Article V


Article V of the GATT (1994, Freedom of Transit) provides for freedom of transit of goods, vessels and other means of transport across the territory of WTO members via the routes most convenient for international transit.
It specifies:

  • equal treatment independent of a vessel's flag, origin, departure, entry, exit, destination or ownership of the goods or vessels;
  • prohibition of unnecessary delays or restrictions to traffic in transit;
  • prohibition to levy Customs duties, transit duties and other transit-related charges (except for charges for transportation or those commensurate with administrative expenses entailed by transit, or with the costs of services rendered);
  • level of charges levied should be reasonable for the conditions of traffic;
  • most favoured nation treatment with regard to charges, regulations and formalities.

Relevance of GATT Article V

Many countries depend on international transit, i.e. crossing the territory of another state as part of the transport journey, to have access to the sea and reach markets. Land-locked countries depend on transit to have access to seaports. Two issues are of key interest to land-locked countries: the right for and conditions of the transit passage; and the efficiency of formalities that have to be undertaken for the Customs transit procedure or transit transport operations.
GATT Article V reiterates the principle of freedom of transit. This is a principle of law that has been the subject of various international conferences and conventions: the Barcelona Statute on Freedom of Transit; the New York Convention on Transit Trade of Land-locked Countries; and UNCLOS III. It was also included in 1949 in the GATT. The principle, calling for granting access to the sea, or passage across the territory, is not itself sufficient to ensure that countries enjoy freedom of transit.
Transit traffic, in particular by road transport, faces obstacles due to the regulatory framework for domestic and international traffic and treatment at and behind borders. Hence, transit traffic is subject to multiple controls, restrictions, and a complex regulatory environment.

On one hand, the right to cross the territory of a transit country and the conditions for this transit traffic have been agreed in bilateral or multilateral agreements. These agreements define the numbers of vehicles authorized for transit traffic, and the types of services that they can offer, as well as license requirements.

On the other hand, delays at borders are caused through lengthy procedures and security measures put in place to monitor and control transit traffic. These security measures are put in place to ensure that goods in transit are not diverted to the market of the transit country, without paying the duties and taxes applicable. Security measures commonly include escorts by Customs, as well GPS tracking of the truck and/or container. It is also common for Customs authorities of the transit country to ask for the deposit of a financial guarantee and security (in cash or as a bond), covering the amount of duties and taxes the transit goods to be paid if put for consumption on its territory. Transit traffic may also suffer from discretionary treatment, frequent en-route controls and checkpoints, and requests for payments to individual officials, and sudden changes in regulations covering transit traffic. A USAID-funded project on transport corridors in West Africa gathers data on checkpoints and bribes on six main corridors and updates and publishes them regularly. The findings of the 17th report, covering the period July-September 2011, are shown in the picture below.

 

 

Transit traffic is mainly regulated through cross-border agreements: multilateral or bilateral transit and transport agreements. These agreements cover market access issues, as well as treatment of goods and means of transport at and behind borders. They have the potential to facilitate transit traffic through, inter alia, the use of a common transit document, mutually recognized controls and seals, and a cross-border guarantee scheme. The most widely known regional transit agreement is the TIR Convention.