OECD, AEO and goods and services in international trade

Our focus into AEO and customs compliance brings us to read and share (very shortly) the very interesting OECD Policy paper n.274/2023 “interactions between goods and services in international trade” which:

1. “…examines whether the customs valuation systems and rules of origin are sufficiently attuned to the changing landscape of commercial realities characterised by new and diverse configurations of goods-services trade…”;
2. “…suggests that, while goods-services interactions in international trade do not require a radical restructuring of existing trade law, challenges for the current approaches and practices for customs valuation and origin determination call for policy solutions specific to each type of goods-services configuration…”;
3. Identifies and distinguishes the following trade configurations (goods-services) “…(i) the type of interaction between goods and services, and, when relevant, (ii) the mode of provision of traded services…”. From this analysis comes this taxonomy: 1) configuration with embodied services; 2) configuration with complementary services; 2) configuration with substitute services or ancillary goods. In the first case, the costs of services are included in the value of the good imported (logistic, R&D, engeneering); in the second case, the cost of services “… are traded alongside the good, usually in a bundle specified in a contract. In these cases, services are an element of the transaction that can be distinguished and separated from the physical good so that the importer could theoretically acquire ownership of the traded good without the services. These configurations feature services which are complementary to the traded goods…”; in the third case, “…Complementary services include those that facilitate sale and usage of the good without altering its functionality… as well as services that modify and extend the scope of the good’s functions, possibly tailoring new uses to the customer’s needs…”.

CUSTOMS VALUATION: The report, then, focuses on customs valuation by recalling that: a) the customs valuation is based on actual value/transaction value of the goods; b) the actual value is impacted by “…First, an embryonic notion of what would become the standard of transaction value as a basis for the application of tariffs was laid down: “(i)t would be in conformity with Article VII to presume that ‘actual value’ may be represented by the invoice price, plus any non-included charges for legitimate costs which are proper elements of ‘actual value’ and plus any abnormal discount or other reduction from the ordinary competitive price” [GATT Annex I, Ad Art VII, 2(1)]. Second, clear indication was given that trade transactions between non independent parties needed special attention [GATT Annex I, Ad Art. VII, 2(2)]. The transaction value standard and the focus on buyer and seller that were not independent of each other were elaborated in the subsequent Agreement on Implementation of Article VII GATT concluded in 1978 as part of the Tokyo Round of GATT negotiations…”.

CUSTOMS ORIGIN: the report underlines that:

• “…Preferential rules are designed to grant enhanced market access opportunities to entities associated with specific sources of supply, usually within the framework of a preferential trade agreement (PTA)…”
• “…Non-preferential rules of origin are used when trade is conducted on a most-favoured nation (MFN) basis…”

From a compliance (AEO-trusted trader) perspective, it is important to underline that:

1. The conclusions do the mentioned report can directly impact on some of the most important pillars of customs obligatios: customs valuations and origin;
2. In the self assessment questionnaire for AEO there are specific questions about value and origin which are and will impacted by the “Servicification” of the goods;
3. Risk assessment and monitoring processing should be embrace the servicification of goods and their related customs rules.