The business case for a permanent prohibition of customs duties on electronic transmissions

ICC issues brief 2 from the ICC Working Group on E-Commerce outlines the business case for a permanent prohibition on customs duties on electronic transmissions.

The moratorium on customs duties on electronic transmissions (“moratorium”) has become an indispensable aspect of the modern trading system and a central piece in the 70+ year long-term trend towards an international trading system as free as possible from barriers to the global exchange of goods and services.

It is now time to make the moratorium permanent by prohibiting customs duties and formalities on electronic transmissions.

In the context of ongoing World Trade Organization (WTO) negotiations on electronic commerce, as well as the upcoming Ministerial Conference, the International Chamber of Commerce (ICC) emphasises the following:

1.) For the Joint Statement Initiative on E-Commerce (JSI) process, global business views agreement on a permanent prohibition as a necessary signal by JSI participants of commitment to a high standard outcome.

2.) Within the broader WTO Membership, a decision by the General Council in December 2019 to extend the moratorium is essential for digital trade.

3.) Customs duties and formalities on electronic transmissions are virtually impossible to implement and enforce.

4.) The calculation of tariffs for electronic transmissions is unworkable: an ad valorem assessment will not work for the majority of electronic transmissions; a non-ad valorem assessment will have highly distortive impacts on the digital economy.

5.) The moratorium’s economic benefits far outweigh any potential tariff revenue from digitalised goods and services, including for developing and least developed economies. This is especially the case given that there are more efficient and practical behind-the-border options for revenue collection.

6.) WTO Members, in particular developing countries, have legitimate concerns regarding revenue loss from the digitalisation of the economy. But traditional tariff measures and formalities are not the answer. Achieving global consensus on direct and indirect tax regimes based on international best practices is the optimal way to deal with this public policy concern.