GENERAL AGREEMENT ON

TRADE AND TARIFFS II

DR INTAN SOEPARNA
The legal instruments in GATT 1947 that is
incorporated into GATT 1994 include
(i) protocols and certifications relating to tariff
concessions;
(ii) protocols of accession;
(iii) waivers granted under Article XXV of GATT
1947 and still in force on the date of entry
into force of the WTO Agreement; and
(iv) other decisions of the contracting parties to
GATT 1947
STATUS OF GATT
 GATT 1994, as set out in Annex 1A to the WTO
Agreement, consists of:
 (a) the provisions of GATT 1947;
 (b) the provisions of legal instruments which entered
into force under GATT 1947 before the date of entry
into force of the WTO Agreement;
 (c) the Understandings on the interpretation of a
number of GATT Articles, adopted at the end of the
Uruguay Round;
 AFTER ESTABLISHMENT OF WTO (GATT 1994) GATT
1947 IS TERMINATED ( 1996) SINCE THEN GATT 1947
IS INCORPORATED IN GATT 1994
GATT REGULATES 4 MAIN OBJECTIVE

 Most favored- nation treatment,

 national treatment
 Prohibition on Quota Restriction
 Regional trade agreement
 Tarriffication
 Tariff Concession
 Tariff modification
1. Most favoured nation treatment
Art. 1 of GATT embodies the MFN rule.
At its simplest,.

 EXAMPLE?
 Indonesa: the MFN tariff applicable to tomatoes from all WTO
Members is 10%.
 Malaysia: is a big tomato producer interested in increasing its
exports of tomatoes to Indonesia
 Imagine that, during a WTO negotiating round, Malaysia initiates
tariff negotiations on tomatoes with
 Indonesia . After long and difficult bilateral meetings, Indonesia
agrees to give Malaysia a duty free access (0% tariff) for tomatoes.
However, according to the MFN principle, Indoneisa should extend
the 0% tariff on tomatoes to all WTO Members. This is because all
WTO Members should enjoy the most favourable treatment for
tomatoes granted by Indonesia.
2. NATIONAL TREATMENT
 Art. 3 of GATT embodied the NT Rules

 Example ?
 Indonesia set a 75% Luxury Goods Tax

(PPnBM) on 3000 cc Limousine cars in

Indonesia, Indonesia is obliged to apply the
75% PPnBm both on 3000 cc Limousine Cars
produced in Tanggerang and Limousine cars
imported from the US
Elimination of Quota Restriction
GATT Arti. 11 (1)
 No prohibitions or restrictions other than
duties, taxes or other charges, whether made
effective through quotas, import or export
licences or other measures, shall be instituted
or maintained by any contracting party on the
importation of any product of the territory of
any other contracting party or on the
exportation or sale for export of any product
destined for the territory of any other
contracting party
However…
Export prohibitions or restrictions temporarily
applied to prevent or relieve critical shortages
of foodstuffs essential to the exporting WTO
Members (Paragraph 2 (a));
 Import and export prohibitions or

restrictions necessary to the application of

standards or regulations for the classification,
grading or marketing of commodities in
international trade (Paragraph 2 (b)); and
 Import restrictions on any agricultural or
fisheries product, necessary to the
enforcement of governmental measures
which operate to restrict production of the
domestic product or for certain other
purposes (Paragraph 2 (c)).
Regional Trade Agreement
 GATT Article 24
The development of GATT trading rules offers
insight into consequences of regional
agreements. GATT article XXIV allowed
countries to grant special treatment to one
another by establishing a customs union or
free-trade association.
Tariffication: WHAT IS TARIFF?
 Tariffs are a type of trade barrier imposed by
countries in order to raise the relative price of
imported products compared to domestic
ones. Tariffs typically come in the form of
taxes or duties levied on importers and
eventually passed on to end consumers.
They're commonly used in international trade
as a protectionist measure, with the aim of
advantaging domestic producers and raising
revenue.
2 type of tariffs
 import Tariffs
Is the most important tariff. The importer pays the tariff to
their home country. Tariffs are collected by the national
customs authority of the country into which the goods are
being brought.
 Export Tariffs

An export tariff is put on goods being sent abroad. The

exporter pays certain tariff to its national customs authority.
Export tariffs are generally levied by raw-material-producing
countries rather than by advanced industrial countries.
Differential exchange rates are sometimes used to extract
revenues from export sectors. Commonly taxed exports
include coffee, rubber, palm oil, and various mineral
products.
Rules on Tariff
A customs duty, or tariff, is a financial charge,
in the form of a tax, imposed on products at the
time of, and/or because of, their importation
Categorized in TARIFF SCHEDULE:
1. Ad Valorem
2. Specific
3. Mixed
4. Compound
5. Technical Tariff
6. Bound tariff
 Tariff Ad Valorem : Based on Value.
Indonesia imply tariff ad valorem for a piece of
leather bag 10%.
 Tariff Specific : A specific customs duty on a
product is an amount based on the weight,
volume or quantity of that product,
US imposed USD 100 tariff for 1 ton frozen
tuna. Tariff on Frozen tuna in Tariff Schedule
will be USD/t100. if Indonesia export 5 ton
tuna, the tariff will be USD 500
 Tariff Mixed : between ad valorem and
Specific,
US set tariff for sugar as 20% or USD 1 per kg.
When importer importing 1 ton of sugar worth
USD 1000. the ad valorem duty is USD 200
while specific duty is USD1000, since ad
valorem duty is less than specific duty, the
importer subjected to pay USD 200 ad valorem
duty.
 Compound Tariff
Is when tariff is calculated based on value of
goods (ad valorem) and based on measurement
of the imported goods (specific). It is normally
calculated by adding ad valorem duty to specific
duty. Countries tend to use compound tariff on
goods that consider sensitive or highly sensitive
product.
 Technical Tariff
Is when a tariff is calculated based on specific
contents of the imported goods and the duty is
charged by its component or certain related
items of the imported goods.
e.g. US sets tariff on laptop as USD 10 each +
USD5 per kg of battery. Thus a laptop computer
with 1 kg battery will be subject to USD 15
import duty, namely USD10 + USD 5 for the
batery
 Bound Tariff
WTO members accepted bound tariff as the
legal commitment of a country in which a
country will not raise the tariffs above certain
level. The commitment “binds” the country tariff
on the product as ceiling for its applied tariff on
the product.
In the negotiation the countries negotiate
“bound tariff”
Tariff Negotiation and Modification
(GATT Arti. 28)

 periodically Members will engage in rounds of

multilateral trade negotiations for reduction
of tariffs on a reciprocal and mutually
advantageous basis
 Members are allowed to modify or withdraw

tariff concessions included in their schedules

according to Art. 28 (Modification Schedule)
4. Tariff Concessions-
 negotiations shall be aimed at reducing tariffs
(Preamble and Art. 28bis GATT). Tariffs shall
also be bound against further increases [Art
2.1(b) GATT].
(Tariff concessions are recorded in schedules of concessions)
Schedule of Concession
 every Member of the WTO has a Schedule of
Concessions on Goods which forms an integral
part of GATT 1994.
 Schedule of Concession is specific tariff
concessions and other commitments that they
have given in the context of trade negotiations,
such as the Uruguay Round.
 For trade in goods in general, these usually consist
of maximum tariff levels which are often referred
to as “bound tariffs” or “bindings” (GATT Article II).

 In the case of agricultural products, these
concessions and commitments also relate to
tariff rate quotas, limits on export subsidies,
and some kinds of domestic support. All WTO
Members have a schedule of concessions
which is either annexed to the Marrakesh
Protocol to the GATT 1994 or to a Protocol of
Accession. The content of the schedules
change over time to take account of different
modifications, such as GATT Article XXVIII
negotiations or rectification procedures.
 Each schedule consists of four parts:
 Part I : Most-favoured-nation or MFN concessions, maximum
tariffs to goods from other WTO members. Part I is further
divided into:
- Section 1A — tariffs on agricultural products
- Section 1B — tariff quotas on agricultural products
- Section II — Other products

 Part II: Preferential concessions (tariffs relating to trade

arrangements listed in GATT Article I)

 Part III: Concessions on non-tariff measures (NTMs)

 Part IV : Specific commitments on domestic support and export
subsidies on agricultural products
 Article II provides that products from one
Member, upon importation into the market of
another Member shall “. . . be exempt from
ordinary customs duties in excess of those
set forth and provided therein [in the
Schedule of the importing Member]”
The table consists of the following columns

 Column 1: Lists the WTO Members in

alphabetical order. It also indicates whether
or not the Member is a party to the
Harmonized System Convention.
 Column 2: Indicates the Roman numeral

assigned to the Member’s schedule. Its

equivalent Arabic numeral is included in
parenthesis for ease of reference.
 Column 3: Indicates the situation of the Pre-

Uruguay Round schedule, if any.

 Column 4: Indicates whether the schedule is
annexed to the Marrakesh Protocol or to a
Protocol of Accession. The date of accession and
references to the relevant documentation is
included for the latter.
 Column 5: Provides information on the
transposition of Uruguay Round schedules into the
Harmonized System and its subsequent
amendments. In the case of Members having
acceded after January 1, 1995, it also indicates the
tariff nomenclature used in the schedule annexed
to its protocol of accession.
 Column 6: Provides information on the
rectifications/modifications requested by the
Member, if any.
 Column 7: Provides information on the

renegotiations under GATT Article XXVIII

initiated by the Member, if any.
Introduction of Harmonized System
 The GATT Committee on Tariff Concessions
developed procedures for this purpose. A
number of schedules were transposed,
certified and annexed to protocols. Some
Members undertook to renegotiate their
schedules in connection with the
implementation of the HS.