Article V: Freedom of Transit Moldova - 12-13 June 2006 23/02/2019 Article V: Freedom of Transit Workshop on Trade Facilitation Chisinau, Moldova, 12-13 June 2006 United Nations Conference on Trade and Development 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Key points Why is transit important?; What Article V says… Proposals regarding Article V; Relevant Trade Facilitation tools; Cooperation mechanisms. 23/02/2019 Workshop on Trade Facilitation Article V

Why is Transit Important ? Moldova - 12-13 June 2006 23/02/2019 Why is Transit Important ? 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Why is transit important? Transit is vital to provide access to most efficient & least costly trade routes. It should warrant the provision of required supplies at a fair cost. Transit is profitable to the « transited »countries: Transit traffic requires provision of services; Transit generates revenues from applicable users’ charges; Transit generates induced economic activities: restaurants & hotels, repairs & workshops, trade of petroleum products; Transit creates opportunities for investment in facilities and equipment supporting transit services. 23/02/2019 Workshop on Trade Facilitation Article V

Specific obstacles include Moldova - 12-13 June 2006 23/02/2019 Specific obstacles include Different standards and regulations Inadequate transport/transfer infrastruc. Insufficient use of ICTs Requirements for drivers and crew Protection of national operators Inadequate transport documentation Inadequate legal framework No Customs transit system Border crossing formalities and delays From EU- The following is a non-exhaustive list of problems identified by developing- and developed- country traders in relation to transit: - Lack of information on and transparency of transit requirements. National rules may change frequently and be enforced without prior notice, without consultation and with a retroactive date of implementation; - High, discriminatory and unwarranted transit charges and illegal roadblocks used to levy fees; - Excessive, burdensome and non-standardized documentation, data requirements and procedures. Documents and certificates may become invalid due to delays occurring in transit and / or within an unreasonably short time period; - Difficulty with the return, at the point of exit, of cash guarantees posted at the point of entry. Imposition of disproportionate guarantees; - Unjustifiable restrictions on means of transport, on drivers and goods in transit, including requirements for consignments to be transported under escort; - Lack of co-ordination between different agencies involved in transit; - Lack of willingness or refusal on the part of transiting countries to co-operate with exporting or importing countries, including with regard to the application of regional transit regimes or corridors; - Non-application of international, regional or bilateral instruments for transit; - Lack of resources in terms of trained personnel and infrastructure. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Inherent obstacles to Transit 23/02/2019 Workshop on Trade Facilitation Article V

Workshop on Trade Facilitation Article V Moving goods… Services Information Legal set-up Operations Vehicles Infrastructure 23/02/2019 Workshop on Trade Facilitation Article V

Key agencies concerned Moldova - 12-13 June 2006 23/02/2019 Key agencies concerned Finances Customs Commerce Industry Interior Transport Foreign Affairs Chambers of Com. Infrastructure Operations Services Vehicles Goods 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Interests controled by agencies 23/02/2019 Workshop on Trade Facilitation Article V

Crossing the border affects the movement of the goods…. Country A B Country B Movement 23/02/2019 Workshop on Trade Facilitation Article V

The concept of “border” Moldova - 12-13 June 2006 23/02/2019 The concept of “border” A border is where the status of the goods, vehicles, or persons transporting/driving them is assessed. Are goods, vehicles, or persons transporting/driving them in conformity with the national interests of the country in which they pretend to enter? Do they comply with local laws and regulations? Protecting national interests: New national concerns about the quality and use of imported goods in developed as well as developing economies. Governments, industry, consumers, and special interest groups call for enforcement of restrictions on goods for export and import, as well as on their trade-related services.. These requirements involve many different federal agencies that have the potential and ability to disrupt supply chains and to increase transaction costs for exports and imports. National interests are legitimate issues of sovereign governments. But if not implemented efficiently, protection of these interests can become a significant burden on the global trading system. Moreover, these burdens are even greater in countries where governments simply cannot cope with the increasing volume of trade and the need for safeguards without disruption in the flow of legitimate commerce. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Crossing the may create… BORDER Country Destination Discrepancies GOODS Products conformity, standards & regulations SERVICES Commercial regulations and practices OPERATIONS Traffic regulations and operational practices VEHICLES Vehicle standards and regulations INFRASTRUCTURE Design, construction, maintenance and inter-operability Country Origin 23/02/2019 Workshop on Trade Facilitation Article V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 What Article V says… 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Article V – Freedom of Transit Moldova - 12-13 June 2006 23/02/2019 Article V – Freedom of Transit Goods (including baggage), and also vessels and other means of transport, shall be deemed to be in transit across the territory of a contracting party when the passage across such territory, with or without trans-shipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes. Traffic of this nature is termed in this article “traffic in transit”. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Traffic in transit A B Transit Territory of contracting party A B Article V, para.1: 1. Goods (including baggage), and also vessels and other means of transport, shall be deemed to be in transit across the territory of a contracting party when the passage across such territory, with or without trans-shipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes. Traffic of this nature is termed in this article “traffic in transit”. A B 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Roumania-(Moldova)-Ukraine 23/02/2019 Workshop on Trade Facilitation Article V

Kyrgy-(Uzbeki)-Kyrgy 23/02/2019 Workshop on Trade Facilitation Article V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Article V – Transit Goods and transport means crossing territory Non-discriminatory treatment of vehicles in transit and of goods transported by them; Routes most convenient for international transit; Prohibition to: Make transit traffic subject to unnecessary delays or restrictions; Impose Customs duties, transit duties or other transit charges, except for: (1) charges for transportation, (2) charges commensurate with administrative expenses entailed by transit, or (3) with cost of services. with no distinction based on (i) flag of vessel, (ii) origin, (iii) departure, (iv) entry, (v) exit, (vi) destination, or (vii) ownership of goods, vessels or other means of transport 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Article V – Charges All charges and regulations imposed on transit shall be reasonable, having regard to the conditions of traffic. MFN treatment with respect to all charges, regulations and formalities. Interpretative note: With respect to transportation charges, MFN requirement refers to like products being transported on the same route under like conditions Problems: Members felt 1.Not specific enough 2. not operational 3. not fully enforceable 4.lack of transparency 5. too much room for discretion 6. lacking cooperative approach 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Possible implications of Art.V Simplification and standardisation of procedures; Transit Customs procedures; Transit fees and charges. 23/02/2019 Workshop on Trade Facilitation Article V

Simplification & standardisation of procedures Limiting formalities at entry points, « en route » (within the national territory), or at exit points; Reducing the number of controls (as no taxation is at stake); Applying risk management techniques; Standardizing required documents and data. 23/02/2019 Workshop on Trade Facilitation Article V

Transit Customs procedures Limited inspections as per Article 10 of the ‘Convention on Harmonisation of Border Management’; Article 5 of the TIR Convention; No Customs escort as per Art. 23 of the TIR Convention; No imposed itinerary as per Chapter 1 (norm 15), Annex E of the Revised Kyoto Convention; No levy of duties on goods lost by accident in the course of transit, and non recoverable, as per Chapter 3 (norm 44) of the Revised Kyoto Convention; Use of commercial documents for describing goods in Customs forms, as per Chapter 1 (norm 6) Annex E of the Revised Kyoto Convention; No calculation of duties and taxes for goods in transit, as per Art. 8 of the TIR Convention 23/02/2019 Workshop on Trade Facilitation Article V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Transit fees & charges Transit fees and charges Often suffer from lack of transparency May be discriminatory in nature on common-user infrastructure Transit charges on foreign trucks Financial impact questionable Bilateral agreements/Reciprocity Fees for use of dedicated infrastructure High budgetary impact Pipelines, canals,etc. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Proposals regarding Article V Moldova - 12-13 June 2006 23/02/2019 Proposals regarding Article V 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Proposals regarding Article V: M. Matters Relating to Goods Transit Measures 1 4 10 2 1 23/02/2019 Workshop on Trade Facilitation Article V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Article V (Proposals) Transit regime Based on international standards; Adherence to international instruments; Bonded transit; International / regional guarantee systems; Regional transit cooperation. All proposals contained in docs TN/TF/W/6 to TN/TF/W/39 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Article V (Proposals) Procedures Reasonable and non-discriminatory; Non-discriminating modes, carriers, routes, goods; Simplified prodedures for perishable goods; Authorized traders; Risk management to limit physical inspections; Automated systems: Cross border vehicle regulations. Fees and charges Publication and periodic review. All proposals contained in docs TN/TF/W/6 to TN/TF/W/39 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Article V (Proposals) Technical assistance, capacity building, S&D Technical assistance Impartial implementation of provisions; Combat illicit trade; Best practices to minimize transit cost; Technology applications; Upgrading customs systems; Risk management; Put in place guarantee system; Collaborative efforts by international organizations. Capacity building Training on procedures, systems, etc. Special & Differential treatment Based on implementing capacities, particularly relating to IT and banking systems ..TA, FA and time frame. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Two relevant TF tools: Transit arrangements; and National/regional Customs Transit regimes. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 Transit Arrangements Corridor-based solutions Infrastructure Operations Services Vehicles Goods Customs transit issues: Documentation; Guarantees Provision of transport services (market access; traffic quotas; freight rates); Transport operation issues: Modes, routes, time, etc.; Visa for crew/drivers; Traffic management issues; Conformity of vehicles & loading units; Driver license; Use of specific transport mode & interface facilities. 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Customs Transit Regime To allow the temporary suspension of customs duties, excise and VAT payable on goods originating from and/or destined for a third country while under transport across the territory of a defined customs area. This suspension of duties and taxes remains in place until the goods either: exit the customs territory concerned; are transferred to an alternative customs regime; or the duties and taxes are paid and the goods enter free circulation. 23/02/2019 Workshop on Trade Facilitation Article V

Customs guarantees & bonds Customs authorities may require guarantees for the crossing of a given Customs territory, meant to avoid fraudulous transfers; Those guarantees (or bonds) shall not penalise transit operations by the amounts claimed, their nature (e,g. a deposit), their duration and the formalities that apply thereto; Bonds shall be acknowledged by both parties (thus bringing justification to transit agreements, be they bilateral or multilateral). 23/02/2019 Workshop on Trade Facilitation Article V

Workshop on Trade Facilitation Article V Moldova - 12-13 June 2006 23/02/2019 IMPORTANT: Promote cooperation mechanisms at national and corridor levels 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

Cooperation mechanisms BORDER Country A Country B Bilateral consultations on trade & transport issues Government Authorities Min. Trade, Finances (Customs), Transport, Interior, Foreign Affairs, etc. Government Authorities Min. Trade, Finances (Customs), Transport, Interior, Foreign Affairs, etc. NTTFC, Clusters, Public-Private Partnerships NTTFC, Clusters, Public-Private Partnerships Regional coordination Private sector Chambers of Commerce, professional associations, corridor-based interests (around projects such as: ICD, Free Zones, etc.) Private sector Chambers of Commerce, professional associations, corridor-based interests (around projects such as: ICD, Free Zones, etc.) Professional networks 23/02/2019 Workshop on Trade Facilitation Article V

Commonalities between Articles V & VIII Moldova - 12-13 June 2006 23/02/2019 Commonalities between Articles V & VIII Simplification of procedures: Risk assessment; Use of international standards (e.g. Kyoto Conv.); Automation; Time limit for Customs release; Cooperation between traders & Customs (e.g. authorized traders); Simplification of documentation requirements: One-stop clearance/release facilities (e.g. Single window); Adoption of basic international standards: Simplified, standardized documentation (e.g. SAD; UNLK); Agreement on a reduced trade/Customs data set; 23/02/2019 Workshop on Trade Facilitation Article V Workshop on Trade Facilitation - Art. V

THANK YOU! Peter Faust (peter.faust@unctad.org) Maxence Orthlieb (maxence.orthlieb@unctad.org) Jan Hoffmann (jan.hoffmann@unctad.org) José Rubiato (jose.rubiato@unctad.org) Trade Logistics Branch Division for Services Infrastructure for Development and Trade Efficiency