Article 3: Advance Rulings

Each Member shall provide binding written decisions about admissible customs disciplines to the applicant traders before the importation of goods


What is covered?

Scope

Pursuant to Article 3 of the TFA, WTO Members shall issue advance rulings, upon written request of the applicant that has submitted all necessary information on specific aspects of trade in good – namely the classification, and the origin of goods – in a reasonable, time-bound manner – prior to the importation. The advance ruling must be valid for a reasonable period of time provided the law or circumstances have not changed.

The decision in writing of the customs, once made, will be binding to the entire customs administration for a specified reasonable period of validity. In addition to providing advance rulings with regard to the tariff classification and the origin of good, which is mandatory, the Member is also encouraged to provide advance rulings on:

  1. The appropriate method or criteria used to determine the customs value under a particular set of facts;
  2. The applicability of Member’s requirements for relief or exemption from customs duties;
  3. The application of the Member’s requirements for quotas, including tariff quotas; and
  4. Any additional matters for which a Member considers it appropriate to issue an advance ruling.

Core obligation

Each Member is required to set up procedures to issue written advance rulings in a reasonable, time-bound manner to applicants (exporter, importer, or any person with a justifiable cause or a representative there of) who have submitted a written request. The ruling will be binding on the Member that has issued it, in respect of the applicant that has sought a decision from the Member country. In addition, it is optional for the Member to provide that the ruling is also binding on the applicant.

Legal standing to submit advance rulings requests

The TFA in Article 3.9 (c) opened the possibility to apply for an advance ruling to a wide range of individuals. Thereby, the advance ruling is to be issued upon request from an importer or exporter or any person with a justifiable cause. Then, a carrier, a freight forwarder, a customs broker, or even a representative of any of the aforementioned individuals may request an advance ruling.
Article 3.9 (d) provides that a Member has the discretion to require – “may require” – that the applicant has the legal representation or registration in its territory. However, WTO Members are compelled to make sure to the extent possible that these requirements do not restrict the categories of persons eligible to apply for advance rulings – with special consideration for the needs of SMEs – and that requirements are formulated in a clear and transparent way, and do not constitute a means of arbitrary or unjustifiable discrimination.

Publication

Under Article 3.6 each Member shall publish, at least:

  1. The requirements needed to submit the application for an advance ruling, including the information to be provided and the format;
  2. The time period within which it will issue an advance ruling; and
  3. The length of time for which the advance ruling is valid.


In addition, WTO shall endeavour to make publicly available any information on advance rulings, which it considers to be of significant interest to other interested parties, taking into account the need to protect commercially confidential information. This means that Members must demonstrate that they are carrying out efforts to implement the provision under consideration.

Declining

A WTO Member may decline to issue an advance ruling to the applicant where the question raised in the application:

a) Is already pending in the applicant’s case before any governmental agency, appellate tribunal, or court; or
b) Has already been decided by any appellate tribunal or court.

The use of the tense “may” denotes that the WTO Member enjoys a legitimate discretion to refuse to issue an advance ruling only in those specific cases listed above.

Nonetheless, if a Member declines to issue an advance ruling, it is required to promptly notify in writing the applicant, clarifying which were the relevant facts and the basis that led to its decision not to issue a ruling upon request of the applicant.

Validity, revocation, modification or invalidation of advance rulings

Article 3.3 requests Member countries to ensure that the ruling be valid for a reasonable period of time after its issuance unless the laws, facts or circumstances supporting that ruling have changed. This measure is therefore meant to provide traders with the certainty and predictability of the treatment of goods at the time of importation discouraging sudden and unmotivated changes.

If a Member decides to revoke, modify or invalidate an advance ruling, Article 3 requests the Member Country to promptly notify in writing the applicant, setting out the relevant facts and the basis for its decision. One of the reasons may be that the applicant provided with incomplete, incorrect, false or misleading information. In this case, if a WTO Member revokes, modifies or invalidates an advance ruling with retroactive effect, it may only do so where such incomplete, incorrect, false, or misleading information grounded the advance ruling. It is worth mentioning that a change in the laws, facts or circumstance will result in the invalidity of an advance ruling, i. e. the entry into force of a Free Trade Agreement containing preferential rules of origin or a change in the tariff classification regulation.

Pursuant to Article 3.7, each Member is required to provide, upon written request of the applicant, a review of the advance ruling or the decision to revoke, modify, or invalidate the advance ruling. The footnote to this paragraph specifies that a review may be provided – either before or after that the ruling has been acted upon – by the official, office or authority that issued the ruling, or by a higher or independent administrative authority, or by a judicial authority. Moreover, the footnote clarifies that the Member country is not required to provide the applicant with recourse to paragraph 1 of Article 4 on procedures for appeal or review.

What is not covered?

The Measure does not require having a dedicated facility issuing advance rulings at every customs office. Indeed, best practices in countries that have already implemented the measure show that it is more efficient to do it at the national level in the headquarters of the customs authority.

Similarly, the Measure does not mandate the obligation to create a separate functional unit that handles advance rulings cases. However, it would be recommendable to centralise the technical competence in a specialized office, as it will result in consistency of the decisions and accountability of the staff in charge of administering the advance rulings.

The Measure does not also specify the exact duration of the validity of the advance ruling, or the time period by which WTO Members will issue the decision. Each WTO Member shall decide and publish the time period to issue an advance ruling. In any case, such period should be minimized to the extent possible to facilitate trade procedures, otherwise traders will not find useful advance rulings issued within long and uncertain time periods. Therefore, it is strongly recommended that traders should be made aware of the timelines of the decisions. It is worth to mention that the time period to issues an advance ruling on the origin of a good is 150 days under the WTO Agreement on Rules of Origin.

Pages that cite the Notes: