Trade Facilitation and Advance Rulings

1. Customs and trade facilitation

At the Singapore Ministerial Conference held in December 1996, the concept of trade facilitation was introduced for the first time into the official language of the World Trade Organization (WTO), understood as the process of simplifying and harmonizing international trade procedures. That is, the practices and formalities that refer to the collection, presentation, communication and processing of data necessary for the movement of goods in international trade. (1)

Obstacles to this process include excessive documentation requirements, pointless investigations, inadequate inspections, lack of transparency, cumbersome and lengthy procedures, lack of controls based on risk assessment techniques, lack of modernization of customs and coordination with other areas of government, among other issues. 

Strictly speaking, the trend opposite to facilitation is the excessive bureaucratisation of customs procedures, which generates unnecessary delays as well as legal uncertainty.

In this scheme of balance between control and facilitation, the concept of smart controlControl based on chance will continue to exist, but is gradually giving way to selective control, primarily aimed at sensitive operations, previously defined as such, based on the formation of risk patterns. 

Furthermore, the interaction between the various customs authorities is becoming increasingly important. The collaboration agreements between customs authorities, the warnings issued by the customs authorities of the country of origin or provenance of the goods and other early warnings that allow customs authorities to anticipate intelligence tasks in order to exercise their control function appropriately are becoming more important.

Certainly, customs administrators around the world are facing a series of important challenges in the face of the new world scenario of this 21st century, in which globalization has brought about an unprecedented international economic development.

There is an increasingly widespread demand for processes "just in time" which require ever shorter border crossing times; there is greater complexity in the global trade landscape, as a result of initiatives to liberalise it, which in turn have given rise to complex trade regulations and the proliferation of regional and multilateral agreements. 

On the other hand, this scenario of increased trade must be understood in a complex world where the problems of international terrorism, transnational organized crime, drug trafficking, human trafficking and international fraud have worsened.

All this has raised awareness in society regarding the importance of Customs. as a fundamental part of economic development and as guardians of the national border.

The challenge of modern Customs is therefore extremely complex, as it must seek to control the entry and exit of goods in a rigorous manner, taking into account especially the increase in terrorism, unfair trade, fraud, drug trafficking and, in general, the problems derived from international organized crime, which obviously seeks ports with fewer controls and, at the same time, develop its new role as facilitator of international trade, under whose protection the administrators will be able to optimize costs in order to achieve competitiveness on the world stage.

Specifically in relation to facilitation, it should be noted that in June 2005, the World Customs Organization (WCO) developed the regulatory framework to ensure and facilitate global trade, which establishes the principles and standards as minimum guidelines for action, for adoption by member countries. 

The four basic elements of the WCO regulatory framework are: a) harmonisation of requirements for electronic advance information; b) consistency and common patterns in risk analysis to address security issues; c) interaction between customs administrations, inspection at origin against the reasonable request of the country of destination, in high-risk cases; and d) determination of advantages for actors who comply with minimum security standards.

The regulatory framework for facilitation has two basic pillars of understanding. The first is the deepening of relations between customs administrations and the genuine exchange of information. The other pillar is the appropriate and permanent relationship between customs administrations and the private sector.

As regards relations between the world's customs authorities, one of the key issues is the advance exchange of information. To this end, the WCO considers it advisable to exchange information electronically, with systems based on harmonised messages that are interoperable. 

To ensure effective control and to ensure that the process does not hinder the smooth movement of goods, customs authorities must use modern technologies, including high-power X-ray and gamma ray machines and radiation-detecting devices, when inspecting high-risk shipments. The use of modern technologies to preserve the integrity of cargo and containers is another key element of this pillar.

2. The Facilitation Agreement

The Facilitation Agreement is the first multilateral trade agreement concluded since the establishment of the World Trade Organization (WTO). It was adopted at the Ninth WTO Ministerial Conference, held in Bali, Indonesia, in December 2013.

As soon as the WTO was born and after the signing of the Uruguay Round documents in 1993, several member states were already thinking about the next Round and one of the key points was precisely the issue of trade facilitation.

As anticipated, it was at the Singapore Ministerial Conference in 1996 that facilitation was first discussed. At this Conference, “facilitation” was definitively established as one of the salient features of customs activity. Since then, facilitation has begun to be measured performance Customs, depending on the time taken to lift or clear the loads.

WTO members therefore agreed to add the issue of trade facilitation to the Doha Development Round agenda, and in 2004 the Negotiating Group on Trade Facilitation was even created.

The Agreement reached in Bali at the end of 2013 provides a framework of rights and obligations that tend to improve border procedures in order to reduce time and costs, generating competitive improvements for states and individuals.

In Argentina, this Facilitation Agreement has been approved by the National Congress, through Law 27.373. The importance of the Agreement is clearly evident, as it introduces into the agendas of customs administrations around the world the definition of best practices for customs processes. 

The World Bank statistics are eloquent, the most efficient countries are the most competitive and facilitation tends to ensure agile and efficient customs processes, in order to promote the reduction of direct and indirect costs linked to international trade, in order to increase the competitiveness of companies and thus improve their performance, which in turn will generate greater economic growth. 

Specialized doctrine has highlighted that forty percent (40%) of cross-border costs are due to inefficiencies in procedures, such as delays in customs clearance, requests for excessive documentation and, in a repetitive manner, cumbersome documentation requirements and unnecessary inspections, among other issues (2). The Agreement is a call to attention regarding this reality and tends to define common policies that allow reducing times and costs.

It is worth bearing in mind the words of Pascal Lamy, then Director General of the World Trade Organization, when he spoke on this topic at the Chittagong Chamber of Commerce, Bangladesh, in 2013, when he pointed out that “Multilateral trade negotiations are sometimes difficult to relate to the day-to-day work of trade operations. But this is not the case with trade facilitation. Effective trade facilitation increases customs productivity, improves tax collection at borders and helps attract foreign direct investment. A multilateral agreement on trade facilitation could speed up the cross-border movement of goods and improve the transparency and predictability of trade and business operations.”

In short, facilitation aims to simplify, standardize, harmonize and automate the procedures applied to international trade, with the aim of speeding up the movement, release and clearance of goods.

This involves generating efficient, effective and agile procedures, so that the loads take the minimum time necessary for proper control to be carried out, depending on the circumstances of the operation, in order to reduce direct and indirect costs associated with international trade. This is the objective of facilitation, to reduce time and costs.

It is certainly a cultural change, a paradigm shift, because historically in many cases, customs administrations have not taken the “time” factor into account in their control tasks.

Certainly, one of the main problems faced by customs administrations has to do with the existence of cumbersome, complex and imprecise operational procedures, with no deadlines for their processing and not auditable in real time.

3. Thematic axes of the Facilitation Agreement

The Agreement deals specifically with the necessary publicity of the rules related to customs processes, customs duties, charges, tariff classification, valuation, quotas, among other issues (art. 1).

It also refers to the convenience of establishing a scheme of prior consultations between entities linked to foreign trade, before the entry into force of the regulations, linked to customs issues, in order to take advantage of the experience of the private sector (art. 2°).

It also deals with binding advance rulings, to be issued within a reasonable and determined period, in order to provide legal certainty to the administered. These contemplate the possibility that the administered party make a presentation before the arrival of the cargo, in order to clearly define the legal regime applicable to the operation. It emphasizes that this should be valid for a reasonable period, except for changes in the law. It also indicates that if the opinion is later modified, the administered party must be notified. 

Furthermore, it also deals with the publicity of these advance decisions, in cases where they may be of interest to other persons. It refers especially to queries related to the origin and tariff classification of goods, but it also encourages this modality for cases of customs valuation and, in general, tax issues (art. 3).

The Facilitation Agreement also requires that customs decisions be founded and motivated. It also guarantees the right of the administered to administrative and judicial review of customs decisions, the latter right being protected in almost all National Constitutions (Art. 4).

It also establishes measures related to impartiality, non-discrimination and transparency. It refers, in particular, to special notifications for reinforced inspections, the detention of cargo and the opportunity for second tests (art. 5).

It also establishes that the charges must be approximated to the service provided. And in relation to fines, it details the personality of the penalty as well as its proportionality. On the other hand, it guarantees the right of the subjects to a hearing for the defense, with a detailed explanation, in order to ensure the right of defense of the administered. It also highlights the attenuation of the amount of the fines established for the cases of self-reporting of the allegedly illicit acts (art. 6).

In terms of the clearance of goods, the agreement expressly refers to prior processing, electronic payment, the separation between the issuance and the final determination of rights, the guarantee regime, risk management, specific deadlines for release or clearance, as well as the existence of subsequent audits and measures that favour qualified operators. It also specifically regulates urgent air cargo shipments (art. 7).

It also deals with cooperation between border agencies. It refers in particular to the compatibility of days and hours; procedures and formalities; common services and joint controls that must necessarily exist in the performance of the various government offices that operate at the border (art. 8°).

The Agreement also has a section on formalities related to the import, export and transit of goods. In this regard, it expressly provides that the formalities and documentation requirements must be adapted to the fastest release and clearance of goods. In short, the provision aims to ensure that the formalities established are adopted and applied in an attempt to reduce the time and cost of clearing cargo. This provision expressly establishes the need for the existence of a Single Window for Foreign Trade (art. 10).

Finally, the Facilitation Agreement refers to freedom of transit (Article 11) as well as customs cooperation (Article 12).

4. The priorities of the Agreement 

In short, we can highlight that the Facilitation Agreement has established as main priorities that:

a) Laws and regulations related to the subject matter must be clear and precise, so as to avoid interpretative discretion. They must also be debated and then published. 

b) The application of customs regulations must be constant and uniform; and changes in interpretation must be applied to the future and not to operations that occurred previously, under the protection of the interpretation previously held by the competent officials. Regulatory changes and even interpretative modifications must be few and necessary, since the administrator has legitimate confidence in the acts of government. Otherwise, it threatens the stability of business.

c) It is essential to work on advance resolutions. In this way, an ex ante control is generated that removes interpretative doubts at the time of release and provides legal peace of mind to the actors; at the same time, it allows them to work on defining their costs and determining the price with customs certainty.

d) The publication of technical resolutions should be encouraged, whether they are of value, origin, classification or even those related to the definition of the tax regime or applicable prohibitions. In this way, greater transparency is encouraged, while the study and doctrine contained therein may be useful for a larger universe of subjects.

e) The Single Window for Foreign Trade (VUCE) is essential, as it will allow working on a uniform and comprehensive platform for procedures and documents related to international trade operations. This platform will allow unifying processes while improving controls, even allowing real-time audits. 

f) Selectivity, on the other hand, must be based on risk profiles and advance information. It must be fair, neither too little nor too much. In global terms, the aim is to control less than 10% of loads. 

g) The release of cargo must be immediate. There must be specific times for the release of goods. Likewise, in the event that there are doubts during the inspection, there must be a quick and expeditious release under the guarantee regime.

h) The need to establish subsequent audits and the separation between the release and the definition of the tariffs to be paid is established.

5. As a summary of the Facilitation Agreement

In short, the principles of effectiveness, efficiency and speed are fundamental in all administrative action, and must operate as guiding principles thereof. In effect, whatever the type of administrative function, whatever the sector or social reality subject to intervention, what interests the administered is to have access to an effective administration, which adequately fulfils the entrusted purposes, which responds quickly where its presence is needed, which acts promptly and effectively.

Certainly, administrative activity must be carried out in the interest of the general public, providing predictability to the practical development of the administrative function. This general interest certainly obliges officials to carry out their activities in an effective, efficient and rapid manner, which in customs terms means exercising due control over foreign trade operations in the shortest possible time. 

No one doubts that Customs must exercise rigorous control of borders. Clearly, that is their primary function. They must therefore exercise control over income and expenditure, in order to oversee the system of prohibitions and restrictions, whether economic or non-economic, and the system of taxes on foreign trade. 

However, it is essential that this control does not delay shipments for longer than strictly necessary, since delays generate costs and these entail a loss of competitiveness. Therefore, it is the responsibility of Customs to collaborate in facilitating international trade.

This does not mean that controls should be relaxed. On the contrary, the Agreement speaks of the effectiveness of control and not the absence of control. And this means that the delay must be strictly necessary, taking into account the particular conditions of the customs operation in question. 

It is therefore clear that there must be a fair balance between the rigorous control that must prevail at our borders, with the proper protection of citizens and the facilitation of international trade that allows for cost savings and, therefore, improves the competitiveness of national actors that must compete in a globalized world.

6. Regarding Advance Rulings (AR)

Certainly, before entering into a commercial transaction, it is necessary for the contracting parties to fully understand the legal consequences of their legal acts. In terms of international trade in goods, it is crucial for an importer to fully understand before agreeing to purchase a good, its tariff classification, the applicable tariffs, its particular regulations, the restrictions scheme that may exist based on its origin, the preferences that may be applied or even if it is subject to compensatory quotas.

An effective legal measure to prevent these questions from turning a good business into a bad one is to file a binding prior consultation with the customs authorities, who will resolve the issue brought to the study through an advance resolution.

These are written decisions that a Member provides to an applicant prior to the importation of the goods covered by the application, which establish the treatment that the Member will grant to the goods at the time of importation, with respect to the aspects of consultation that are decisive for determining the tax and restriction regime.

They constitute obligatory or binding provisions, which the State must observe. This is a measure that has enormous facilitating effects and also provides legal certainty to importers in their relations with Customs, since the resolutions issued by Customs will have the legal nature of being obligatory for it and therefore the interested party can have some assurance that he will not subsequently suffer claims from Customs for the operations that were adjusted to said advance resolutions (3).

7. The Latin American experience on AR

In Uruguay, the advance ruling regime is subject to legislation, as it is regulated in art. 194 of the CAROU (Customs Code of the Eastern Republic of Uruguay). It states that the holder of a personal and direct right or interest may make inquiries to Customs regarding the application of customs legislation to a current and specific situation. 

To this end, the person concerned must present the constituent elements of the situation that motivates the consultation, and is also authorized to express his or her reasoned opinion.

Decree 145/2015 established the regulations for this institute. It states that the resolution will have effects on operations that are documented subsequently (i.e. it does not apply backwards). It establishes that the resolution must be issued within 30 business days from the request. The publication of the resolutions is provided for and the right of the applicant to appeal is guaranteed.

Subsequently, through RG 44/2015, the National Customs Directorate of Uruguay regulated the consultation procedure. The requirements for submission, the formalities of processing, the corresponding deadlines and the consequences thereof were regulated there.

In Brazil, for its part, there is a prior classification consultation regime, established by Resolution of the Federal Revenue of Brazil (RFB) No. 2057 of 2021 and a prior consultation regarding the interpretation of tax and customs legislation regulated by Resolution of the Federal Revenue of Brazil (RFB) No. 2058 of 2021.

The regulations clearly establish who is entitled to make the request, the requirements that the request must contain, the formalities corresponding to its presentation, the effects that the advance resolution will have, the cases of divergences and their publication.

In Colombia, the Advance Resolution is regulated in art. 298 of decree 1165 of 2019. There it is defined as the act by which the customs authority (DIAN) before the importation of a merchandise, issues a resolution regarding the tariff classification; the valuation criteria; the origin; the return, suspension or other exemptions; the re-importation free of payment of customs duties; the application of quotas and in general any other matter agreed by Colombia through international agreements.

It regulates in detail who is authorized to request an early resolution, the forms and requirements for submission, its processing and issuance (3 months), notification, appeals, as well as its validity and its obligation.

In Chile, it is supported by Exempt Resolution 1629 of 2020 of the National Customs Service. There, the advance resolution is defined as the official and binding written pronouncement issued by the National Customs Service, prior to the processing of an import, export or re-entry destination, which affects any of the following matters: a) tariff classification, b) customs valuation or c) origin criteria. 

The general requirements for submission are regulated; the necessary documentation; special requirements depending on the classification, assessment or origin; cases of admissibility; procedural issues; issues related to the issuance of the resolution, its validity, publication and administrative review, among other relevant issues.

In Peru, advance rulings are also regulated by Legislative Decree 1053 (General Customs Law) of 2021, in whose article 210 it is determined that at the request of a party, the Customs Administration must issue an advance ruling on tariff classification, customs valuation criteria, as well as the application of returns, suspensions and exemptions from customs duties, the re-importation of repaired or altered goods, as well as other customs issues defined in international agreements.

It is established that resolutions must be issued within 90 days from their presentation. It determines that they will be effective from their issuance or the date established by them and may be used for other future operations carried out by the same importer. It also establishes the obligation to publish them on the Customs portal (SUNAT).

Then, through resolution 50/2021 of the SUNAT, specific issues related to prior consultation linked to classification issues are regulated. There is also a Supreme Decree 14/2021 for issues related to advance resolutions of non-preferential origin.

In Mexico, explains Espinosa Berecochea, customs regulations deal with the issue in a general and little detailed manner, and also do not contemplate the possibility of carrying out a prior consultation on the origin of goods, regulating consultations on classification and customs valuation issues.

In Ecuador, for its part, through Resolution 0011 of 2022, issued on February 04, 2022, the National Customs Service of Ecuador (SENAE) issued the procedure that regulates the issuance of advance resolutions.

The object and scope of application were regulated there, determining that the classification, origin and customs valuation issues may be subject to consultation; the competent authority (SENAE); the effects of the advance resolution (binding); its publicity; the formalities of its request, as well as the general and specific requirements (according to the object of the consultation); the issues that make up its admissibility and the causes of inadmissibility; the withdrawal of the application; the issuance and publicity of the advance resolution; among other issues.

8. The Argentine case. Decree 70/2023 and AFIP General Resolutions 5484, 5473 and 5477

In Argentina, the basic customs legislation (CA) does not have any reference to advance resolution. It would be strange if it did, given that the code was drafted in the early 80s, when this type of measure was not yet discussed. None of the subsequent reforms of the code addressed the issue.

Notwithstanding the foregoing, Law 27.373 approved the Facilitation Agreement, which highlights, among other measures, advance resolutions in customs matters. However, it was not until the enactment of Decree of Necessity and Urgency 70/2023 that our country began to work on advance resolutions. Indeed, through arts. 120 and 132 of the decree, advance resolutions for both import and export were incorporated into arts. 226 and 323 of the Customs Code.

It was determined there that the advance resolution is the administrative act, issued by the customs service, at the request of the applicant, before the import or export of the merchandise, through which the customs treatment that will be granted to the merchandise is established at the time of its entry or exit, in relation to the subject of consultation.

The request is appropriate in cases of tariff classification, origin, valuation, or in relation to the elements necessary for the correct application of the tax regime, prohibitions or restrictions. In other words, the measure proposed in the decree is very broad.

It was also determined that the regulations will determine the formal requirements and the information that the applicant must provide.

It was established that the advance ruling must be issued within 30 days. In the event of silence, the declarant may proceed with his declaration under the terms provided in the Customs Code for declarations with the intervention of the customs service (art. 234, par. 3° for import and art. 332, par. 3° for export). Where appropriate, with the provision of sufficient guarantee.

It is also established that the procedure and challenge may be filed against the early resolution (art. 1053 inc. f) of the CA).

Subsequently, through AFIP General Resolution 5473/2023, the Advance Resolution on Tariff Classification was regulated, through AFIP General Resolution 5477/203, the Advance Resolution on Valuation was regulated, and through AFIP General Resolution 5484/2024, the Advance Resolution on Customs Technical Criteria was regulated.

The regulations fully comply with the Technical Guidelines on Advance Rulings in Customs Classification, Origin and Valuation Matters, issued by the World Customs Organization (WCO) in 2018.

Confidentiality is regulated; the forms of presentation and the documentation that must be submitted are adequately established; the details of its processing are determined as well as the intervening customs departments; the issuance period (30 working days), as well as the mechanism provided for the case of silence of the administration; the validity and effects; the cases of rejection and the notification and effects thereof.

9. In closing

There is an increasingly widespread demand for processes "just in time" which require ever shorter border crossing times. No one doubts that Customs must exercise rigorous border control. Clearly, that is their primary function. However, it is essential that this control does not delay shipments for longer than strictly necessary, given that delays generate costs and these entail a loss of competitiveness. Therefore, it is the responsibility of Customs to collaborate in facilitating international trade.

The most efficient countries are the most competitive and facilitation tends to ensure agile and efficient customs processes, in order to promote the reduction of direct and indirect costs linked to international trade, in order to increase the competitiveness of companies and thus improve their performance, which in turn will generate greater economic growth. 

In this context, it is important to highlight the introduction of Advance Rulings to Argentine customs legislation, as they tend to discuss ideas regarding the application of the tax regime or restrictions, before the arrival of the cargo. In this way, the aim is to speed up trade, lower operating costs and ensure predictability, in order to generate legal certainty.

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1. COTTER, Juan P. “The challenge of 21st century Customs. Facilitation and control”, in AA VV Information technology in Customs and its legal effects, Mexico, Argentina and Colombia. (coord. Nohemí Bello Gallardo), University Foundation of Law, Administration and Politics SC, Mexico, 2012.
2. Ezequiel Guicovsky Lizarraga, senior officer of the International Trade Center, which is the joint agency of the WTO and the UN // Seminar organized by CERA and ITC in Buenos Aires in March 2017.
3.  ROHDE PONCE, Andres, “Trade Facilitation”, ed. CAAAREM, Mexico, 2021, p. 213.
4. ESPINOSA BERECOCHEA, Carlos, “Legal Regime of Advance Rulings in Foreign Trade Matters”, Praxis Journal of Tax and Administrative Justice.