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Background Note

October 2000

The Administration and Implementation of the WTO Agreement on Customs Valuation


The administration of the Agreement

The implementation of the Agreement

A) Delays in implementation

B) Reservations regarding certain obligations

C) Technical assistance


I. Introduction

1. The Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade of 1994 (more commonly referred to as the Agreement on Customs Valuation) (note 1) came into effect on 1 January 1995, concurrently with the other agreements negotiated during the Uruguay Round. It replaced, without really fundamentally changing, the Agreement on Customs Valuation which had been signed by 40 contractual parties at the Tokyo Round negotiations in 1979.

2. During the Uruguay Round, it had been deemed necessary to draw up a separate agreement on customs valuation to clarify the rules laid down in article VII of the General Agreement on Tariffs and Trade, thereby ensuring a better harmonisation of the various national methods used to evaluate customs duties on goods crossing the border, and making it easier to anticipate the legislation likely to confront international traders.

3. This Background Note examines the status of the Agreement six years after its introduction and, in particular its administration, and implementation.

II. The administration of the Agreement

4. Article 18 of the text of the Agreement on Customs Valuation allows for the setting up of two distinct bodies to handle administration:

  • A Committee on Customs Valuation, which is a subsidiary of the WTO and consists of representatives from all the Members of the Organisation as well as some from International Organisations actively involved in customs valuation as observers. The Committee on Customs Valuation acts as a consultation forum for Members and has a remit to undertake a comprehensive examination of the implementation of the Agreement, at least once every year. Mr. Remo Moretta from Australia has chaired the Committee since 8 May 2000.
  • A Technical Committee on Customs Valuation, institutionally linked to the "Council for Customs Cooperation", which has now become the World Customs Organisation (WCO). Its composition and remits are described in detail in Annex II of the Agreement. The main point to note is that the Technical Committee is charged with ensuring that technical definitions and the day to day application of the rules on customs valuation defined in the WTO Agreement are interpreted in a uniform manner (concrete reports on these two aspects are produced every year). Each Member of the WTO can sit on the Technical Committee, as do those countries who presently belong to the WCO without yet belonging to the WTO (note 2). The WTO itself has observer status.

5. The Committee on Customs Valuation, must, according to the text of the Agreement, convene "at least once a year". In actual fact, since 1995 the Committee has averaged three or four official sessions every year. The last official meeting of the Committee took place on 21 July 2000, and the next meeting is already planned for 7 November, that is to say the day following the AITIC seminar on "The Less-Advantaged Countries and the Agreement on Customs Valuation: Issues at Stake". During its last formal meeting the Committee paid particular attention to three items:

  • The question of extending delays for implementation of the Agreement in some developing countries (a matter dealt with below).
  • The new concept of technical assistance for customs valuation developed by the European Communities (on which more below).
  • An unresolved dispute between India and the European Communities, relating to standard values applied to certain products by European countries, dating back to November 1998.

6. If the Agreement is to work properly, it is essential that each Member be kept informed as precisely and as comprehensively as possible of the legislation employed by their commercial partners to deal with customs valuation, as well as any proposed changes. This is why WTO Members are obliged under article 22 to issue a notification of any changes introduced to rules governing customs valuation. So far, almost 120 notifications have been received by the WTO Secretariat regarding changes to legislation governing customs valuation since 1995. Every year, the Committee fulfils its administrative role by checking that the legal framework relating to customs valuation used in a number of WTO Member countries conforms to the Agreement. Thus in 1999, regulations were reviewed in nine Member countries: Gabon, Israel, Morocco, Namibia, Panama, the Czech Republic and, to a partial extent, Brazil and Romania.

III. The implementation of the Agreeement

7. Although it is of concern to all WTO Members, the implementation of the Agreement on Customs Valuation is a particular problem for developing countries and LDCs (note 3). Negotiators were aware of the difficulties that would face some of these countries, especially with regard to the change in the method of calculating customs duties foreseen by the Agreement (note 4). They accordingly agreed on special and differential provisions for the developing and LDC Members of the Organisation:


  • Longer delays in the full, comprehensive application of the Agreement for developing countries and LDCs who need it.
  • The possibility for developing countries and LDCs to request and lodge temporary reservations regarding certain obligations under the Agreement, subject to approval by the other Members.
  • Efficient technical assistance from industrialised countries to developing countries and LDCs who request it.

A) Delays in implementation

8. The Agreement allows for three types of implementation delay applicable to developing countries and LDCs who were not Members of GATT on 12 April 1979, in other words those who were not party to the Agreement on Customs Valuation of the Tokyo Round, in fact, the great majority of WTO Members from developing countries and LDCs:


  • Article 20.1 allows developing countries and LDCs a delay of 5 years before the full, comprehensive implementation of the Agreement, calculated from the date upon which the particular Member became a Member of the WTO.
  • In addition to the previous provision, Annex III.1 allows those Members who have encountered particular difficulties a further delay of 3 years in implementation, subject to their request being approved by the Members.
  • Regarding the sole application of the provisions of the Agreement relating to the "method of calculation" (note 5), article 20.2 allows developing countries and LDCs a 3-year delay in implementation, calculated from the date upon which all the other provisions in the Agreement were applied.

9. The existence of these three types of delay means that, currently, not all WTO Members are rigorously applying the same provisions of the Agreement on Customs Valuation. Thus, apart from the industrialised countries who have implemented the Agreement in its entirety, countries can be split into four categories (see Annex 1 of this Note for the list of countries in each category):


  • Those Members who have not implemented the Agreement by virtue of the 5-year delay in application allowed for in article 20.1 (23 Members).
  • Those Members whose 5-year delay under article 20.1 has expired but who have obtained or requested an additional delay in accordance with Annex III.1 (11 Members).
  • Those members who have implemented the Agreement but have availed themselves of an additional 3-year period to apply the method of calculating valuation in accordance with article 20.2 (19 Members).
  • Members who have made no notifications (25 Members).

B) Reservations regarding certain obligations

10. Paragraphs 2, 3 and 4 of Annex III of the Agreement, allow developing countries and LDCs to express reservations regarding certain technical provisions of the Agreement, subject to special approval by the other Members. Thus, paragraph 2 permits developing countries and LDCs to retain their system of minimum values (note 6), on request, for a limited transitional period. Paragraphs 3 and 4 meanwhile, allow for eventual reservations regarding the deductive method and the method of calculating valuation, especially in relation to the order in which these methods are to be applied.

11. As in the case of delays in implementation, the fact that reservations can be expressed regarding various provisions contained in the Agreement has had the effect of encouraging a "twin-track" development. As of 26 April 2000, 4 Members had expressed reservations regarding paragraph 2, and 19 other Members had done the same in relation to paragraphs 3 et 4 of Annex III (see Annex 2 of this Note for a list of the countries in those two categories).

C) Technical assistance

12. The efficient operation and full implementation of the Agreement on Customs Valuation is of particular importance to developing countries and LDCs, since apart from managing the level of imports and allowing them to protect certain areas of their national production, the levying of customs duties on imported goods constitutes a considerable source of revenue for them (note 7). This makes it easier to understand why these countries demand various safeguards when determining the value of imported goods, such as appraisal by private inspection companies, in order to avoid "under-valuation" of goods.

13. This cannot however be viewed as a long-term solution for these countries and article 20.3 of the Agreement allows for the setting up of bilateral or regional technical assistance programmes for developing countries who request them, provided by WTO Members from developed countries. The objective of these programmes is to steer developing countries and LDCs towards autonomous management of their customs operations (note 8).

14. During the first years of operation of the Agreement, a variety of technical assistance programmes were developed, notably at regional level. Instances of this are the programmes by Spain for Latin American countries, by Austria for English-speaking Africa, by France for French-speaking Africa or by the USA for the Caribbean countries. Technical assistance is also provided through regional trade agreements such as APEC (developed by the United States, Canada, New Zealand and Australia), ASEAN (programme financed by Japan) or again within the framework of the Lomé agreements for ACP countries (programme financed by the European Union).

15. Back in May 1997, the WTO Committee on Customs Valuation was mandated to develop its technical assistance activities. It began by investigating how appropriate and effective the various existing regional and bilateral programmes were. By October 1997, the Committee had concluded that technical assistance had to be directed towards the real needs of the developing countries and LDCs. A request for information was then drafted, asking Members to identify any specific difficulties they were encountering in implementing the Agreement on Customs Valuation. In May 1998 the Committee received the preliminary analysis of the questionnaires and at the same time the WTO launched its "Technical Assistance Programme for Customs Valuation". Faced with a multiplicity of organisations providing technical assistance, it was then decided to pursue the analysis of the questionnaires in order to determine who among the WTO, the other International Organisations and Members from industrialised countries could best service the needs of the developing countries and LDCs. With this in mind, in November 1998 the Committee asked the Secretariat to produce a detailed checklist of priority areas for technical assistance for each Member of the developing countries. At the same time, the Committee decided to increase the flow of information to and from other Organisations involved in customs valuation, in order to better co-ordinate their respective activities (note 9). During the 1999 sessions, the Committee continued its analysis of areas in which increased cooperation with other International Organisations was achievable, even the Inter-American Development Bank presented its technical assistance programme at one of the meetings of the WTO Committee on Customs Valuation.

16. But the most recent development of importance in the area of technical assistance is without doubt the European communities’ "Technical Assistance Project on Customs Valuation" presented during the official session of the Committee on 14 June 2000. This document was later the subject of informal consultations carried out under the auspices of the Secretariat, the conclusions to which were made public by the Chairman of the Committee on Customs Valuation during its last session on 21 July 2000. The following points, drawn from the project presented by the European Community, were accepted by the vast majority of the Members and deserve special attention :

  • The Committee on Customs Valuation needs to revitalise its activities in the field of technical assistance.
  • There is an urgent need to develop a co-ordinated approach to technical assistance with other International Organisations in order to improve efficiency.
  • Technical assistance must be demand-driven which means that needs assessments are essential.
  • As for the financing of technical assistance programmes, the principle is re-stated that funds are always easier to secure for projects of a concrete nature, as opposed to a framework of global and abstract financing. Therefore, the emphasis must be placed on defining the content of technical assistance programmes (note 10).
  • Finally, with regard to the beneficiaries of this technical assistance, the European Community re-states the principle according to which all those who have a genuine need should have access to assistance, "whether they signed the Agreement 10 months or 10 years ago". The important issue, above all, is to define needs clearly.

17. Have all these programmes been effective and have they really helped the developing countries and LDCs to implement the Agreement on Customs Valuation? What are the remaining priorities in terms of assistance needs for these countries and what means can be brought to bear? These are the very questions which the AITIC seminar will address.


Note 1 : Details of the main provisions of the Agreement are set out in the AITIC Background Note of February 2000 on Customs Valuation. (return to text)

Note 2 : Today, the WCO has 153 Member States whereas the WTO has only 138. It is interesting to note that 4 countries are currently Members of the WTO without belonging to the WCO: Bahrain, Costa Rica, El Salvador and Honduras. (return to text)

Note 3 : During the preparations for the WTO 1999 Ministerial Conference in Seattle, several developing countries presented proposals on various aspects of the Agreement. These cover a broad spectrum: from amendments to the Agreement to making it more expeditious. See for example WTO document WT/GC/W/227, 5 July 1999. (return to text)

Note 4 : Some one hundred countries (many of them developing countries and LDCs) had been using, and in some cases continue to use, the Brussels Definition of Value to determine the notional price upon which customs duties are based when goods cross borders. However, the United States, Australia, Canada and New Zealand have long been using another method for evaluating price; this was the method chosen under the WTO Agreement on Customs Valuation, and all the Members of the Organisation now have to conform to it, which implies that a large number of countries now have to make considerable efforts to adapt, particularly with regard to the training of customs staff. (return to text)

Note 5 : The basic rule of the Agreement, as defined in its 1st article, is that the price of the goods upon which customs duties are levied must be determined according to the transaction value method. If a State does not have all the information necessary to determine this transaction value, then it may use one of the other four methods outlined in the Agreement, but in a clearly-defined order. In other words the customs may only employ a method if the preceding one is unusable: 1) transaction value method; 2) comparative method; 3) deductive method; 4) computed or reconstituted value method; 5) method of last resort. See AITIC Background Note of February 2000 for a brief description of each of these methods. (return to text)

Note 6 : Despite the fact that the Agreement does not allow minimum values as a basis for determining the customs valuation of goods for import. (return to text)

Note 7 : According to developing countries, this is believed to account for 45 to 65% of State revenue. (return to text)

Note 8 : A communication from Kenya, on behalf of the African Group during the preparations for the WTO Ministerial Conference in Seattle, made clear that the technical assistance granted to these countries had been insufficient to palliate their institutional and human deficiencies (WT/GC/W/301, 6 August 1999). (return to text)

Note 9 : The following organisations were concerned: the African Development Bank, the Asian Development Bank, The European Bank for Reconstruction and Development, The Inter-American Development Bank, the IMF, UNCTAD, the World Bank and the WCO. (return to text)

Note 10 : Some Members from developing countries have suggested for example that it would be helpful to differentiate more clearly between technical assistance programmes and those aimed at capacity building. (return to text)


Annex 1 :

Members who have requested an extension for the implementation of the Agreement as of 26 April 2000, WTO document G/VAL/2/Rev.10/Corr.2.

Members under the Article 20.1 five-year transition period







Burkina Faso







El Salvador


Central African Republic





United Arab Emirates




Members for which the Article 20.1 five-year delay period has expired and which have either requested an extension or have been granted an extension under paragraph 1, Annex III

Extension requested

Extension granted



Côte d'Ivoire



Sri Lanka





Dominican Republic


Members which have invoked a transition period of three additional years to apply the computed value method under Article 20.2








Costa Rica


Brunei Darussalam











Members who have made no notifications

Antigua & Barbuda





Saint Kitts & Nevis


Republic of Guinea

Saint Lucia


Kyrgyz Republic

Saint Vicent and the Grenadines



Sierra Leone



Solomon Islands

Democratic Rep. of the Congo




Papua New Guinea



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Annex 2 :

Members who have requested a reservation for the implementation of the Agreement as of 26 April 2000, WTO document G/VAL/2/Rev.10/Corr.2.

Members which have requested or have been granted a reservation to maintain a system of minimum values for a limited time under paragraph 2, Annex III

Reservation required

Reservation granted






Members which have invoked paragraphs 3 and 4 of Annex III which have no expiration date








Costa Rica


Brunei Darussalam










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