The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade.

The organization officially commenced on 1 January 1995 under the Marrakech Agreement, replacing theGeneral Agreement on Tariffs and Trade (GATT), which commenced in 1948.[5]The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which are signed by representatives of member governments[6]:fol.910 and ratified by their parliaments.[7] Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (19861994). The organization is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete.[8] The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector(requested by developed countries) and the substantiation of the international liberalization of fair trade on agricultural products (requested by developing countries) remain the major obstacles. These points of contention have hindered any progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this impasse, there has been an increasing number of bilateral free trade agreements signed.[9] As of July 2012, there were various negotiation groups in the WTO system for the current agricultural trade negotiation which is in the condition of stalemate.[10] WTO's current Director-General is Roberto Azevdo,[11][12] who leads a staff of over 600 people in Geneva, Switzerland.

The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation notably the Bretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named theInternational Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never went into effect.[15][16][17] In the absence of an international organization for trade, the GATT would over the years "transform itself" into a de facto international organization

An international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.

The World Trade Organization deals with the rules of trade between nations at a near-global level. It is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries' adherence to all the WTO agreements, signed by the majority of the world's trading nations and ratified in their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round. The organization is currently working with its members on a new trade negotiation called the Doha Development Agenda (Doha round), launched in 2001. The WTO has 153 members, which represents more than 95% of total world trade.[6] The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a directorgeneral, who is appointed by the Ministerial Conference. The WTO's headquarters is in Geneva, Switzerland. The basic structure of the WTO includes the following bodies (see organizational diagram): The Ministerial Conference- which is composed of international trade ministers from all member countries. This is the governing body of the WTO, responsible for setting the strategic direction of the organization and making all final decisions on agreements under its wings. The Ministerial Conference meets at least once every two years. The General Council- Composed of senior representatives of all members. It is responsible for overseeing the day-to-day business and management of the WTO.

General Agreement on Trade and Tariff

Definitions Bretton Woods Agreement Agreement coming out of WWII (1945) to stabilize the world economy. Created GATT, IMF, and the World Bank GATT General Agreement on Tariffs and Trade. Revised under the Uruguay Round

in 1994. IMF International Monetary Fund - lending and consulting organization for member nations World Bank Lending and consulting organization for non-member nations WTO Non-elected administration and dispute resolution agency created by the Uruguay round of GATT MAI Multilateral Agreement on Investment. Amendments in 1996 to the IMF charter have essentially covered most of the issues the MAI was to address. OECD Organization for Economic Cooperation and Development Agreements GATT General Agreement on Tariffs and Trade Initiated after WWII and generally known as the Breton Woods Agreement the most recent rounds of discussion are known as the Uruguay Round ended in 1994 and became GATT as it is known today. The Uruguay Round puts into place comprehensive international rules about which policy objectives so-called independent countries are permitted to pursue and which means a country might use to obtain even GATT-legal objectives. Currently more than 110 nations responsible for more than 4/5ths of world trade have signed the agreement. 1. Established the World Trade Organization [WTO] as the ruling body in international trade disputes. 2. GATT supercedes all national and regional law. 3. Provides nations and corporations the ability to sue other nations for barriers to free trade. Examples of such barriers may be government subsidies for industries, or to promote policy objectives. 4. Corporations must be given national treatment, meaning corporations must receive the same treatment in bidding and contracting regardless of national or local origin. 5. Includes non-tariff barriers as actionable. For example, environmental and worker protection legislation. Any nation, state, or local standard that provides more protection than does a specified industry-shaped international standard must past WTO tests to determine whether such standards are an illegal trade barrier. (Nader and Wallach) FTAA - Free Trade Act of the Americas (excluding Cuba)

- Extend NAFTA to the rest of the hemisphere(with the exception of Cuba) - Replace the NAFTA panel with the WTO as overseer and enforcer - Remove all barriers to trade (except free movement of workers and population across national borders), including tariff and non-tariff policies, services and intellectual property rights, and constitutions, laws, regulations and policies. - Extend the national treatment provisions of NAFTA - Extend the investor-to-state rights of NAFTA Where did this come from? The FTAA has been in secret negotiations for seven years. The constructors of this document have been the Trade Ministers of the governments involved, and representatives of major corporations. Neither the public nor government officials have seen this document - including our senators and congress people. President Bush is going to request fast track approval to push through the FTAA. This means that when it comes to a vote, senators must vote yea or no and have no input into the document. It is reported that several other attractive pieces of legislation will most likely be bundled with the FTAA to ensure its approval. The Summit of the Americas voted to implement FTAA by 2005. MAI Multilateral Agreement on Investment - Focus is on international investment and ownership. - Limits how and when nations, states and communities could limit foreign investment and ownership. - Requires national treatment for foreign investors and corporations. - Bans performance requirements such as employment, or reinvestment. - Allows investors to sue governments using the local courts.

The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1994, when it was replaced by theWorld Trade Organization in 1995.

GATT and the World Trade Organization

In 1993, the GATT was updated (GATT 1994) to include new obligations upon its signatories. One of the most significant changes was the creation of the World Trade Organization (WTO). The 75 existing GATT members and the European Communities became the founding members of the WTO on 1 January 1995. The other 52 GATT members rejoined the WTO in the following two years (the last being Congo in 1997). Since the founding of the WTO, 21 new non-GATT members have joined and 29 are currently negotiating membership. There are a total of 157 member countries in the WTO, with Russia and Vanuatu being new members as of 2012. Of the original GATT members, Syria[5][6] and the SFR Yugoslavia have not rejoined the WTO. Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership negotiations later split in two), is not recognised as a direct SFRY successor state; therefore, its application is considered a new (non-GATT) one. The General Council of WTO, on 4 May 2010, agreed to establish a working party to examine the request of Syria for WTO membership.[7][8] The contracting parties who founded the WTO ended official agreement of the "GATT 1947" terms on 31 December 1995. Serbia and Montenegro are in the decision stage of the negotiations and are expected to become the newest members of the WTO in 2012 or in near future. Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The WTO expanded its scope from traded goods to include trade within the service sector and intellectual property rights. Although it was designed to serve multilateral agreements, during several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral agreements created selective trading and caused fragmentation among members. WTO arrangements are generally a multilateral agreement settlement mechanism of GATT.[9]

STCTURE OF THE WORLD

The structure of the WTO is dominated by its highest authority, the Ministerial Conference, composed of representatives of all WTO members, which is required to meet at least every two years and which can take decisions on all matters under any of the multilateral trade agreements. The day-to-day work of the WTO, however, falls to a number of subsidiary bodies; principally the General Council, also composed of all WTO members, which is required to report to the Ministerial Conference. As well as conducting its regular work on behalf of the Ministerial Conference, the General Council convenes in two particular forms - as the Dispute Settlement Body, to oversee the dispute settlement procedures and as the Trade Policy Review Body to conduct regular reviews of the trade policies of individual WTO members. The General Council delegates responsibility to three other major bodies - namely the Councils for Trade in Goods, Trade in Services and Trade-Related Aspects of Intellectual Property. The Council for Goods oversees the implementation and functioning of all the agreements (Annex 1A of the WTO Agreement) covering trade in goods, though many such agreements have their own specific overseeing bodies. The latter two Councils have responsibility for their respective WTO agreements (Annexes 1B and 1C) and may establish their own subsidiary bodies as necessary. Three other bodies are established by the Ministerial Conference and report to the General Council. The Committee on Trade and Development is concerned with issues relating to the developing countries and, especially, to the "least-developed" among them. The Committee on Balance of Payments is responsible for consultations between WTO members and countries which take trade-restrictive measures, under Articles XII and XVIII of GATT, in order to cope with balance-ofpayments difficulties. Finally, issues relating to WTO's financing and budget are dealt with by a Committee on Budget. Each of the four plurilateral agreements of the WTO - those on civil aircraft, government procurement, dairy products and bovine meat - establish their own management bodies which are required to report to the General Council.

The World Trade Organization came into force on January 1, 1995, fully replacing the previous GATT Secretariat as the organization responsible for administering the international trade regime. The basic structure of the WTO includes the following bodies (see organizational diagram): The Ministerial Conference, which is composed of international trade ministers from all member countries. This is the governing body of the WTO, responsible for setting the strategic direction of the organization and making all final decisions on agreements under its wings. The Ministerial Conference meets at least once every two years. Although voting can take place, decisions are generally taken by consensus, a process that can at times be difficult, particularly in a body composed of 136 very different members.

The General Council, composed of senior representatives (usually ambassador level) of all members. It is responsible for overseeing the day-to-day business and management of the WTO, and is based at the WTO headquarters in Geneva. In practice, this is the key decision-making arm of the WTO for most issues. Several of the bodies described below report directly to the General Council.

The Trade Policy Review Body is also composed of all the WTO members, and oversees the Trade Policy Review Mechanism, a product of the Uruguay Round. It periodically reviews the trade policies and practices of all member states. These reviews are intended to provide a general indication of how states are implementing their obligations, and to contribute to improved adherence by the WTO parties to their obligations.

The Dispute Settlement Body is also composed of all the WTO members. It oversees the implementation and effectiveness of the dispute resolution process for all WTO agreements, and the implementation of the decisions on WTO disputes. Disputes are heard and ruled on by dispute resolution panels chosen individually for each case, and the permanent Appellate Body that was established in 1994. Dispute resolution is mandatory and binding on all members. A final decision of the Appellate Body can only be reversed by a full consensus of the Dispute Settlement Body.

The Councils on Trade in Goods and Trade in Services operate under the mandate of the General Council and are composed of all members. They provide a mechanism to oversee the details of the general and specific agreements on trade in goods (such as those on textiles and agriculture) and trade in services. There is also a Council for the Agreement on Trade-Related Aspects of Intellectual Property Rights, dealing with just that agreement and subject area.

The Secretariat and Director General of the WTO reside in Geneva, in the old home of GATT. The Secretariat now numbers just under 550 people, and undertakes the administrative functions of running all aspects of the organization. The Secretariat has no legal decision-making powers but provides vital services, and often advice, to those who do. The Secretariat is headed by the Director General, who is elected by the members.

The Committee on Trade and Development and Committee on Trade and Environment are two of the several committees continued or established under the Marrakech Agreement in 1994. They have specific mandates to focus on these relationships, which are especially relevant to how the WTO deals with sustainable development issues. The Committee on Trade and Development was established in 1965. The forerunner to the Committee on Trade and Environment (the Group on Environmental Measures and International Trade) was established in 1971, but did not meet until

1992. Both Committees are now active as discussion grounds but do not actually negotiate trade rules.

WTO STRENGTH AND WEAKNESS

The system has both strengthens and weaknesses. For example, with respect to its weaknesses, despite the deadlines, a full dispute settlement procedure still takes a considerable amount of time, during which the complainant suffers continued economic harm if the challenged measure is indeed (WTO)-inconsistent. No provisional measures (interim relief) are available to protect the economic and trade interests of the successful complainant during the dispute settlement procedure. Moreover, even after prevailing in dispute settlement, a successful complainant will receive no compensation for the harm suffered during the time given to the respondent to implement the ruling. Nor does the winning party receive any reimbursement from the other side for its legal expenses. In the event of non-implementation, not all Members have the same practical ability to resort to the suspension of obligations. Lastly, in a few cases, a suspension of concessions has been ineffective in bringing about implementation. However, these cases are the exception rather than the rule. How successful one considers the dispute settlement system to have been depends on the benchmark one applies. If one compares the WTO dispute settlement system with the previous dispute settlement system of GATT 1947, the current system has been far more effective. Moreover, its quasi-judicial and quasi-automatic character enables it to handle more difficult cases. These features also provide greater guarantees for Members that wish to defend their rights. Compared with other multilateral systems of dispute resolution in international law, the compulsory nature and the enforcement mechanism of the WTO dispute settlement system certainly stand out.

Ministerial Conferences The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. The inaugural ministerial conference was held in Singapore in 1996. Disagreements between largely developed and developing economies emerged during this conference over four issues initiated by this conference, which led to them being collectively referred to as the "Singapore issues". The second ministerial conference was held in Geneva in Switzerland. The third conference in Seattle, Washington ended in failure, with massive demonstrations and police and National Guard crowd control efforts drawing worldwide attention. The fourth ministerial conference was held in Doha in the Persian Gulf nation of Qatar. The Doha Development Round was launched at the conference. The conference also approved the joining of China, which became the 143rd member to join. The fifth ministerial con ference was held in Cancn, Mexico, aiming at forging agreement on the Doha round. An alliance of 22 southern states, the G20 developing nations (led by India, China, Brazil, ASEAN led by the Philippines), resisted demands from the North for agreements on the so-called "Singapore issues" and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress. The sixth WTO ministerial conference was held in Hong Kong from 13-18 December 2005. It was considered vital if the four-year-old Doha Development Round negotiations were to move forward sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries, following the Everything but Arms initiative of the European Union but with up to 3% of tariff lines exempted. Other major issues were left for further negotiation to be completed by the end of 2010. The WTO General Council, on 26 May 2009, agreed to hold a seventh WTO ministerial conference session in Geneva from 30 November-3 December 2009. A statement by chairman Amb. Mario Matus acknowledged that the prime purpose was to remedy a breach of protocol

WTO Ministerial Conferences

The General Council The General Council is the highest ruling body of the WTO when the Ministerial Conference is not in session, and the only one which can make binding decisions outside the Ministerial Conference. For instance, in July 2004 the General Council adopted a package of agreements, referred to as the July Framework, which effectively broke months of deadlock following the collapse of minister-level talks in Cancn in September 2003. The General Council can meet whenever Members want. In practice its meetings usually take place every two months, and are attended by the highest rank of trade diplomats in Geneva, mostly ambassadors. It is common practice for the General Council to elect its chairperson and those of other WTO bodies during its first meeting of the cal endar year. The Councils meetings are often preceded by informal sessions that are not announced publicly. The functions of the General Council are wide-ranging: it follows up on issues arising from Ministerials it oversees the operation of WTO agreements, and shares with the Ministerial Council the responsibility of adopting interpretations of the WTO Agreement. An example is its 2003 decisions on TRIPS and public health. it grants and extends waivers from WTO rules, on behalf of the Ministerial Conference. An example is the Kimberley Process waiver, to prevent trade in blood diamonds. it meets as the Trade Policy Review Body (TPRB) and the Dispute Settlement Body (DSB); the two bodies and the General Council are considered as second level bodies after the Ministerial Conference. it deals with accession-related matters, including authorizing the accession of new Members when the Ministerial Conference is not in session. For accession matters, the General Council decides on the establishment of working parties on accession, and endorses accession packages upon completion of negotiations. it supervises the overall conduct of negotiations such as the Doha Work Programme. Since the Trade Negotiations Committee (TNC) was set up to carry out the Doha negotiations, the General Council has regularly reviewed its work under a standing agenda item. The TNC reports to each regular meeting of the General Council on the activities of its negotiating groups. The General Council also deals with systemic issues (such as selection of DirectorsGeneral and external transparency), and performs specific tasks assigned to it by the Ministerial Conference.

DISPUTE SETTLEMENT
In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in Marrakesh in 1994. Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading system, and as a "unique contribution to the stability of the global economy". WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. The operation of the WTO dispute settlement process involves the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions. Bodies involved in the dispute settlement process, World Trade Organization. The Dispute Settlement Mechanism The Dispute Settlement Mechanism (DSM) is a quasi-judicial system for resolving trade disputes. The Dispute Settlement Body (DSB) can authorize trade retaliation measures, or suspension of concessions in WTO jargon if Members do not comply with DSM panel or Appellate Body rulings. This particular enforcement mechanism of the WTO regime, though a last resort, remains unique among international tribunals. The DSB is composed of all WTO Members. Its functions are: to establish panels which examine the case in dispute to appoint the members of the standing Appellate Body to adopt reports of panels and the Appellate Body (the body which deals with appeals) to monitor implementation of rulings and recommendations to authorize sanctions or retaliation measures under the WTO agreements to adjudicate cases on textiles and clothing if they are not resolved by the Textiles Monitoring Body (TMB), the only other WTO body dealing with disputes

The WTO dispute settlement mechanism is arguably more efficient and effective than almost any other international tribunal dealing with non-criminal matters. The DSM sets clear timeframes for different stages in resolving trade disputes among Members, which avoids cases dragging on for a long time. It usually takes between 12 to 18 months to settle a dispute, but the application of rulings often takes longer.

The system nevertheless seems slow to traders, especially when the disputed measures are temporary in nature. For example, the US decision to impose temporary (for three years) higher tariffs on certain steel products triggered a dispute case in March 2002. By the time the DSB made a final decision in December 2003 that the measures were illegal, the higher tariffs had been in place for 19 months, long enough for significant harm to have been caused to countries

and companies exporting steel to the US. It is also worth noting that dispute complaints are typically filed at the request of business interests, who usually seek their own - expensive - legal advice before turning to their government to request it to take up their case. The mechanism applies to all WTO agreements, and can cover plurilateral agreements as well, should parties to these agreements so decide. It applies only to WTO agreements: a Member can only turn to the DSM for resolution of a dispute concerning a WTO rule. The DSM will therefore only rule on other matters, such as environmental policy, human rights or social questions, if these arise in a dispute concerning a WTO rule, as was the case in the Shrimp-Turtle dispute.

Transfer Pricing Transfer pricing is the mechanism adopted by multinational Enterprises for valuing the goods and services traded with their Subsidiaries or Associate Companies abroad so as to lower taxes and to maximize profits. The yardstick for acceptance of such transfer pricing is the Arms Length Price which should represent the price charged in comparable transactions between independent parties, where price is not influenced by the relationship or business interest between the parties in the transaction. The Transfer Pricing policies of several countries are based on the OECD (Organization of Economic Cooperation and Development) Guidelines on the subject.

2. Transfer Pricing law has been enacted for Income Tax purposes in 2001 by amending the Income Tax Act, supplemented by Transfer Pricing Rules, which are broadly based on OECD Guidelines. While Article VII of the GATT and the WTO Agreement on Customs Valuation (ACV) do not refer explicitly to transfer pricing, in the case of related party transactions the Agreement indirectly accepts the arms length principle. The Customs Valuation Rules, 1988 (CVR) also provide for transaction value of identical / similar goods, deductive value and computed value methods which are similar to valuation methods in the Transfer Pricing Rules under the Income Tax Act. A paper concerning harmonization of Regulatory Controls under the Custom and Income Tax Laws is at Annexure B.

3.

The Income tax and the Customs authorities are driven by diametrically opposite

approaches to valuation in view of the conflicting interests involved for measuring the tax incidence. While the Income Tax authorities may seek to avoid diversion of profits to the exporting country by assessing lower transaction price on imports, the custom authorities would prefer to determine a higher transfer price to enhance customs revenue. It would, therefore be desirable to have a coordinated approach to valuation of imported goods in cases involving transfer pricing so that the same price is adopted for both purposes after necessary verification for authenticity.

4.

The transfer pricing rules under the Income Tax treat enterprises as related even on the grounds of

consumption of raw materials, dependence on patents, technology etc. whereas, the concept of relationship under CVR is limited. This difference between the CVR and transfer pricing rules could lead to one department treating the same transactions as between related parties and the other taking a contrary view. Thus, while customs may accept the declared price as at arms length, the tax authorities may not and may reduce the declared price. Harmonization of definition of related parties is a possible solution. However the definition of related party in Customs Valuation Rules (CVR) is based on th e WTO definition in the ACV and cannot be revised at national level. There are certain common areas where the definitions are similar and the coordination between the two departments could focus on these areas.

5.

In order to circumvent transfer pricing provisions, certain taxpayers structure international

Transactions between group companies by involving a third party. In order to plug this loophole, Section 92B(2) in the lncome Tax Act was introduced. The Customs Valuation Rules could be amended to take care of this situation.

6.

Income Tax and Customs officials proceed independently to establish arms length valuations in

related-party import transactions. This may lead to different results which may be far from reality. Legislative action and agency cooperation should create an environment in which the Income tax and Customs authorities can coordinate import valuations as a unified force. In USA, Section 1059A has been introduced to prevent a U.S. importer from jeopardizing the government revenue by valuing merchandise inconsistently for customs and income tax purposes. Under section 1059A, importers are barred from declaring a transfer price that exceeds the value declared for Customs valuation purposes. In USA, the IRS and Customs have executed a document entitled Working Arrangement for Mutual Assistance and Exchange of Information Between the U.S. Department of the Treasury U.S. Customs Service and the Internal Revenue Service Regarding International Compliance and Importation lssues (the Mutual Assistance Agreement ) that is designed to facilitate communication and cooperation between the agencies. A similar legal basis could be introduced to harmonize the Income tax and Customs approaches in India also

7.

The Documentation requirements under Income Tax Transfer Pricing Rule 10D are

quite exhaustive. The documentation requirements under the Customs Act, (Valuation Rules) are however not specific. In case of an adjustment of import valuation by Customs or Income tax, the importer should be obliged to disclose such adjustments to the other department. As there is no such provision in the law as of now, suitable amendments could be made. Transfer pricing documentation including Cost Accountants certificate submitted to Income Tax Authorities could also be mandatory for submission to the Customs department handling special valuation (SVB) cases of related party transactions.

8.

For effective administration of transfer pricing policies, a very comprehensive There are several databases available with Income Tax and

Database is required.

Customs departments, each of which provides information of a niche area. Some of the Databases/Information resources maintained by Customs Department are NIDB (National Import Database), Export Commodity Database (ECDB), Special Valuation Branch Database(SVB), Valuation instructions Valuation Alerts and the Valuation Bulletin. Similar

databases will be available in the Income Tax department. Sharing information contained in these databases would be beneficial to both the departments in taking considered decisions as Transfer Pricing questions.

9.

Transfer Pricing under the Income Tax Act

is administered by the Directorate

General of Transfer Pricing in the Income Tax Dept. In the Customs Department, the Special Valuation Branch (SVB) presently functioning at major customs stations (Mumbai, Delhi, Chenna, Bangalore, Kolkata) examine the relationship based imports which include Transfer Pricing. For effective coordination between Customs & Income Tax Departments, it would be necessary to bring the SVBs under a single authority. Directorate General of Valuation which is handling all Customs valuation related matters is best suited or the purpose. This would also facilitate sharing of data bases maintained by the Customs Department and Income Tax Department.

10.

Income Tax and Customs Departments may also exchange data regarding

adjustments/revisions made during assessments for uniformity in approach. It is also desirable to have joint action plan in important areas such as valuation rulings, documentation, and audit controls for effective coordination over the Transfer Pricing controls of Multinational Enterprises. These would also reduce transaction costs to the trade. Joint programme for training of officers on the Income Tax and Customs Laws relating to transfer pricing is also recommended.

11.

Finally, an institutional mechanism for harmonization and coordination of transfer

pricing matters between Income Tax and Customs departments with adequate legal backing is desirable.

12.

This issue was discussed at length Chief Commissioners Conference on 1 -10-05

and the relevant extract of the Minutes of Meeting is given in the Annexure A. This issue was again discussed in the Board meeting on 28.11.2005 and the Board has directed that a committee consisting of the DG, Valuation and Chief Commissioners of Customs, New Delhi, Mumbai I, Kolkata, Chennai would consider the following issues arising in this

area and submit its report with in a period of one month. (i) Strengthening the SVB branch of Customs House on transfer pricing (ii) whether SVB should be brought under the control of single authority like DG of Valuation (iii) nomination of DG, Valuation as nodal agency to study the basis followed by Income Tax department in its legislation and study the administrative and institutional arrangements in handling transfer pricing work and for interaction with the IT department.

Nevertheless, the concern remains that the broad reach of WTO rules and their implications for a wide array of domestic policies makes the DSM a particular threat because it ensures strong enforcement of rules designed to favour trade liberalization, rather than to promote well-being or respect for human rights.

The dispute settlement process

Panels A panel is a quasi-judicial body which examines the evidence and decides on the merits of the case, according to the Dispute Settlement Understanding (DSU): A panel usually consists of three (but sometimes five) experts from different countries. Panellists for each case are chosen from a roster of qualified professionals or from elsewhere, in consultation with Members involved in the dispute. The Director-General can also appoint panellists if the parties cannot agree on the panel. In a dispute between a developed country and a developing country, the latter can request that at least one of the panellists be from a developing country. Panellists serve in their individual capacity and do not receive instructions from any government. In general, panellists are considered to be impartial and competent. Panels have the right to seek information and technical advice from any individual or body which they deem appropriate. In many disputes the panel has consulted scientific experts or appointed an expert review group to prepare an advisory report. However, the question of uninvited, non-governmental input into the dispute settlement process is a contentious issue.

Appellate Body Either party to a dispute may appeal to the standing Appellate Body against a panels ruling on points of law and legal interpretation of WTO agreements. The Appellate Body can uphold, modify or reverse the legal findings of a panel and its conclusion, but cannot re-examine existing evidence or examine new issues. The Appellate Body consists of seven permanent members, and three of them hear each appeal case: Members of the Appellate Body are individuals recognized in the field of law and international trade, and not affiliated to any government. Members are appointed for a four-year term by the DSB, renewable once.

UNCTAD The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a permanent intergovernmental body. It is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues. The organization's goals are to "maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis." The creation of the conference was based on concerns of developing countries over the international market, multi-national corporations, and great disparity between developed nations and developing nations .In the 1970s and 1980s, UNCTAD was closely associated with the idea of a New International Economic Order (NIEO).The United Nations Conference on Trade and Development was established in 1964to provide a forum where the developing countries could discuss the problems relating to their economic development. UNCTAD grew from the view that existing institutions like GATT (now replaced by the World Trade Organization, WTO), the International Monetary Fund (IMF), and World Bank were not properly organized to handle the particular problems of developing countries. The primary objective of the UNCTAD is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology. The conference ordinarily meets once in four years. The first conference took place in Geneva in 1964, second in New Delhi in 1968, the third in Santiago in 1972, fourth in Nairobi in 1976, the fifth in Manila in 1979, the sixth in Belgrade in 1983, the seventhin Geneva in 1987, the eighth in Cartagena in 1992 and the ninth at Johannesburg(South Africa) in 1996. The permanent secretariat is in Geneva. One of the principal achievements of UNCTAD has been to conceive and implement the Generalized System of Preferences (GSP). It was argued in UNCTAD that to promote exports of manufactured goods from developing countries, it would benec essary to offer special tariff concessions to such exports. Accepting this argument the developed countries formulated the GSP scheme under which manufacturers 'exports and some agricultural goods from the developing countries enter duty-free or at reduced rates in the developed countries. Since imports of such items from other developed countries are subject to the normal rates of duties, imports of the same items from developing countries would enjoy a competitive advantage. Currently, UNCTAD has 194 member states and is headquartered in Geneva, Switzerland. UNCTAD has 400 staff members and a bi-annual (2010 2011) regular budget of $138 million in core expenditures and $72 million in extrabudgetarytechnical assistance funds. It is a member of the United Nations Development Group. There are non-governmental organizations participating in the activities of UNCTAD

FOUNDATION AND HISTORY In the early 1960s, growing concerns about the place of developing countries in international trade led many of these countries to call for the convening of a fullfledged conference specifically devoted to tackling these problems and identifying appropriate international actions. The first United Nations Conference on Trade and Development (UNCTAD) was held in Geneva in 1964. Given the magnitude of the problems at stake and the need to address them, the conference was institutionalized to meet every four years, with inter governmental bodies meeting between sessions and a permanent secretariat providing the necessary substantive and logistical support. Simultaneously, the developing countries established the Group of 77 to voice their concerns. (Today, the G77 has 131 members.)The prominent Argentinian economist Ral Prebisch, who had headed the United Nations Economic Commission for Latin America and the Caribbean, becam e theorganization's first Secretary-General