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

2. 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.
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3. Why is Transit Important ?
Moldova June 2006
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Why is Transit Important ?
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Workshop on Trade Facilitation - Art. V

4. 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.
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5. Specific obstacles include
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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.
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Workshop on Trade Facilitation - Art. V

6. Inherent obstacles to Transit
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7. Workshop on Trade Facilitation Article V
Moving goods…
Services
Information
Legal set-up
Operations
Vehicles
Infrastructure
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Workshop on Trade Facilitation Article V

8. Key agencies concerned
Moldova June 2006
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Key agencies concerned
Finances
Customs
Commerce
Industry
Interior
Transport
Foreign Affairs
Chambers of Com.
Infrastructure
Operations
Services
Vehicles
Goods
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Workshop on Trade Facilitation - Art. V

9. Interests controled by agencies
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10. Crossing the border affects the movement of the goods….
Country A B
Country B
Movement
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11. The concept of “border”
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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.
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Workshop on Trade Facilitation Article V
Workshop on Trade Facilitation - Art. V

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

14. Article V – Freedom of Transit
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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”.
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Workshop on Trade Facilitation - Art. V

15. Workshop on Trade Facilitation Article V
Moldova June 2006
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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
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Workshop on Trade Facilitation - Art. V

16. Roumania-(Moldova)-Ukraine
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17. Kyrgy-(Uzbeki)-Kyrgy
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18. Workshop on Trade Facilitation Article V
Moldova June 2006
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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
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Workshop on Trade Facilitation Article V
Workshop on Trade Facilitation - Art. V

19. Workshop on Trade Facilitation Article V
Moldova June 2006
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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
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Workshop on Trade Facilitation Article V
Workshop on Trade Facilitation - Art. V

20. Possible implications of Art.V
Simplification and standardisation of procedures;
Transit Customs procedures;
Transit fees and charges.
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21. 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.
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22. 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
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23. Workshop on Trade Facilitation Article V
Moldova June 2006
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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.
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Workshop on Trade Facilitation - Art. V

24. Proposals regarding Article V
Moldova June 2006
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Proposals regarding Article V
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Workshop on Trade Facilitation - Art. V

25. Proposals regarding Article V: M. Matters Relating to Goods Transit
Measures 1 4 10 2 1
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26. Workshop on Trade Facilitation Article V
Moldova June 2006
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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
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Workshop on Trade Facilitation - Art. V

27. Workshop on Trade Facilitation Article V
Moldova June 2006
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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
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Workshop on Trade Facilitation - Art. V

28. Workshop on Trade Facilitation Article V
Moldova June 2006
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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.
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29. Workshop on Trade Facilitation Article V
Moldova June 2006
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Two relevant TF tools: Transit arrangements; and National/regional Customs Transit regimes.
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Workshop on Trade Facilitation - Art. V

30. Workshop on Trade Facilitation Article V
Moldova June 2006
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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.
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Workshop on Trade Facilitation Article V
Workshop on Trade Facilitation - Art. V

31. 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.
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32. 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).
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33. Workshop on Trade Facilitation Article V
Moldova June 2006
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IMPORTANT: Promote cooperation mechanisms at national and corridor levels
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Workshop on Trade Facilitation - Art. V

34. 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
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35. Commonalities between Articles V & VIII
Moldova June 2006
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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;
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Workshop on Trade Facilitation Article V
Workshop on Trade Facilitation - Art. V

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