Navigating the complexities of international trade requires a clear understanding of the regulations that govern market access. Non-tariff barriers, ranging from customs fees to technical regulations, often pose significant challenges for businesses seeking to trade goods across borders. These barriers, governed by specific GATT provisions and agreements, are designed to balance trade facilitation with critical objectives like public health, environmental protection, and fair competition. This blog will explore these barriers in detail, examine the exceptions under GATT 1994, and discuss the practical implications for businesses aiming to thrive in the global marketplace.
Access to markets—non-tariff obstacles
Many non-tariff barriers and quantitative constraints impede the market access of commodities. Non-tariff barriers are not subject to any general regulations. Instead, each non-tariff barrier is governed by particular GATT rules (such as quantitative restrictions) or the terms of specific GATT-annexed agreements. The following are the most common non-tariff barriers and the relevant clauses or agreements:
| Non-tariff barrier | Agreement / Provision | Objective |
|---|---|---|
|
Sanitary and phytosanitary (SPS) requirements |
Agreement on the Application of Sanitary and Phytosanitary Measures |
The agreement regulates food safety as well as plant and animal health. The SPS Agreement allows Member States to use measures to protect plant, animal and human health or life provided that these measures are based on science and do not unjustifiably discriminate between Member States |
|
Customs fees and formalities |
Article VIII of the GATT 1947 |
Article VIII addressed various fees and charges (other than tariffs) and formalities imposed on or in connection with import and export and the services rendered at the border. The rules aim to prevent these fees, charges and formalities from hindering market access and to reduce the cost of these transactions |
|
Technical regulations |
Agreement on Technical Barriers to Trade (TBT) |
The TBT Agreement allows Member States to use technical regulations, standards and testing procedures provided that these do not create unnecessary barriers to trade |
|
Customs valuation |
Article VII of the GATT 1947 and the Agreement on Customs Valuation |
Article VII and the Agreement on Customs Valuation prohibits the use or arbitrary or fictitious customs values by providing for a system of customs valuation |
|
Import licensing procedures |
Agreement on Import Licensing |
The Agreement on Import Licensing prevents the procedures for obtaining import licences from being restrictive. It also requires simplicity, transparency and non-discriminatory application and administration |
|
Rules of origin of a good |
Agreement on Rules of Origin |
The Agreement on Rules of Origin ensures that the criteria used to determine where a product was made is not restrictive to trade and administered in a non-discriminatory manner |
GATT 1994 exceptions
The GATT contains several exceptions that permit Member States to depart from the GATT’s rules.
They are:
- general exceptions
- security exception
- safeguard measures
- balance of payment exception
- waiver, and
- free trade arrangement exception
The general exception, GATT
Article XX contains the General Exceptions to the GATT disciplines. Accordingly, several measures may be implemented, provided they do not amount to arbitrary or unjustified discrimination among Member States. The following actions are permitted:
- Required to safeguard public morals (Article XX(a)).
- required to safeguard the health or life of people, animals, or plants (Article XX(b))
- Concerning the import and export of silver or gold (Article XX(c))
- Required to ensure adherence to laws or rules that do not conflict with the GATT’s provisions, such as those about the enforcement of customs, the protection of patents, trade marks, and copyrights, the enforcement of monopolies operating under paragraph 4 of Article II and Article XVII, and the avoidance of deceptive practices (Article XX(d)).
- Pertaining to goods made using jail labour (Article XX(e)).
- It is mandated under Article XX(f) to safeguard national treasures of artistic, historic, or archaeological significance.
- As long as such measures are taken in conjunction with restrictions on domestic production or consumption, they are relevant to protecting limited natural resources (Article XX(g)).
- Carried out in fulfilment of duties under any intergovernmental commodities agreement that satisfies requirements submitted to the Member States and accepted by them or submitted by such criteria and accepted by them (Article XX(h)).
- Involving limitations on exports of domestic materials required to guarantee essential quantities of such materials to a domestic processing industry during times when the domestic price of such materials is kept below the global price as part of a governmental stabilisation plan, as long as such limitations do not interfere with the non-discrimination provisions of this Agreement (Article XX(i)) or increase the exports of or protections provided to such domestic industry. And
- necessary for the purchase or distribution of goods in general or in areas where there is a shortage; provided, however, that any such actions are by the idea that each party to the contract has a right to a fair portion of the global supply of those goods and that any actions that conflict with the other provisions of the Agreement are immediately terminated once the circumstances that gave rise to them have passed.
Article XX(a), (b), (d), and (g) are the measures that are frequently seen. The first thing to determine is whether the measure conflicts with a GATT discipline before considering whether Article XX offers a legitimate exception to any GATT rule. It is unnecessary to ascertain whether the measure qualifies as a justifiable exception under Article XX if it is not contradictory.
Article XX lays out a two-tier test that must be fulfilled for the measure to be justified after it has been established that it conflicts with a GATT discipline:
- Does the action fit within one of the permitted actions specified in Article XX (a) through (j)?
- If yes, does the measure meet Article XX’s opening clause?
- The appellate body has emphasised the significance of the order of analysis in relation to the two-tier test. Analysing the second question and responding to the first is not feasible.
Does the measure have to be taken to safeguard public morals?
Two questions must be addressed to determine if the proposal is covered by Article XX(a):
- Was the goal of the measure to uphold public morals?
- If yes, is upholding public morality required?
These two concerns must be considered before determining whether the bill satisfies the opening chapeau of Article XX.
According to the Appellate Body, Member States should have some latitude in defining and implementing public morals in accordance with their own beliefs and systems. Therefore, determining the precise nature of the public moral standard is unnecessary. All that needs to be established is that the action is within the bounds of the policy to uphold public morals.
The Appellate Body has decided that, in the context of Article XX, analysing “necessity” entails “weighing and balancing” several different elements. These considerations pertain to the action being argued to be “necessary” and potential substitute actions that the responding Member State may properly take to accomplish its intended goal. The steps to determine whether the measure is required were outlined by the Appellate Body:
- Initially, the ‘ relative importance’ of the values or interests the measure aims to safeguard is evaluated. Conceding that a measure is “necessary” if its goal reflected more vital or significant interests or values would be more straightforward.
- After that, attention should be directed to the other elements that must be “weighed and balanced.” To do this, one must evaluate, either qualitatively or quantitatively, how much the measure contributes to the desired outcome rather than just determining whether it contributes. And
- Next, the challenged policy should be compared to potential substitutes that would have a less distorting effect on trade.
Is the action required to safeguard the health or life of people, animals, or plants?
The same two-tier examination is used in Article XX(b) to assess whether the measure qualifies as an exception:
- Is the measure intended to safeguard the health or well-being of people, animals, or plants?
- If yes, is safeguarding the health or life of people, animals, or plants essential?
These two questions must be considered before deciding whether the measure satisfies the opening chapeau of Article XX.
- Member states have some latitude in determining the degree of protection they need to safeguard the health, life, and property of people, animals, and plants. Therefore, it only needs to be decided whether the action is within the policy’s bounds to safeguard the health or life of people, animals, or plants. Furthermore, the same necessity test that the US Gasoline Appellate Body established will be used.
Is the measure covered by Article XX(d)?
Article XX(d) employs a two-tiered method to determine if the measure is eligible for an exemption to the GATT disciplines. In connection with the test, the following needs to be determined:
- The measure must not conflict with a GATT requirement and must be designed to “secure compliance” with laws or regulations.
- This kind of compliance requires that the action be “necessary.”
There are three components to the first question.
They are:
- the existence of rules or laws. The measure will not constitute an exception to the GATT rules if no laws or regulations are a part of the domestic legal system.
- that the terms of the GATT do not conflict with such laws or regulations. The legislation will not be exempt from the GATT’s rules if it conflicts with one of its provisions. And
- that the action being defended is intended to ensure adherence to those laws or rules. To ensure compliance, a measure has to be created.
The measure does not have to provide 100% certainty of the outcome it seeks to achieve. The proposal will not be exempt from the GATT regulations if it fails to ensure conformity. The same necessity test that the US Gasoline Appellate Body established will also be used.
If you need further guidance, don’t hesitate to reach out to Frei Solicitors. Schedule your complimentary 30-minute consultation with Hakan Doğancı today.
