Approval of Trade Facilitation Agreement in India – A Brief Overview

[The
following guest post is contributed by Ananya Banerjee, a 5th Year Student of University of Calcutta,
Department of Law]
In another effort to promote the ease of doing
business in India and to create a more business friendly environment in India,
the Union Cabinet has, on February 17, 2016, approved the proposal for notification
of commitments under the Trade Facilitation Agreement (“TFA”), the ratification and the acceptance of the Instrument of
Acceptance of Protocol of the TFA to the World Trade Organization (“WTO”) Secretariat.
What is
TFA?
The TFA is the first multilateral trade
agreement to be concluded since the establishment of WTO, the organization
which regulates international trade. The WTO members had concluded negotiations
on the TFA at the 9th Ministerial Conference in December, 2013, held
in Bali (as a part of Bali Package). An amendment protocol for the TFA was
adopted by the General Council of WTO in November 2014 to bring the TFA into WTO’s
legal framework. Hong Kong, China became the first member to deposit the
Instruments of Acceptance to the Secretariat in December 2014. The TFA shall
come into force only when 2/3rd of the 162 members of WTO deposit
their Instruments of Acceptance.
Salient
Features
Presently, international trade involves a series
of transactions and requires several documents. On an average, in 2014, an
export transaction required 6 to 86 days and involved 2 to 11 documents,
whereas, an import transaction required 4 to 130 days and involved 2 to 17
documents[1]. The object of the TFA is
to expedite the movement, release and clearance of goods, including goods in
transit in order to establish a standardized customs procedure among all the
WTO members. Special consideration has been given towards the needs of
developing and least developed country members and the need for effective cooperation
among all the members of the WTO.
The TFA has set forth a series of measures to
facilitate expeditious movement goods cross-border trades. In addition to the
foregoing, the TFA provides that commitments of developing and least-developed
countries shall be linked to their capacity to implement the TFA. In line with
the objective of the TFA, provisions have also been made for providing assistance
to the countries to achieve its fullest capacity. The TFA has 3 main Sections,
along with other provisions.
Section
I
: This Section contains provisions which would facilitate expeditious
movement, release and clearance of goods, including goods in transit through
improvement of relevant articles of the General Agreement on Tariffs and Trade,
1994 (“GATT”). This Section also
lays down provisions for customs cooperation among the member states.
Section II: This Section contains
provisions relating to special and differential treatment (“SDT”) which would allow the developing
and least-developed countries to determine when they would be able to implement
individual provisions of the TFA and would also enable them to identify the provisions
which would require technical assistance and support for implementation. Every
such country, falling in the ambit of this Section, would categorize the
provisions of the TFA in the following manner and notify the members of WTO in
order to benefit from the provisions of SDT.
– Category
A would contain the provisions which each such country would implement on the
date on which the TFA comes into force (“Commencement
Date
”). Although, the least developed countries would have the option to
implement such provisions within 1 year from the Commencement Date.
– Category
B would contain the provisions which each such country would implement after a
transitional period following the Commencement Date.
– Category
C would contain those provisions which such country would be able to implement
after a transitional period only upon receiving technical assistance and
support.
The transitional period, after which the countries
falling under this Section II would be able to implement the provisions
categorized under Categories B and C above, also need to be mentioned in
accordance with the provisions of this Section.
Section
III
: This Section mainly provides for the establishment of a
permanent committee for trade facilitation and requires every member to
establish a national committee to enable proper implementation and facilitate
domestic coordination, required to achieve the purpose of the TFA.
Union
Cabinet’s Approval
India has, pursuant to the provisions of Section
II of the TFA, sought a transitional period of 5 years from the Commencement
Date to implement few measures such as releasing of goods before the payment of
duty against surety, and, a single window clearance. While India has sought for
a transitional period to implement 152 provisions out of the total 265
provisions, it has decided not to seek financial assistance for implementing
any measure under the TFA. The Union Cabinet has also provided for the formation
of a National Committee on Trade Facilitation, to be set up in accordance with
the provisions of Section III of the TFA.
Conclusion
It is expected that once the TFA comes into full
force, it would not only be able to harmonize customs procedures worldwide, it
would also facilitate a saving of up to USD 1 Trillion annually. The WTO
members shall be highly benefitted from the TFA as the cost of implementing different
provisions of the TFA is expected to be far less than the projected benefits
arising out of a simpler cross-border flow of goods. It is estimated that upon
successful implementation of the TFA, the total cross-border trade cost would
be reduced by 14% in least developed countries, 15% in lower middle-income countries
and 13% for upper middle income countries. Although India will take at least 5
years to implement all the provisions of the TFA completely, the ratification
of the other provisions is expected to boost India’s cross-border trade
scenario to a great extent even before that. Not only India, with the
simplification of international trade and establishment of uniform customs
procedures, the overall growth of worldwide export would also be significant. The
positive impact on export scenario would not only help in the growth of world
economy, it would also work effectively in the reduction of global trade
barriers, as envisaged under the Bali Package.
– Ananya Banerjee



[1] Source: World Bank “Doing Business” project, 2015

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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