Trade knowledge / International Organizations That Play a Role in Importing and Exporting
Date: 2017-12-02
International Organizations That Play a Role in Importing and Exporting
In an increasingly globalized world, international organizations play an important role in importing and exporting. Their functions include maintaining standards to ensure safety, helping developing countries achieve economic security, and establishing norms regarding how countries make trade agreements and resolve conflicts.
Whether you’re new to international trade or a seasoned veteran, understanding the part that these organizations play is key to clear communication and compliance with both import and export regulations.
World Trade Organization
The World Trade Organization (WTO) was established in 1994 and is the largest intergovernmental economic organization in the world. According to the official website, WTO’s ultimate goal is “to ensure trade flows as smoothly, predictably, and freely as possible.”
Throughout its history there have been several World Trade Agreements that are signed by representatives from member countries and ratified by their respective legislative bodies. Major agreements include those designed to establish a common approach to handling country-to-country trade agreements and conflict resolution processes. The WTO acts as a forum for negotiations between member countries.
The Agreement on the Application of Sanitary and Phytosanitary Measures, known as the SPS Agreement, is an international treaty established by WTO in 1995. It sets rules called International Phytosanitary Measures which are meant to protect safety and the environment. Among them is International Standards for Phytosanitary Measures No. 15 (ISPM 15), a set of regulations requiring that wood packaging materials be properly treated in order to minimize the spread of pests and diseases.
There are currently 164 countries participating in WTO. It is headquartered in Geneva, Switzerland.
World Customs Organization
The World Customs Organization (WCO) was founded in 1952 as an intergovernmental association of customs authorities dedicated to the continual improvement of customs processes worldwide. Its primary goal is to maximize the effectiveness and efficiency of each country’s customs authority in order to facilitate collecting revenue, compiling trade statistics, and ensuring security.
WCO plays a role in the administration of WTO’s agreements on customs valuation and rules of origin. Customs valuation is the process where customs authorities assign a monetary value to a product being imported or exported. Rules of origin are regulations that specify what criteria must be met in order for a country to claim to be the origin of a good or service.
Rules of origin may be used when determining whether preferential duty treatment applies under the terms of a free trade agreement or in a free trade zone. Rules of origin may also be non-preferential in nature, such as for the purpose of collecting trade data relevant to governing a nation’s economy.
The Harmonized System (HS) was implemented by WCO in 1988 as a standard set of nomenclature regarding product classification that could be used by all trading nations. HS is organized into 21 sections, which are subdivided into 96 chapters. The 96 chapters are further subdivided into approximately 5,000 headings and subheadings.
An HS code is a six-digit numeric code which represents a unique category of products. The first two digits designate the chapter, the second two digits designate the heading, and the third two digits designate the subheading. Individual countries may add two or four digits to form eight-digit or 10-digit codes that further specify products and which may be different in each country.
In essence, HS lays out a logical decision tree that starts with general categories and branches out into more and more specific categories, with the idea being that any product that can be traded has a corresponding code that can be used to identify it.
HS is significant because it makes it easier for countries to assess duties (assessment is the process of determining the value of an item for the purpose of taxation; duties is a term used interchangeably with import tax or tariff) and to collect trade statistics. More than 200 countries use the Harmonized System, and more than 98% of merchandise in international trade is classified in terms of HS codes.
There are currently 180 customs administrations participating in WCO. It is headquartered in Brussels, Belgium.
International Chamber of Commerce
Founded in 1919, the official motto of the International Chamber of Commerce (ICC) is “The World Business Organization.” It is the largest association of companies in the world. ICC enables businesses to cooperate in order to set rules, resolve disputes, and advocate for policy change on the world stage.
Incoterms are internationally recognized trade terms that clearly communicate the costs, tasks and risks allocated to the buyer and seller in an international transaction. They outline who is responsible for packaging the goods, arranging transportation, and paying import duties.
In 1923, ICC published its first work on international trade terms, and the first edition known as Incoterms was published in 1936. Incoterms have been revised over the years, with the most recent revision occurring in 2010. There are currently 11 Incoterms, and each Incoterm has a three-letter abbreviation.
One very general way of understanding the differences is to think of Ex Works (EXW) as being on one end of the spectrum, with the seller’s responsibility minimized and the buyer’s responsibility maximized, while Delivered Duty Paid (DDP) is on the other end of the spectrum, with the seller’s responsibility maximized and the buyer’s responsibility minimized.
Uniform Customs and Practice for Documentary Credits (UCP) was established by ICC in 1933 as a set of rules on the use of letters of credit, a method of payment involving banks that is often used in international transactions.
ICC has hundreds of thousands of member companies located in over 130 countries. It is headquartered in Paris, France.
United Nations Conference on Trade and Development
The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as an intergovernmental organization dedicated to assisting developing countries build their economies. They do this by increasing access to digital technologies, ending regulations that limit trade, and providing analysis, consensus-building, and technical assistance.
Among UNCTAD’s accomplishments is establishing preferential duty treatment for imports into developed countries from developing countries. This means importers can import goods from developing countries duty-free or at a reduced duty rate, making the developing countries more competitive and ensuring a more fair playing field.
There are currently 194 countries participating in UNCTAD. It is headquartered in Geneva, Switzerland.
International Maritime Organization
The Inter-Governmental Maritime Consultative Organization (IMCO) was established in 1948 and later renamed the International Maritime Organization (IMO) in 1982. It is a specialized agency of the United Nations. IMO’s purpose is to create and maintain a common framework for international maritime shipping (shipping via sea) in order to ensure safety, legality, security and efficiency.
Among IMO’s primary functions is to regulate the maritime transport of dangerous goods. It publishes guidelines for creating a Dangerous Goods IMO Declaration, a shipping document used to declare that a shipment contains dangerous goods and to provide important information to the carrier in order to ensure safe transport.
The International Convention for the Safety of Life at Sea (SOLAS) is an international treaty that was passed in 1914 in the aftermath of the Titanic disaster. It is governed by IMO and has been updated over the years.
An amendment in 2015 added a regulation requiring that exporters provide a Verified Gross Mass of each container before it is loaded on a ship. This change was initiated due to the realization that many exporters were misrepresenting the weight of their containers, leading to potential safety issues.
There are currently 172 countries participating in IMO. It is headquartered in London, United Kingdom.
International Air Transport Association
The International Air Transport Association (IATA) was established in 1945 as a trade association for the world’s airlines. Its purpose is to promote and support airlines and to establish industry standards.
Among IATA’s primary functions is to regulate the transport of dangerous goods by air. It publishes guidelines for creating a Shipper's Declaration for Dangerous Goods, a shipping document used to declare that a shipment contains dangerous goods and to provide important information to the carrier in order to ensure safe transport.
There are currently 278 airlines participating in IATA, representing 117 countries. It is headquartered in Montreal, Canada.
International Organization for Standardization
The International Organization for Standardization (ISO) was founded in 1947 and consists of representatives of national standards organizations from countries around the world. Its purpose is to create and maintain international standards in order to ensure safety, fairness, and efficiency in international trade.
ISO is not specific to any one particular industry, and plays a role in maintaining standards in industries as varied as manufacturing, transportation, energy, healthcare, agriculture, financial services, and information technology.
There are currently 162 countries participating in ISO. It is headquartered in Geneva, Switzerland.
United Nations Commission on International Trade Law
The United Nations Commission on International Trade Law (UNCITRAL) was established in 1966 as an association of nations committed to the modernization and harmonization of laws which regulate international trade.
UNCITRAL activities include helping governments coordinate to achieve mutually beneficial economic goals, promoting and facilitating the unification of disparate legal systems, and collecting and disseminating information on case law and other legislative activity.
UNCITRAL is currently composed of over 50 member states. Members are elected to serve six-year terms by the United Nations General Assembly. UNCITRAL’s work is carried out in annual sessions held alternately in New York City and Vienna.
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