Discussion with the industry on the Customs Moratorium on Electronic Transmissions

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Discussion with the industry on the Customs Moratorium on Electronic Transmissions

Garima Prakash

@GarimaP

September 27, 2023

Public Policy

118

On September 20, 2023, we organised a virtual closed-door discussion with the industry on the World Trade Organisation’s (WTO) Customs Moratorium on Electronic Transmission (the Moratorium), with the objective of understanding industry’s views on the impact of the Moratorium and the recent developments on this topic. Indian and foreign MNCs participated in this discussion, including IT-enabled services companies, software product companies, companies providing online audio-video streaming services, cloud service providers etc.

Background

Since 1998, WTO member countries have agreed not to impose customs duties on electronic transmissions. While there is no agreed definition of ‘electronic transmissions’ it is generally understood to mean trade delivered electronically without a physical medium, such as, software accessed online, e-books, e-music, online videos etc.

Every few years governments agree to temporarily extend the Moratorium. The last extension occurred in June 2022, and it is due to lapse at the 13th WTO Ministerial Conference in February 2024, unless WTO members decide to make it permanent or temporarily extend it further.

Nasscom’s past work

In the past, Nasscom has advocated for a rollover of the Moratorium. In 2020, we published a paper to examine the definition of goods, services, and e-products; review the debate on the Moratorium; and seek industry’s feedback on alternative approaches to the definition of electronic transmissions and the consequent implications for the Indian Information Technology and e-commerce industry.

Since then, we have analysed this topic further and understood that the notion that digitisable goods in their digital form are equivalent of their physical counterparts that once used to cross borders physically over a tangible medium, needs a closer examination. Goods are increasingly being transmitted digitally, and are being consumed through new service-based business models, such as, through a subscription service. These business models were not possible or comprehendible at the time the Moratorium was first put in place, in 1988.

Recent Developments and next steps:

In a recent discussion at the WTO on the scope and meaning of the Moratorium, some members presented their views on the understanding of the scope and definition of the moratorium and provided additional evidence of the benefits to be gained from keeping the moratorium in place. It was stated that the moratorium is commonly understood to cover anything transmitted by telecommunications. The representative of India stated that this interpretation can lead to an implication that all services which are delivered via internet are included in the scope of the moratorium; however, trade in services is covered under the General Agreement on Trade in Services (GATS) disciplines; and the application of the moratorium cannot alter the GATS commitments nor introduce the concept of customs duties in the context of GATS.

Representative of Indonesia shared the recent developments in terms of implementation of a new tariff heading (Chapter 99) that classifies digital goods such as software, multimedia. The customs duty is kept at 0%. They highlighted that such classification has been done with the primary objective of recording trade statistics, promoting a level playing field between e-commerce and conventional modes of trade, supporting SMEs etc. Representative of Indonesia also explained the customs procedures and formalities that need to be undertaken by importers in Indonesia through an online application.

Thematic discussions at the WTO are being undertaken in September 2023 by WTO members to continue to build an understanding of the scope and meaning of the Moratorium.

The next WTO Ministerial Meeting is scheduled in February 26 – 29, 2024, wherein Ministers will decide on whether to extend the Moratorium or end it.

We are continuing to engage with the industry on this topic. For more information, kindly write to garima@nasscom.in with a copy to policy@nasscom.in.

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Garima Prakash

Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech