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The Administration of the Vocabulary of International Trade: The Adaptation of WTO Schedules to Changes in the Harmonized System

Published online by Cambridge University Press:  06 March 2019

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A common language is indispensible for reaching and maintaining understanding in all inter-subject relations, including international relations. One element of today's common language in the field of international trade in goods is the Harmonized Commodity Description and Coding System (the Harmonized System/HS) which is maintained by the World Customs Organization (WCO). The HS provides for a common vocabulary by classifying all traded goods according to a nomenclature. This common vocabulary facilitates, and avoids misunderstandings in, communications about products. It thus reduces transaction costs and consequently is of eminent economic importance for today's globalized trade relations. Take for example WTO tariff negotiations with respect to chocolate: While one party might assume that the product commonly referred to as white chocolate is included in the negotiations on chocolate, the other trading partner might assume that it is excluded for the reason that it does not contain cocoa and thus does not qualify as chocolate. Reference during the negotiations to specific positions of the HS nomenclature reduces the probability of such misunderstandings. If during the exemplary tariff negotiations parties would refer to the HS heading Chocolate no party could later claim that the negotiated tariff should also apply to white chocolate since the HS classifies the product which is commonly referred to as white chocolate under the heading Sugar Confectionary (and there under a specific sub-position) whereas chocolate containing cocoa is classified under the heading Chocolate. The vocabulary of the Harmonized System is a point of reference for many legal norms which relate to international trade in goods – in my example the legal obligation to comply with the negotiated tariff concession (Art. II GATT) and not to discriminate against like products (Art. I, III GATT). While the HS provides the vocabulary, these norms provide the grammar of a common language of international trade.

Type
Thematic Studies
Copyright
Copyright © 2008 by German Law Journal GbR 

References

1 To be sure, even when the HS is used, classification of products will frequently be contentious. For example, the dispute between the European Communities on one side and Brazil and Thailand on the other concerning the classification of salted frozen boneless chicken cuts. See EC – Chicken Classification, WT/DS269, 286/R (panel report), WT/DS269, 286/AB/R (Appellate Body Report).Google Scholar

2 The metaphor of the HS as a vocabulary therefore seems more fitting than that of the HS as the language of international trade which is often used. For example, the WCO referring to the HS as a universal economic language. See http://www.wcoomd.org/home_wco_topics_hsoverviewboxes_overview_hsharmonizedsystem.htm; Petros C. Mavroidis, Trade in Goods. The GATT and the Other Agreements Regulating Trade in Goods 73 (2007) (depicting the HS as supplying the common language to describe goods).Google Scholar

3 In the following when I speak of schedules of concessions I mean schedules of concessions with respect to goods which are annexed to the General Agreement on Tariffs and Trade (GATT) and according to Art. II:7 GATT form an integral part of the GATT.Google Scholar

4 For a study that aims at a conceptualization of horizontal cross-linkages, see Kal Raustiala & David G. Victor, The Regime Complex for Plant Genetic Resources, 58 International Organization 277–309 (2004). Cross-linkages between international dispute settlement organs are relatively well-studied and there have been several attempts to conceptualize them in legal terms. See e.g. Jasper Finke, Die Parallelität internationaler Streitbeilegungsmechanismen. Untersuchung der aus der Stärkung der internationalen Gerichtsbarkeit resultierenden Konflikte (2004); Heiko Sauer, Jurisdiktionskonflikte in Mehrebenensystemen (2008).Google Scholar

5 Moreover institutional linkage seems to be a more plausible and also a more desirable solution to the perceived dangers of fragmentation than, for example, a hierarchy of norms which does not leave room for politics. For an approach that stresses inter-institutional cooperation, see Gunther Teubner & Andreas Fischer-Lescano, Regime Collisions: The Vain Search for Legal Unity in the Fragmentation of Global Law, 25 Michigan Journal of International Law 999–1046 (2004).Google Scholar

6 This could provide a principled answer to the question whether in the EC – Chicken Classification the WTO panel or rather the HS Committee of the WCO should have decided the classification question. See (note 1).Google Scholar

7 This could also be characterized as the exercise of public authority. See Armin von Bogdandy, Philipp Dann and Matthias Goldmann, Developing the Publicness of Public International law: Towards a Legal Framework for Global Governance Activities, in this issue (employing a wide definition). Administration as used and defined here, however, is a narrower term since it does not encompass acts taken by the highest political organs that are preceded by processes of inter-state diplomatic bargaining.Google Scholar

8 For example the recent draft guidelines to further the practical implementation of Art. 6 of the SPS which explicitly provide that they shall “not add to nor detract from the existing rights and obligations of Members under […] any […] WTO Agreement” G/SPS/W/218, para. 2 (25 February 2008); on the activities of the FTSC see Joseph Windsor, in this issue.Google Scholar

9 In the form of workshops organized by the secretariat for national administrators.Google Scholar

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13 The classification under the residual position “Other” results from the fact that the only other sub-position is titled “Chewing gum, whether or not sugar-coated.”Google Scholar

14 The Brussels Convention had replaced the so-called Geneva Nomenclature of 1937.Google Scholar

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18 HS Convention preamble, first recital.Google Scholar

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21 Examples are the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the Basel Convention, The United Nations Food and Agricultural Organization, or the Montreal Protocol. The trade statistical systems of the UN (e.g. the Standard International Trade Classification (SITC) and Central Product Classification (CPC)) are also based on the HS nomenclature.Google Scholar

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24 Peter Van den Bossche, The Law and Policy of the World Trade Organization 379 (2005).Google Scholar

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34 Proposals by national governments are often prompted by private sector initiatives that are addressed to the customs or trade ministry and are considered by all agencies which have an interest in the matter; as an example of an international institution proposing a HS change, see Decision 13.37 of the Conference of the Parties of CITES according to which the secretariat shall “liaise with the World Customs Organization to promote the establishment and use of specific headings within the standard classifications of the Harmonized System for tortoises and freshwater turtles and for products thereof.”Google Scholar

35 Rule 2(b) Rules of Procedure of the Review Sub-Committee.Google Scholar

36 The amendment proposals are drafted by the HS Working Party.Google Scholar

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41 Art. 6:4 HS Convention and Rule 19 Rules of Procedure of the HS Committee.Google Scholar

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45 GATT panel report in Spain – Unroasted Coffee, BISD 28S/102, para 4.4.Google Scholar

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48 Concessions which are included in the schedules and which may be affected by adaptation to HS changes are not only tariff concessions. However the impact of HS changes is greatest with respect to tariff concessions which shall be the focus of the following observations.Google Scholar

49 For a more detailed analysis of how the adoption or changes of the HS nomenclature can affect tariff concessions, see Dayong Yu, the Harmonized System – Amendments and their Impact on WTO Members’ Schedules, WTO Staff Working Paper ERSD-2008-02, at 12, 13, available at: http://www.wto.org/english/res_e/reser_e/ersd200802_e.htm; see also WTO Procedures for Introduction of HS2002 Changes to Schedules of Concessions, WT/L/405, Attachment A, at 3, 4.Google Scholar

50 L/5470/Rev. 1, Annex 1, para 4.2.Google Scholar

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52 Decision of 10 November 1980, C/113 and Corr. 1, BISD 27S/26.Google Scholar

53 Members which may participate in Art. XXVIII GATT renegotiations are Members which have an initial negotiation right or a principal supplying interest. On principal supplying interest see also the Understanding on the Interpretation of Art. XXVIII of the General Agreement on Tariffs and Trade 1994.Google Scholar

54 BISD S 27, 26.Google Scholar

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58 WT/L/673, para. 4 and Annex 1.Google Scholar

59 WT/L/673, para. 4.Google Scholar

60 WT/L/673, Annex 2, para. 4.Google Scholar

61 Preferably according to the methods set out above to avoid a negative impact on the value of concessions, see WT/L/673, Annex 2, para. 5.Google Scholar

62 L/5470 Rev. 1 Annex 1, para 1.Google Scholar

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83 Under the GATT 1947 the HS procedures were established by the Committee on Tariff Concessions which had been created in 1980 by the GATT Council; Minutes of the Council meeting on 29 January 1980, C/M/138, at 10.Google Scholar

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86 Rule 33 Rules of Procedure of the Committee on Market Access, G/L/148.Google Scholar

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94 G/MA/M/38, Add. 1, para. 1.2.Google Scholar

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98 The information notes of the GATT Secretariat, TAR/W/22, TAR/W/81, TAR/W/89.Google Scholar

99 G/MA/M/37, paras. 3.2-3.6 and G/MA/M/45, para. 6.4.Google Scholar

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103 G/MA/M/39, paras. 4.9-4.19.Google Scholar

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112 An initiative by a group of developing countries for a formal amendment extending the 90 days time limit did not achieve consensus. Since there was no consensus in the committee the matter was taken to the Council and the CONTRACTING PARTIES where consensus could also not be reached due to objections by some contracting parties that such an amendment might delay the transposition process too much. The CONTRACTING PARTIES consequently referred the matter back to the Committee on Tariff Concessions for an appropriate solution (SR.42/5, at 5).Google Scholar

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124 A Member may however bring a non-violation complaint against a Member which received a waiver, this possibility is acknowledged in the Understanding.Google Scholar

125 This ability to change legal obligations established by primary law distinguishes waiver decisions from other acts of secondary law which usually establish a level of law beneath primary law and thus a hierarchy of norms. Due to these characteristics Benedek characterized the granting of waivers under GATT 1947 as a special form of lawmaking by secondary law (“sekundärrechtliche Rechtsfortbildung”) note 11, 141.Google Scholar

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130 G/MA/M/42, para. 3.11.Google Scholar

131 The decision of 15 June 1999 extended the HS96 collective waiver and was granted with retroactive effect to 30 April 1999, WT/L/303, footnote 1.Google Scholar

132 WT/L/675, para. b(iii).Google Scholar

133 The latest report of 6 May 2008 is contained in G/MA/198.Google Scholar

134 Proposal by Sweden, TAR/W/88 (23 September 1993).Google Scholar

135 This proposal was based on proposals submitted by delegations; for the chairman's proposal see TAR/M/36, Annex, at 3.Google Scholar

136 Developing country Members are further disadvantaged with respect to the renegotiation of concessions due to the transaction costs incurred in such renegotiations and their limited bargaining power.Google Scholar

137 The so-called TRIPS waiver (WT/L/540) was granted to facilitate the importation by Members of generic drugs in case of public health crises, or the Kimberley waiver (WT/L/518) which was granted to legalize trade restrictions implementing the Kimberley Process Certification Scheme to combat trade in so-called blood diamonds.Google Scholar