Chapter 11 Technical Barriers to Trade

I. INTRODUCTION

In the international trade arena, countries establish controls and regulations governing the access of foreign products to their domestic markets. These controls and regulations can be divided into two categories:  i) tariff barriers, such as fees or customs duties applied upon importation; and ii) non-tariff restrictions, including all other requirements that do not involve fees or customs duties.

Technical barriers to trade are types of non-tariff restrictions. They may take the form of mandatory compliance provisions establishing the technical or standard requirements that must be complied with to import products for sale in a country’s domestic market, as well as related procedures to assess and certify legal conformity and compliance. In general, countries may establish such mandatory compliance provisions when the objective is the proper regulation of domestic markets, consumer protection, or preservation of natural resources. However, when such provisions are not justified, or when the underlying intent is to protect domestic industries or to discriminate against foreign products, such requirements could result in unnecessary barriers to trade.

Therefore, the effective regulation of technical barriers to trade is a fundamental component of multilateral trade agreements, including international organizations such as the World Trade Organization (WTO), along with bilateral or regional agreements signed by their member countries.  Such member countries regulate not only tariff treatment for imports and exports, but also provide rules to avoid establishing unnecessary barriers to trade.


II. EXECUTIVE SUMMARY

Considering the risk that technical barriers to trade pose to the member countries’ relationships and to the liberalization of trade intended and agreed upon by the Parties, Chapter 11 on Technical Barriers to Trade regulates the creation, adoption, and application of standards, technical regulations, and conformity assessment procedures.  Chapter 11 includes amendments that could affect the trade in goods between USMCA Parties and mandates the adoption of principles of collaboration and treatment of foreign goods in accordance with the USMCA’s National Treatment requirements.

Article 11.2 sets forth certain exceptions to the application of Chapter 11.  For example, such exceptions include the technical specifications established by a government body to satisfy its production or consumption requirements in government contracts, and the provision and application of sanitary and phytosanitary measures, which are permitted as long as such measures address food safety and the protection of national security. In these cases, Parties may not argue that the specifications or requirements are impermissible because they constitute unnecessary barriers to trade based on the provisions of Chapter 11.

Chapter 11 encompasses agreements and provisions pertaining to the regulation of technical barriers to trade, including the following:

  1. Recognition and adoption of multilateral agreements.
  • Recognition, validity, and use of technical regulations and international standards.
  • Procedures and collaboration with respect to the creation, use, and implementation of technical regulations by a Party.
  • Openness, transparency, consulting, and publicity in the creation, implementation, maintenance, and amendment of technical regulations by a Party and conformity assessment procedures.
  • Measures to facilitate implementation, cooperation commitments, and trade, including procedures for mutual recognition and regulatory alignment.
  • Cooperation mechanisms for the exchange of information and joint technical discussions for mutual solutions to common trade issues.
  • The establishment of a Technical Barriers to Trade Committee with representatives from each of the Parties, to perform required monitoring duties and joint work.
  • Designation and establishment of the official points of contact of each of the Parties to address issues that arise under USMCA Chapter 11.

Chapter 11 of the USMCA provides as guiding principles the national treatment principle of the World Trade Organization (WTC) and avoidance of the creation of unnecessary barriers to trade among the Parties. Consequently, Chapter 11 incorporates the substantive provisions of the Agreement on Technical Barriers to Trade (TBT Agreement) of the WTO, as well as the decisions of the Technical Barriers to Trade Committee (TBT Committee) established under Article 13 of the TBT Agreement to create regulations, guides, and international recommendations, as set forth in USMCA Article 11.4.  Such guiding principles call for greater regulatory alignment and good regulatory practices, in a spirit of transparency, openness, impartiality, consensus, efficacy, relevance, and coherence, while reducing unnecessary barriers to trade.


III. LEGAL DISCUSSION

Under Article 2.5 of the TBT Agreement (incorporated into Chapter 11 in Article 11.3 along with several other articles from the TBT Agreement), a Party preparing, adopting and applying a technical regulation that could have a significant effect on trade of the other Parties must, upon the request of another Party, provide the justification for the technical regulation according to the terms of the provisions set forth in Paragraphs 2 through 4 of Article 2 of the TBT Agreement.  Additionally, under USMCA Article 11.7.22, when a Party has adopted a technical regulation or conformity assessment procedure that may have a significant impact on trade, a Party must promptly publish online an explanation of how the technical regulation or conformity assessment procedure achieves the Party’s objectives, along with a description of alternative approaches, if any, considered by the Party, and other required information.  If a technical regulation is prepared, adopted or applied for one of the legitimate objectives specified in TBT Article 2.2, and it is in accordance with international standards, it will be rebuttably presumed not to create an unnecessary obstacle to international trade.  Under Article 11.5.6, if a Party does not use an international standard as a basis for a technical regulation, such Party must, on request from another Party, explain why it has not used a relevant international standard or why it has substantially deviated from an international standard.  Under Article 2.9 of the TBT Agreement, whenever a relevant international standard does not exist or the technical content of a proposed technical regulation is not in accordance with the technical content of relevant international standards, if a technical regulation may have a significant effect on trade of the other Parties, a Party must publish, and otherwise give notice and provide information to the other Parties, in accordance with the provisions of such Article 2.9.

Under Article 11.3, the Parties are not allowed to resort to Dispute Settlement provisions in Chapter 31 of the USMCA with respect to disputes that arise in relation to Chapter 11, in order to avoid contradictions with the provisions of or resolutions issued within the framework of the WTO, particularly regarding disputes arising from provisions incorporated in the TBT Agreement or regarding actions related to a Dispute Settlement Panel of the WTO or the WTO Dispute Settlement Agency.

Under Article 11.4.7, each Party must ensure that any obligation or understanding that it has with a non-Party does not facilitate or require the withdrawal or limitation on the use or acceptance of any relevant standard, guide or recommendation developed in accordance with the TBT Committee Decision on International Standards, or the relevant provisions of USMCA Chapter 11.

Under Article 11.5.2, each Party must periodically review the technical regulations and conformity assessment procedures to adjust such to international standards and implement less restrictive approaches to trade and better practices.

With specific reference to conformity assessment procedures, under Article 11.6, each Party must accord to conformity assessment bodies located in the territory of another Party national treatment (i.e. treatment no less favorable than that it accords to conformity assessment bodies located in its own territory or in the territory of the other Party).  Such treatment includes procedures, criteria, fees, and other conditions relating to accrediting, approving, licensing, or otherwise recognizing conformity assessment bodies, as well as recognizing the results issued by the conformity assessment bodies.   Article 11.6.2 provides that no Party may condition the recognition of conformity assessment results to the conformity assessment body: (i) being located within its territory; or (ii) operating an office within its territory.

Notwithstanding the provisions of 11.6.1 and 11.6.2 that relate to the foregoing national treatment obligations, another Party is not precluded from reviewing the results of a conformity assessment procedure, as long as such review does not imply subjecting a product to duplicate conformity assessment procedures.

As to accreditation of a conformity assessment body, under Article 11.6.6, a Party may not reject the conformity assessment results issued by a conformity assessment body located within the territory of another Party because the accreditation body: (i) operates in the territory of a Party where there is more than one accreditation body; (ii) is a non-governmental body; (iii) is domiciled in the territory of a Party that does not maintain a procedure for recognizing accreditation bodies, provided that the accreditation body is recognized internationally; (iv) does not operate an office in the Party’s territory; or (v) is a for-profit agency.

Under Article 11.6.9, the fees charged by governmental conformity assessment bodies must be limited to the cost of the services rendered.

The provisions of Article 11.7 ensure that individuals of another Party have the same opportunity to participate in the creation of technical regulations, standards, and conformity assessment procedures, in conditions that are no less favorable than the ones granted to the individuals of a Party.

Pursuant to Article 11.7.10, each Party must publish online and make freely accessible, preferably on a single website, all proposed and final technical regulations and mandatory conformity assessment procedures, except with respect to any standards that are developed by non-governmental organizations and have been incorporated by reference into a technical regulation or conformity assessment procedure.

Under Article 11.8, if feasible and appropriate, each Party must endeavor to provide a time period of at least six months between the publication of a final technical regulation or conformity assessment procedure and its entry into force, without risking compliance with the legitimate objectives of the Party.

Under Article 11.9, in order to promote cooperation among the Parties and trade facilitation, the Parties acknowledge several mechanisms for the acceptance of conformity assessment results, from the mutual recognition of technical regulations and conformity assessment procedures compatible among the Parties, to the unilateral recognition of results of conformity assessments carried out within the territory of another Party.

The TBT Committee established under Article 11.11, which will be comprised of representatives of each of the Parties, will carry out, among other items, monitoring and identification of ways to strengthen implementation and operation of Chapter 11, promote cooperation among the Parties in matters related to Chapter 11, and carry out initiatives to support a better regulatory alignment in the USMCA region.


IV. CONCLUSION

In addition to agreements reached and to be administered by the Parties, the business community plays a fundamental role in safeguarding the unrestricted application of benefits arising from the USMCA and the promotion of liberalization of trade in the region.

In order to promote domestic industries, the business community must work with their governments to create and maintain the level of competitiveness required by such domestic industries to handle competition presented by foreign industries under the scope of the USMCA, while seeking to prevent the creation or implementation of technical barriers to trade as mere protectionist measures.

Businesses should, within the scope of their industries, be active and participate in the processes for the creation of new technical regulations and the updating of current ones, in order to promote the development of their respective domestic markets, the protection of consumers, and the preservation of local resources, all pursuant to terms that ensure equality for foreign businesses.

In the same manner, businesses must identify and denounce, through their governments, any technical barriers to trade that constitute unnecessary barriers that prevent market access by any of the other two Parties, or the granting of the same treatment received by domestic businesses.


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