Freedom of Transit: Article V

In one line

Goods passing through a country on their way somewhere else must be let through by the most convenient routes, free of transit duties and without discrimination.

In exam wording: Article V of GATT 1994 guarantees freedom of transit through the territory of each member, by the routes most convenient for international transit, for traffic in transit to or from the territory of other members, without distinction based on flag, origin, departure, entry, exit or destination, and free of customs duties and transit duties.

Why the article exists

Because a landlocked country's trade is at the mercy of its neighbours. Nepal, Bolivia, Zambia and thirty others reach the sea only through another State. Without a right of transit their WTO market access is theoretical.

And because a coastal State can strangle a rival's trade without touching its own tariff. Requiring trans-shipment, restricting the ports at which goods may enter, or charging for passage are all ways of taxing another country's commerce, and Article V forbids them.

What Article V provides

Article V:1 defines traffic in transit. Goods, and also vessels and other means of transport, are in transit across the territory of a member when the passage is only a portion of a complete journey beginning and terminating beyond the frontier of that member.

Article V:2 is the operative obligation and it has two sentences, each of which has been applied. There shall be freedom of transit through the territory of each member, via the routes most convenient for international transit, for traffic in transit to or from the territory of other members. And no distinction shall be made which is based on the flag of vessels, the place of origin, departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of vessels or of other means of transport.

Article V:3 exempts traffic in transit from customs duties, from transit duties and from other charges except charges for transportation or commensurate with administrative expenses or the cost of services rendered, and from unnecessary delays and restrictions.

Article V:4 requires charges and regulations to be reasonable, having regard to the conditions of the traffic. Article V:5 applies most favoured nation treatment to transit. Article V:6 requires products that have been in transit to be treated no less favourably than had they been transported without going through the third territory.

The case that applied both sentences

Colombia: Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R, adopted 20 May 2009, not appealed. Facts. Colombia confined imports of textiles, apparel and footwear arriving from Panama and the Colon Free Zone to two ports of entry out of a much larger number otherwise available, required advance declaration with duties and taxes payable in advance, and required goods proceeding in international transit to undergo trans-shipment. Panama complained. Held. By requiring trans-shipment in order for goods to proceed in international transit, Colombia failed to extend freedom of transit by the most convenient routes contrary to Article V:2 first sentence read with Article V:1; the measures made distinctions based on place of origin or departure contrary to Article V:2 second sentence; the confinement to two ports was a prohibited restriction under Article XI:1; and the advance declaration requirement conferred on like products from other members an advantage not accorded to goods from Panama, contrary to Article I:1. Panama won on every claim. Why it matters: it is the leading and almost the only authority on Article V, and it decides the ports of entry question in the same report.