad valorem customs duty on Carlie, based on the sales price in Richland since it violates Article
VII: 2(a), Article II:1(b) of the GATT 1994 and Article 1.1 of the CVA and identify wrong origin of
Carlie.

ISSUE 2.
Issue: Does the import of Carlie in the form of finished or unassembled products create any
difference in the customs classification under Rule 2(a) of the GRI?

Rules: To meet the criteria of Rule 2(a), the question must be satisfied: Do the separate parts of Carlie
retain the essential character of the complete Carlie?

Application: Do the separate parts of Carlie retain the essential character of the complete Carlie?

Yes. Although Carlie's components are produced in various locations and assembled in Richland, the
essential character of Carlie as a complete doll remains unchanged. This essential character is defined
by its final form as a doll, inclusive of all its parts - body, hair, and clothes. Whether Carlie is
imported as a fully assembled doll or in disassembled parts for later assembly, the classification for
customs purposes remains the same, as the unassembled parts collectively represent the complete doll.

Conclusion: According to Rule 2(a), Whether Carlie is imported into Utopia in the form of finished
goods or is imported into separated parts remains the same customs classification.

ISSUE 3.
Issue: Does the introduction of customs duty by the Utopia Parliament on movies imported into the
country via the Internet violate Article XVI:1 of the General Agreement on Trade in Services
(GATS)?
7 Article II:1(b) of GATT 1994: Schedules of Concessions
Rules: To comply with Article XVI:1 of the GATS, these questions must be satisfied:

a. Are Carlie’s short movies "services”?

b. Does the imposition of customs duty on movies imported via the Internet by the Utopia
Parliament align with Utopia's commitment in its Schedule, which mirrors Vietnam's, or does it
differ in “a less favorable manner”?

Application:

a. Are Carlie’s short movies "services”?

Yes. The WTO Services Sectoral Classification List identifies "audiovisual services" 8, which includes
motion picture and video tape production and distribution services (CPC 9611) 9. Dolls R's short
movies, designed for international viewing through the 'Carlie Doll' app, clearly fall within this sub-
sector as a service. Moreover, their mode of service delivery aligns with "cross-border supply", as
defined in Article I: 2(a) of GATS.

b. Does the imposition of customs duty on movies imported via the Internet by the Utopia
Parliament align with Utopia's commitment in its Schedule, which mirrors Vietnam's, or does it
differ in “a less favorable manner”?

No. According to Utopia's Schedule of Specific Commitments in Services, there is no commitment for
"motion picture distribution" (CPC 96113)10, particularly addressing "cross-border supply" within the
Audiovisual category. This absence implies Utopia’s freedom to introduce market access barriers in
this sector within the meaning of Article XVI:2 of the GATS. Additionally, the imposition of tariffs
by Utopia on Carile's short movies also does not align with any of the measures outlined in Article
XVI:2 (a) to (f) of the GATS, which prescribes the actions that a Member shall not maintain or adopt.
Therefore, customs duty introduced by the Utopia Parliament does not deviate in a less favorable
manner than that provided in their Schedule.

Conclusion: The imposition of customs duties by the Utopia Parliament on Internet-imported movies,
including Carlie's short films, complies with Article XVI:1 of the GATS.

ISSUE 4.
Issue: Did the Government of Newland violate Article XI of the GATT 1994 when restricting the
number of plastic body parts exported every year?

Rule: Did the case of Newland belong to the exemption of Article XI?

Application: Did the case of Newland belong to the exemption of Article XI?

No. Newland was not legitimate to apply the quotas since it is inconsistent with Article XI. Also, the
QR was implemented just for the sake of the toy industry of its country and was not subjected to any
QR-related exceptions.

8 WTO, Services: Audiovisual Services

9 S/C/W/310
10 Guide To Viet Nam's Commitments On Trade In Services In The WTO, p.110.
Conclusion: The government of Newland violated Article XI of GATT 1994 when restricting the
number of plastic body parts exported every year.

REFERENCES
“S/C/W/310” <https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?
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“WTO | Legal Texts - Marrakesh Agreement”

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<https://www.wto.org/english/tratop_e/serv_e/audiovisual_e/audiovisual_e.htm>

Kawazoe T, “General Rules of Interpretation Rule 2(GRI2)” (September 4, 2019)

<https://www.customslegaloffice.com/global/general-rules-of-interpretation-rule-2gri2/>

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Vụ Chính sách Thương mại Đa biên Bộ Thương mại, Guide To Viet Nam’s Commitments On Trade
In Services In The WTO